ファーストアドバンテージの四半期報告

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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, 2023


☐	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. Employer Identification No.)
1 Concourse Parkway NE, Suite 200 Atlanta, GA	30328
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (888) 314-9761

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 3, 2023, the registrant had 145,188,675 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)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations and Comprehensive Income	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	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

PART II.	OTHER INFORMATION	38

Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	38
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
Signatures		41

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

First Advantage Corporation

Condensed Consolidated Balance Sheets

(Unaudited)


(in thousands, except share and per share amounts)	June 30, 2023			December 31, 2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	399,050		$	391,655
Restricted cash		136			141
Short-term investments		2,153			1,956
Accounts receivable (net of allowance for doubtful accounts of $1,568 and $1,348 at June 30, 2023 and December 31, 2022, respectively)		139,968			143,811
Prepaid expenses and other current assets		21,471			25,407
Income tax receivable		8,959			3,225
Total current assets		571,737			566,195
Property and equipment, net		93,265			113,529
Goodwill		793,582			793,080
Trade name, net		67,565			71,162
Customer lists, net		299,000			326,014
Deferred tax asset, net		2,473			2,422
Other assets		10,491			13,423
TOTAL ASSETS	$	1,838,113		$	1,885,825
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$	51,930		$	54,947
Accrued compensation		15,231			22,702
Accrued liabilities		15,661			16,400
Current portion of operating lease liability		5,594			4,957
Income tax payable		379			724
Deferred revenues		1,310			1,056
Total current liabilities		90,105			100,786
Long-term debt (net of deferred financing costs of $7,148 and $8,075 at June 30, 2023 and December 31, 2022, respectively)		557,576			556,649
Deferred tax liability, net		87,582			90,556
Operating lease liability, less current portion		5,730			7,879
Other liabilities		3,012			3,337
Total liabilities		744,005			759,207
COMMITMENTS AND CONTINGENCIES (Note 11)
EQUITY
Common stock - $0.001 par value; 1,000,000,000 shares authorized, 145,193,679 and 148,732,603 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		145			149
Additional paid-in-capital		1,183,715			1,176,163
Accumulated deficit		(68,508	)		(27,363	)
Accumulated other comprehensive loss		(21,244	)		(22,331	)
Total equity		1,094,108			1,126,618
TOTAL LIABILITIES AND EQUITY	$	1,838,113		$	1,885,825

The accompanying notes are an integral part of these condensed consolidated financial statements.

First Advantage Corporation

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)


	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands, except share and per share amounts)	2023		2022			2023		2022
REVENUES	$	185,315	$	201,561		$	360,835	$	391,442

OPERATING EXPENSES:
Cost of services (exclusive of depreciation and amortization below)		92,997		100,292			184,058		196,723
Product and technology expense		12,643		12,946			25,267		26,719
Selling, general, and administrative expense		29,982		31,136			58,664		59,681
Depreciation and amortization		32,056		34,407			63,922		68,441
Total operating expenses		167,678		178,781			331,911		351,564
INCOME FROM OPERATIONS		17,637		22,780			28,924		39,878

OTHER EXPENSE, NET:
Interest expense, net		3,887		3,112			12,568		2,262
Total other expense, net		3,887		3,112			12,568		2,262
INCOME BEFORE PROVISION FOR INCOME TAXES		13,750		19,668			16,356		37,616
Provision for income taxes		3,968		5,432			4,649		10,367
NET INCOME	$	9,782	$	14,236		$	11,707	$	27,249

Foreign currency translation income (loss)		218		(11,319	)		1,087		(12,836	)
COMPREHENSIVE INCOME	$	10,000	$	2,917		$	12,794	$	14,413

NET INCOME	$	9,782	$	14,236		$	11,707	$	27,249
Basic net income per share	$	0.07	$	0.09		$	0.08	$	0.18
Diluted net income per share	$	0.07	$	0.09		$	0.08	$	0.18
Weighted average number of shares outstanding - basic		144,112,028		150,748,211			144,982,459		150,644,034
Weighted average number of shares outstanding - diluted		145,338,920		152,360,350			146,894,790		152,361,788

The accompanying notes are an integral part of these condensed consolidated financial statements.

First Advantage Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended June 30,
(in thousands)	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	11,707		$	27,249
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		63,922			68,441
Amortization of deferred financing costs		927			894
Bad debt expense (recovery)		138			(120	)
Deferred taxes		(3,057	)		3,773
Share-based compensation		5,659			3,802
Loss on foreign currency exchange rates		4			37
Loss on disposal of fixed assets and impairment of ROU assets		2,125			162
Change in fair value of interest rate swaps		(1,235	)		(7,378	)
Changes in operating assets and liabilities:
Accounts receivable		4,034			11,199
Prepaid expenses and other assets		5,335			38
Accounts payable		(3,035	)		(2,748	)
Accrued compensation and accrued liabilities		(8,847	)		(8,780	)
Deferred revenues		248			(272	)
Operating lease liabilities		(460	)		(596	)
Other liabilities		304			557
Income taxes receivable and payable, net		(6,047	)		154
Net cash provided by operating activities		71,722			96,412
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of businesses, net of cash acquired		—			(19,044	)
Purchases of property and equipment		(688	)		(5,165	)
Capitalized software development costs		(12,434	)		(10,236	)
Other investing activities		(196	)		82
Net cash used in investing activities		(13,318	)		(34,363	)
CASH FLOWS FROM FINANCING ACTIVITIES
Share repurchases		(52,334	)		—
Payments on finance lease obligations		(74	)		(459	)
Payments on deferred purchase agreements		(469	)		(526	)
Proceeds from issuance of common stock under share-based compensation plans		2,104			1,270
Net settlement of share-based compensation plan awards		(211	)		(98	)
Net cash (used in) provided by financing activities		(50,984	)		187
Effect of exchange rate on cash, cash equivalents, and restricted cash		(30	)		(2,546	)
Increase in cash, cash equivalents, and restricted cash		7,390			59,690
Cash, cash equivalents, and restricted cash at beginning of period		391,796			292,790
Cash, cash equivalents, and restricted cash at end of period	$	399,186		$	352,480

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes, net of refunds received	$	13,797		$	6,181
Cash paid for interest	$	21,933		$	10,191
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired on account	$	73		$	23
Excise taxes on share repurchases incurred but not paid	$	522		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

First Advantage Corporation

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)


(in thousands)	Common Stock			Additional Paid-In-Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
BALANCE – December 31, 2022	$	149		$	1,176,163		$	(27,363	)	$	(22,331	)	$	1,126,618
Share-based compensation		—			2,058			—			—			2,058
Repurchases of common stock		(2	)		—			(25,515	)		—			(25,517	)
Proceeds from issuance of common stock under share-based compensation plans		0			1,399			—			—			1,399
Common stock withheld for tax obligations on restricted stock unit and option settlement		0			(25	)		—			—			(25	)
Foreign currency translation		—			—			—			869			869
Net income		—			—			1,925			—			1,925
BALANCE – March 31, 2023	$	147		$	1,179,595		$	(50,953	)	$	(21,462	)	$	1,107,327
Share-based compensation		—			3,601			—			—			3,601
Repurchases of common stock		(2	)		—			(27,337	)		—			(27,339	)
Proceeds from issuance of common stock under share-based compensation plans		0			705			—			—			705
Common stock withheld for tax obligations on restricted stock unit and option settlement		0			(186	)		—			—			(186	)
Foreign currency translation		—			—			—			218			218
Net income		—			—			9,782			—			9,782
BALANCE – June 30, 2023	$	145		$	1,183,715		$	(68,508	)	$	(21,244	)	$	1,094,108


(in thousands)	Common Stock		Additional Paid-In-Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
BALANCE – December 31, 2021	$	153	$	1,165,163		$	(31,441	)	$	(1,637	)	$	1,132,238
Share-based compensation		—		1,859			—			—			1,859
Proceeds from issuance of common stock under share-based compensation plans		0		547			—			—			547
Foreign currency translation		—		—			—			(1,517	)		(1,517	)
Net income		—		—			13,013			—			13,013
BALANCE – March 31, 2022	$	153	$	1,167,569		$	(18,428	)	$	(3,154	)	$	1,146,140
Share-based compensation		—		1,943			—			—			1,943
Proceeds from issuance of common stock under share-based compensation plans		0		723			—			—			723
Common stock withheld for tax obligations on restricted stock unit and option settlement		—		(98	)		—			—			(98	)
Foreign currency translation		—		—			—			(11,319	)		(11,319	)
Net income		—		—			14,236			—			14,236
BALANCE – June 30, 2022	$	153	$	1,170,137		$	(4,192	)	$	(14,473	)	$	1,151,625

The accompanying notes are an integral part of these condensed consolidated financial statements.

First Advantage Corporation

Notes to Unaudited Condensed Consolidated Financial Statements

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 applicant’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 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 / vehicle compliance, hiring tax credits and incentives, resident / 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, 2022.

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.

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, revenue recognition, capitalized software, 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 fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, rather than the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

The carrying amounts of cash and cash equivalents, short-term investments, 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 long-term debt are disclosed in Note 5.

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, 2023 (in thousands):


	Level 1		Level 2		Level 3
Assets
Interest rate collars	$	—	$	7,652	$	—
Interest rate swap	$	—	$	344	$	—

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).

Impairment of Long-Lived Assets — The Company regularly evaluates whether events and circumstances have occurred that indicate the carrying amount of property and equipment, ROU assets, and finite-life intangible assets may not be recoverable or that indicate useful lives warrant revision. The Company determined that triggering events occurred for certain leases exited during the three and six months ended June 30, 2023 which required an impairment review of certain ROU assets. Based on the results of the analysis, the Company recorded non-cash impairment charges of $0.7 million and $1.8 million for the three and six months ended June 30, 2023, respectively, primarily related to office space exited during the year. Write down of abandoned property and equipment no longer in use was $0.2 million and $0.3 million for the three and six months ended June 30, 2023, respectively.

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 had one customer which represented approximately 11% and 10% of its consolidated revenues during the three and six months ended June 30, 2023, respectively. The Company did not have any customers which represented 10% or more of consolidated revenues for the three and six months ended June 30, 2022. Additionally, the Company did not have any customers which represented 10% or more of consolidated accounts receivable, net for any period presented.

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. Currency translation income (loss) included in accumulated other comprehensive income (loss) was approximately $0.2 million and $(11.3) million for the three months ended June 30, 2023 and 2022, respectively. Currency translation income (loss) included in accumulated other comprehensive income (loss) was approximately $1.1 million and $(12.8) million for the six months ended June 30, 2023 and 2022, respectively.

Gains or losses resulting from foreign currency transactions are included in the accompanying condensed consolidated statements of operations and comprehensive income, 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 income (loss). Currency transaction income included in the accompanying condensed consolidated statements of operations and comprehensive income was approximately $0.2 million and $0.3 million for the three months ended June 30, 2023 and 2022, respectively. Currency transaction (loss) income included in the accompanying condensed consolidated statements of operations and comprehensive income was approximately $(0.3) million and $1.3 million for the six months ended June 30, 2023 and 2022, respectively.

Recent Accounting Pronouncements — There were no accounting pronouncements issued during the six months ended June 30, 2023 that are expected to have a material impact on the condensed consolidated financial statements.

Recently Adopted Accounting Pronouncements — In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Prior to the issuance of this guidance, contract assets and contract liabilities were recognized by the acquirer at fair value on the acquisition date. This guidance is effective for annual reporting periods beginning after December 15, 2022 including interim periods therein. Adoption of this standard on January 1, 2023 did not have a material impact on the condensed consolidated financial statements. However, if the Company acquires material customer contracts in the future, this standard will impact the accounting for those arrangements which may have a material effect on future results.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and in January 2021 issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. These ASUs provide temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as the London Inter-bank Offered Rate (“LIBOR”), to alternate reference rates, such as the Secured Overnight Financing Rate (“SOFR”). These standards were effective upon issuance and allowed application to contract changes as early as January 1, 2020. Adoption of this standard in June 2023 did not have a material impact on the condensed consolidated financial statements.

Note 3. Property and Equipment, net

Property and equipment, net as of June 30, 2023 and December 31, 2022 consisted of the following (in thousands):


	June 30, 2023			December 31, 2022
Furniture and equipment	$	23,356		$	23,422
Capitalized software for internal use, acquired by business combination		227,405			227,405
Capitalized software for internal use, developed internally or otherwise purchased		72,943			60,187
Leasehold improvements		2,423			2,957
Total property and equipment		326,127			313,971
Less: accumulated depreciation and amortization		(232,862	)		(200,442	)
Property and equipment, net	$	93,265		$	113,529

Depreciation and amortization expense of property and equipment was approximately $16.6 million and $17.3 million for the three months ended June 30, 2023 and 2022, respectively. Depreciation and amortization expense of property and equipment was approximately $33.1 million and $34.1 million for the six months ended June 30, 2023 and 2022, respectively.

Note 4. Goodwill, Trade Name, and Customer Lists

The changes in the carrying amount of goodwill for the six months ended June 30, 2023 by reportable segment were as follows (in thousands):


	Americas		International		Total
Balance – December 31, 2022	$	677,171	$	115,909	$	793,080
Foreign currency translation		97		405		502
Balance – June 30, 2023	$	677,268	$	116,314	$	793,582

The following summarizes the gross carrying value and accumulated amortization for the Company’s trade name and customer lists as of June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Useful Life (in years)
Trade name	$	93,978	$	(26,413	)	$	67,565	20 years
Customer lists		516,035		(217,035	)		299,000	13-14 years
Total	$	610,013	$	(243,448	)	$	366,565


	December 31, 2022
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Useful Life (in years)
Trade name	$	93,959	$	(22,797	)	$	71,162	20 years
Customer lists		515,762		(189,748	)		326,014	13-14 years
Total	$	609,721	$	(212,545	)	$	397,176

Amortization expense of trade name and customer lists was approximately $15.4 million and $17.1 million for the three months ended June 30, 2023 and 2022, respectively. Amortization expense of trade name and customer lists was approximately $30.8 million and $34.3 million for the six months ended June 30, 2023 and 2022, respectively. Trade name and customer lists are amortized on an accelerated basis based upon their estimated useful life.

Note 5. Long-term Debt

The fair value of the Company’s long-term debt obligation approximated its book value as of June 30, 2023 and December 31, 2022 and consisted of the following (in thousands):


	June 30, 2023			December 31, 2022
First Lien Credit Facility	$	564,724		$	564,724
Less: Deferred financing costs		(7,148	)		(8,075	)
Long-term debt, net	$	557,576		$	556,649

The Company is a party to a First Lien Credit Agreement with its banking group (“Credit Agreement”), which provides for a term loan of $766.6 million due January 31, 2027 carrying an interest rate of 2.75% to 3.00%, based on the first lien ratio, plus LIBOR (“First Lien Credit Facility”) and a $100.0 million revolving credit facility due July 31, 2026 (“Revolver”). In June 2023, the Credit Agreement was amended to transition the reference rate from LIBOR to SOFR (the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York), with the addition of an applicable margin. The Credit Agreement is collateralized by substantially all assets and capital stock owned by direct and indirect domestic subsidiaries and are 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 Revolver exceeds 35% 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, 2023, there were no outstanding borrowings under the Revolver and $564.7 million outstanding under the First Lien Credit Facility. As the Company had no outstanding amounts under the Revolver, it was not subject to the consolidated first lien leverage ratio covenant. The Company was compliant with all other covenants under the agreement as of June 30, 2023.

Note 6. Derivatives

To reduce exposure to variability in expected future cash outflows on variable rate debt attributable to the changes in one-month LIBOR, 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. In June 2023, the Company transitioned the reference rate for its interest rate derivative agreements from one-month LIBOR to one-month SOFR.

As of June 30, 2023, 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 collars (a)	June 30, 2023	February 29, 2024	$300.0 million	0.48% floor/1.47% cap
Interest rate swap (b)	June 30, 2023	February 28, 2026	$100.0 million	4.32%

(a)

In conjunction with the June 2023 transition of the reference rate from LIBOR to SOFR, the cap rate was reduced from 1.50% to 1.47%.

(b)

In conjunction with the June 2023 transition of the reference rate from LIBOR to SOFR, the fixed rate was reduced from 4.36% to 4.32%.

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 (in thousands):


		Fair Value
Derivatives not designated as hedging instruments	Balance Sheet Location	As of June 30, 2023		As of December 31, 2022
Interest rate collars	Prepaid expenses and other current assets	$	7,652	$	11,570
Interest rate swap	Prepaid expenses and other current assets	$	344	$	—

The following is a summary of location and amount of gains and (losses) recorded related to the derivative instruments (in thousands):


		Gain/(Loss)
		Three Months Ended June 30,				Six Months Ended June 30,
Derivatives not designated as hedging instruments	Income Statement Location	2023		2022		2023		2022
Interest rate collars	Interest expense, net	$	1,204	$	2,119	$	769	$	7,378
Interest rate swap	Interest expense, net	$	1,910	$	—	$	466	$	—

Note 7. 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, 2023, 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 rate for the three and six months ended June 30, 2023 was 28.9% and 28.4%, respectively. The Company’s effective income tax rate for the three and six months ended June 30, 2023 was higher than the U.S. federal statutory rate of 21% primarily due to the Global Intangible Low-Taxed Income (“GILTI”) inclusion, nondeductible share-based compensation, and U.S. state income taxes.

The effective income tax rate for the three and six months ended June 30, 2022 was 27.6%. The Company’s effective income tax rate for the three and six months ended June 30, 2022 was higher than the U.S. federal statutory rate of 21% primarily due to GILTI inclusion, nondeductible share-based compensation, and U.S. state income taxes.

Note 8. 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 $7.4 million and $6.5 million as of June 30, 2023 and December 31, 2022, 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 $1.3 million and $1.1 million as of June 30, 2023 and December 31, 2022, 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 14, “Reportable Segments.”

Note 9. 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 as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Share-based compensation expense
Cost of services	$	313	$	277	$	588	$	551
Product and technology expense		568		312		1,025		516
Selling, general, and administrative expense		2,720		1,354		4,046		2,735
Total share-based compensation expense	$	3,601	$	1,943	$	5,659	$	3,802

In May 2023, the Company’s Board of Directors approved a modification of the vesting terms of outstanding unvested and unearned performance-based options, restricted stock units, and restricted stock (collectively, “Performance Awards”) previously issued under its equity plans. The modification, effective May 10, 2023, allowed for unvested and unearned Performance Awards outstanding as of the date of the modification, to vest based on time on the fourth, fifth, and sixth anniversaries of the relevant vesting commencement date, as set forth in each grant agreement (the “Vesting Commencement Date”), while preserving the eligibility to vest upon the Company’s investors receiving a targeted money-on-money return, subject to continued service. As of the modification date, unrecognized pre-tax non-cash compensation expense related to the Performance Awards, after accounting for the modification, was $28.8 million. The Company expects to recognize pre-tax non-cash compensation expense related to the modification of Performance Awards prospectively from the date of modification, on a straight-line basis, over a weighted average period of 1.9 years.

The fair value of the modified restricted stock units and restricted stock was estimated using the closing stock price on the date of modification. The fair value of the modified stock options was estimated on the date of modification using the Black-Scholes option-pricing model with the following weighted average assumptions:


	Options
Expected stock price volatility		37.43	%
Risk-free interest rate		3.40	%
Expected term (in years)		4.67
Fair-value of the underlying unit	$	12.61

2020 Equity Plan

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”). Awards issued under the 2020 Equity Plan consist of options. No awards were issued under the plan during the six months ended June 30, 2023.

A summary of the stock option activity for the six months ended June 30, 2023 is as follows:


		Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
December 31, 2022	Grants outstanding		2,843,342		$	6.66
	Grants exercised		(191,564	)	$	6.67
	Grants cancelled/forfeited		(424,742	)	$	6.70
June 30, 2023	Grants outstanding		2,227,036		$	6.65	6.7 Years	$19.5 million
June 30, 2023	Grants vested		702,197		$	6.63	6.7 Years	$6.2 million
June 30, 2023	Grants unvested		1,524,839		$	6.66

2021 Equity Plan

The First Advantage Corporation 2021 Omnibus Incentive Plan (as amended by the First Amendment, dated as of May 10, 2023, 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, 2023, 16,905,954 shares were available for issuance under the 2021 Equity Plan.

Stock Options

A summary of the stock option activity for the six months ended June 30, 2023 is as follows:


		Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
December 31, 2022	Grants outstanding		4,311,662		$	15.24
	Grants issued		316,262		$	12.86
	Grants cancelled/forfeited		(43,565	)	$	16.12
June 30, 2023	Grants outstanding		4,584,359		$	15.06	8.3 Years	$2.6 million
June 30, 2023	Grants vested		1,523,812		$	15.16	8.1 Years	$0.6 million
June 30, 2023	Grants unvested		3,060,547		$	15.01

The fair value for stock options granted for the six months ended June 30, 2023 was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:


	Options
Expected stock price volatility		35.58	%
Risk-free interest rate		3.56	%
Expected term (in years)		6.25
Fair-value of the underlying unit	$	12.86

Restricted Stock Units

A summary of the restricted stock units (“RSU”) activity for the six months ended June 30, 2023 is as follows:


		Shares			Weighted Average Grant Date Fair Value
December 31, 2022	Nonvested RSUs		472,332		$	16.00
	Granted		135,326		$	13.23
	Vested		(104,647	)	$	14.73
	Forfeited		(17,389	)	$	16.73
June 30, 2023	Nonvested RSUs		485,622		$	15.48

Restricted Stock

A summary of the restricted stock activity for the six months ended June 30, 2023 is as follows:


		Shares			Weighted Average Grant Date Fair Value
December 31, 2022	Nonvested restricted stock		2,281,300		$	3.85
	Vested		(326,670	)	$	3.85
June 30, 2023	Nonvested restricted stock		1,954,630		$	8.50

As of June 30, 2023, the Company had approximately $45.8 million of unrecognized pre-tax non-cash compensation expense, comprised of approximately $17.6 million related to restricted stock, $6.7 million related to RSUs, and approximately $21.5 million related to stock options, which the Company expects to recognize over a weighted average period of 1.6 years.

2021 Employee Stock Purchase Plan

The Company adopted the First Advantage Corporation 2021 Employee Stock Purchase Plan (“ESPP”) that 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. During each offering period, there is 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 $0.2 million and $0.1 million for the three months ended June 30, 2023 and 2022, respectively. The Company recorded an associated expense of approximately $0.4 million and $0.2 million for the six months ended June 30, 2023 and 2022, respectively.

Note 10. Equity

Stock Repurchase Program

On August 2, 2022, the Company’s Board of Directors authorized the repurchase of up to $50.0 million of the Company’s common stock over the 12-month period ending August 2, 2023 (the “Repurchase Program”). On November 8, 2022, the Company’s Board of Directors authorized an increase to the total available amount under its Repurchase Program to $150.0 million and extended the program through December 31, 2023. In February 2023, the Company’s Board of Directors further increased the total available amount under the Repurchase Program to $200.0 million effective February 28, 2023.

Stock repurchases may be effected through open market repurchases at prevailing market prices, including through the use of block trades and trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, privately-negotiated transactions, through other transactions in accordance with applicable securities laws, or a combination of these methods on such terms and in such amounts as the Company deems appropriate and will be funded from available capital. The Company is not obligated to repurchase any specific number of shares, and the timing, manner, value, and actual number of shares repurchased will depend on a variety of factors, including the Company’s stock price and liquidity requirements, other business considerations and general market and economic conditions. No shares will be purchased from SLP Fastball Aggregator, L.P. and its affiliates. The Company may discontinue or modify purchases without notice at any time.

A summary of the stock repurchase activity under the Repurchase Program, is summarized as follows (in thousands, except share and per share amounts):


	Three Months Ended June 30, 2023		Six Months Ended June 30, 2023
Shares repurchased		2,024,046		3,895,737
Average price per share	$	13.37	$	13.43
Costs recorded to accumulated deficit
Total repurchase costs	$	27,026	$	52,252
Additional associated costs		311		600
Total costs recorded to accumulated deficit	$	27,337	$	52,852

As of June 30, 2023, the remaining authorized value of shares available to be repurchased under this program was approximately $87.1 million.

Repurchased shares of common stock are retired. The par value of repurchased shares is deducted from common stock and the excess repurchase price over par value is reflected as a reduction to accumulated deficit. Additional associated costs include the related brokerage commissions and excise taxes on share repurchases.

Preferred Stock

As of June 30, 2023 and December 31, 2022, 250,000,000 shares of Preferred Stock were authorized, and no Preferred Stock was issued or outstanding.

Note 11. Commitments and Contingencies

There have been no material changes to the Company’s contractual obligations as compared to December 31, 2022.

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, could become 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 $4.9 million and $4.4 million at June 30, 2023 and December 31, 2022, respectively, for matters that it believes a loss 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 12. Related Party Transactions

The Company had no material related party transactions.

Note 13. Net Income 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. Basic and diluted net income per share was calculated as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Basic net income per share	$	0.07	$	0.09	$	0.08	$	0.18
Diluted net income per share	$	0.07	$	0.09	$	0.08	$	0.18
Numerator:
Net income (in thousands)	$	9,782	$	14,236	$	11,707	$	27,249
Denominator:
Weighted average number of shares outstanding - basic		144,112,028		150,748,211		144,982,459		150,644,034
Add stock options to purchase shares and restricted stock units		1,226,892		1,612,139		1,912,331		1,717,754
Weighted average number of shares outstanding - diluted		145,338,920		152,360,350		146,894,790		152,361,788

For the three months ended June 30, 2023 and 2022, 4,961,441 and 2,533,594 stock options and RSUs were excluded from the calculation of diluted net income per share, respectively, because their effects were anti-dilutive. For the six months ended June 30, 2023 and 2022, 4,681,847 and 2,292,520 stock options and RSUs were excluded from the calculation of diluted net income per share, respectively, because their effects were anti-dilutive.

Note 14. Reportable Segments

We have two reportable segments, Americas and International. Our chief operating decision maker (“CODM”) uses the profit measure of Adjusted EBITDA, on both a consolidated and a segment basis, to allocate resources and assess performance of our businesses. We use Adjusted EBITDA as our profit measure because it eliminates the impact of certain items that we do not consider indicative of operating performance, which is useful to compare operating results between periods. Our Board of Directors and executive management team also use Adjusted EBITDA as a compensation measure for both segment and corporate management under our incentive compensation plans. Adjusted EBITDA is also a measure frequently used by securities analysts, investors, and other interested parties in their evaluation of the operating performance of companies similar to ours.

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 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.

The segment financial information below aligns with how we report information to our CODM to assess operating performance and how the Company manages the business. Corporate costs are generally allocated to the segments based upon estimated revenue levels and other assumptions that management considers reasonable. The CODM does not review the Company’s assets by segment; therefore, such information is not presented. The accounting policies of the segments are the same as described in Note 2, “Summary of Significant Accounting Policies” and Note 8, “Revenues.”

The following is a description of our two reportable segments:

Americas. This segment performs a variety of background check and compliance services 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. We deliver our solutions across multiple vertical industries in the United States, Canada, and Latin America markets.

International. The International segment provides services similar to our Americas segment in regions outside of the Americas. We primarily deliver our solutions across multiple vertical industries in the Europe, India, and Asia Pacific markets.

A reconciliation of Segment Adjusted EBITDA to net income for the three and six months ended June 30, 2023 and 2022 is as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Adjusted EBITDA
Americas	$	52,324	$	52,954	$	96,980	$	99,773
International		3,647		7,880		7,551		14,661
Total	$	55,971	$	60,834	$	104,531	$	114,434
Adjustments to reconcile to net income:
Interest expense, net		3,887		3,112		12,568		2,262
Provision for income taxes		3,968		5,432		4,649		10,367
Depreciation and amortization		32,056		34,407		63,922		68,441
Share-based compensation		3,601		1,943		5,659		3,802
Transaction and acquisition-related charges (a)		1,190		1,179		2,261		2,677
Integration, restructuring, and other charges (b)		1,487		525		3,765		(364	)
Net income	$	9,782	$	14,236	$	11,707	$	27,249

(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 includes incremental professional service fees incurred related to the initial public offering and subsequent one-time compliance efforts. The three and six months ended June 30, 2023 and 2022 include a transaction bonus expense related to one of the Company’s 2021 acquisitions.

(b)

Represents charges from organizational restructuring and integration activities, non-cash, and other charges primarily related to nonrecurring legal exposures, foreign currency (gains) losses, and (gains) losses on the sale of assets.

Geographic Information

The Company bases 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):


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenues
Americas	$	162,682		$	170,591		$	314,738		$	330,679
International		24,113			33,044			48,961			64,785
Eliminations		(1,480	)		(2,074	)		(2,864	)		(4,022	)
Total revenues	$	185,315		$	201,561		$	360,835		$	391,442

The following table sets forth net long-lived assets by geographic area (in thousands):


	June 30, 2023		December 31, 2022
Long-lived assets, net
United States, country of domicile	$	1,086,824	$	1,134,201
All other countries		174,493		180,258
Total long-lived assets, net	$	1,261,317	$	1,314,459

Note 15. Subsequent Events

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 is expected to be paid on August 31, 2023.

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, 2023, and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2022, 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, 2022.

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: 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, uncertainty in financial markets (including as a result of recent bank failures and events affecting financial institutions), and the COVID-19 pandemic; 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; operating in a penetrated and competitive market; 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; 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; the timing, manner and volume of repurchases of common stock pursuant to our share repurchase program; 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 executive 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; the indemnification provisions in our contracts with our customers and third-party data suppliers; 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, 2022, 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 speak 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:

•

“Americas” in regards to our business, means the United States, Canada, and Latin America;

•

“Enterprise customers” means our customers who contribute $500,000 or more to our revenues in a calendar year;

•

“First Advantage,” the “Company,” “we,” “us,” and “our” mean the business of First Advantage Corporation and its subsidiaries;

•

“International” in regards to our business, means all geographical regions outside of the United States, Canada, and Latin America;

•

“Revenues attributable to the Company’s acquisitions” means revenues recognized in the first year following each acquisition; and

•

“Silver Lake” means Silver Lake Group, L.L.C., together with its affiliates, successors, and assignees.

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 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 Securities and Exchange Commission (“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 global provider of employment background screening and verification solutions. We deliver innovative services and insights that help our customers manage risk and hire the best talent. Enabled by our proprietary technology, our products help companies protect their brands and provide safer environments for their customers and their most important resources: employees, contractors, contingent workers, tenants, and drivers.

Our comprehensive product suite includes criminal background checks, drug / health screening, extended workforce screening, biometrics and identity, education / work verifications, resident screening, fleet / driver compliance, executive screening, data analytics, continuous monitoring, social media monitoring, and hiring tax incentives. 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 approximately 33,000 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.

Our products are sold both individually and packaged. The First Advantage platform offers 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 both customers and periods. 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. Accordingly, contracts do not provide guarantees of future revenues. Due to our contract terms and the nature of the background screening industry, we determined our contract terms for ASC 606 purposes are less than one year. Through our ongoing dialogue with our customers, we have visibility into their expected future order volumes, although these can be difficult to accurately forecast due to the dynamic nature of forecasting hiring and business needs. 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. Over 92% of the criminal searches performed in the United States in 2022 were completed the same day they were submitted.

We generated revenues of $185.3 million for the three months ended June 30, 2023, as compared to $201.6 million for the three months ended June 30, 2022 and generated revenues of $360.8 million for the six months ended June 30, 2023, as compared to $391.4 million for the six months ended June 30, 2022. Approximately 86% of our revenues for the six months ended June 30, 2023 was generated in the Americas, predominantly in the United States, while the remaining 14% was generated in our International segment. 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, 2023. Please refer to “Results of Operations” for further details.

Segments

We manage our business and report our financial results in two reportable segments, Americas and International:

•

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 holiday season and lowest at the beginning of the new year, following the holiday season. Certain customers across various industries also historically ramp up their hiring throughout the second quarter of the year as winter concludes, commercial activity tied to outdoor activities increases, and the school year ends, giving rise to student and graduate hiring. In addition, apartment rental activity and associated screening activity typically decline in the fourth quarter heading into the holiday season. We expect that further growth in e-commerce, the continued digital transformation of the economy, and other economic forces may impact future seasonality, but we are unable to predict these potential shifts and how our business may be impacted.

Recent Developments

Current Economic Conditions

Macroeconomic factors, including inflation, increased interest rates, instability in the global banking system, the prolonged COVID-19 pandemic, global supply chain constraints, and global economic and geopolitical developments, have negatively impacted significant portions of the global economy, and created volatility in the financial markets.

While our overall productivity has not been materially adversely impacted, we have experienced, and may continue to experience, the lengthening of certain sales cycles. If the economic uncertainty is sustained or increases, we may experience a negative impact on new business, customer renewals and demand levels, sales and marketing efforts, revenues growth rates, customer deployments, customer collections, product development, or other financial metrics. Any of these factors could harm our business, financial condition, and operating results.

Despite the continuing uncertainty associated with these events, we are confident in the long-term overall 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 ability to deliver innovative products and solutions that enhance workplace safety and address compliance risks has contributed to the durability of our financial results. 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, 2022.

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.

Components of our Results of Operations

Revenues

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 technology, 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 applicant evaluation process and ensure compliance with their workforce onboarding criteria from the time an application is submitted to an applicant’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 / vehicle compliance, hiring tax credits and incentives, resident / 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.

Operating Expenses

We incur the following expenses related to our cost of revenues and operating expenses:

•

Cost of Services: Consists of amounts paid to third parties for access to government records, other third-party data and services, and our internal processing fulfillment and customer care functions. In addition, cost of services includes expenses from our drug screening lab and collection site network as well as our court runner network. Third-party cost of services are largely variable in nature and are typically invoiced to our customers as direct pass-through costs. Cost of services also includes our salaries and benefits expense for personnel involved in the processing and fulfillment of our screening products and solutions, as well as our customer care organization and robotics process automation implementation team. Other costs included in cost of services relate to allocations of certain overhead costs for our revenue-generating products and solutions, primarily consisting of certain facility costs and administrative services allocated by headcount or another related metric. We do not allocate depreciation and amortization to cost of services.

•

Product and Technology Expense: Consists of salaries and benefits of personnel involved in the maintenance of our technology and its integrations and APIs, product marketing, management of our network and infrastructure capabilities, and maintenance of our information security and business continuity functions. A portion of the personnel costs are related to the development of new products and features that are primarily developed through agile methodologies. These costs are partially capitalized, and therefore, are partially reflected as amortization expense within the depreciation and amortization cost line item. Product and technology expense also includes third-party costs related to our cloud computing services, software licensing and maintenance, telecommunications, and other data processing functions. We do not allocate depreciation and amortization to product and technology expense.

•

Selling, General, and Administrative Expense: Consists of sales, customer success, marketing, and general and administrative expenses. Sales, customer success, and marketing expenses consist primarily of employee compensation such as salaries, bonuses, sales commissions, share-based compensation, and other employee benefits for our verticalized Sales and Customer Success teams. General and administrative expenses include travel expenses and various corporate functions including finance, human resources, legal, and other administrative roles, in addition to certain professional service fees and expenses incurred in connection with our IPO and now as a public company. We expect our selling, general, and administrative expenses to increase in the short-term, primarily as a result of additional public company related reporting and compliance costs. Over the long-term, we expect our selling, general, and administrative expenses to decrease as a percentage of revenues as we leverage our past investments. We do not allocate depreciation and amortization to selling, general, and administrative expenses.

•

Depreciation and Amortization: Property and equipment consisting mainly of capitalized software costs, furniture, hardware, and leasehold improvements are depreciated or amortized and reflected as operating expenses. We also amortize the capitalized costs of finite-life intangible assets acquired in connection with business combinations.

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 new 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 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 revenues growth and any shifts we see in the business in order to align with our overall financial objectives. While we expect internal operating expenses to increase in absolute dollars to support our continued growth, we believe that, in the long term, operating expenses will decline gradually as a percentage of total revenues 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:

•

Interest Expense, Net: Relates primarily to our debt service costs, the interest-related unrealized gains and losses of our interest rate derivative instruments and, to a lesser extent, the interest on our capital lease obligations and the amortization of deferred financing costs. Additionally, interest expense, net includes interest income earnings on our cash and cash equivalent balances held in interest-bearing accounts. We also earn interest income on our short-term investments which are fixed-time deposits having a maturity date within twelve months.

Provision for Income Taxes

Provision for income taxes consists of domestic and foreign corporate income taxes related to earnings from our sale of 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.

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, 2023 compared to the three and six months ended June 30, 2022


	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except percentages)	2023			2022			2023			2022
Revenues	$	185,315		$	201,561		$	360,835		$	391,442

Operating Expenses:
Cost of services (exclusive of depreciation and amortization below)		92,997			100,292			184,058			196,723
Product and technology expense		12,643			12,946			25,267			26,719
Selling, general, and administrative expense		29,982			31,136			58,664			59,681
Depreciation and amortization		32,056			34,407			63,922			68,441
Total operating expenses		167,678			178,781			331,911			351,564
Income from operations		17,637			22,780			28,924			39,878

Other Expense, Net:
Interest expense, net		3,887			3,112			12,568			2,262
Total other expense, net		3,887			3,112			12,568			2,262
Income before provision for income taxes		13,750			19,668			16,356			37,616
Provision for income taxes		3,968			5,432			4,649			10,367
Net income	$	9,782		$	14,236		$	11,707		$	27,249
Net income margin		5.3	%		7.1	%		3.2	%		7.0	%

Revenues


	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2023			2022			2023			2022
Revenues
Americas	$	162,682		$	170,591		$	314,738		$	330,679
International		24,113		$	33,044			48,961		$	64,785
Eliminations		(1,480	)	$	(2,074	)		(2,864	)	$	(4,022	)
Total revenues	$	185,315		$	201,561		$	360,835		$	391,442

Revenues were $185.3 million for the three months ended June 30, 2023, compared to $201.6 million for the three months ended June 30, 2022. Revenues for the three months ended June 30, 2023 decreased by $16.2 million, or 8.1%, compared to the three months ended June 30, 2022.

The decrease in revenues was primarily due to:

•

a net decrease of $25.6 million in existing customer revenues primarily driven by reduced demand from customers more impacted by macroeconomic events, the elevated levels of growth experienced in 2022 due to the post-pandemic recovery that did not sustain into 2023, and the impact of lost accounts. In the Americas segment, certain industry verticals were impacted by reduced hiring activity resulting in lower revenues. In the International segment, declines were more significantly experienced in India and APAC markets. Together, these decreases were partially offset by ongoing contribution from upselling and cross-selling existing customers, contributing $7.1 million of additional revenues, and increased revenues from certain existing customers not impacted by the macroeconomic declines.

The decrease in revenues was offset by:

•

increased revenues of $9.4 million primarily attributable to new customers in our Americas segment.

Revenues were $360.8 million for the six months ended June 30, 2023, compared to $391.4 million for the six months ended June 30, 2022. Revenues for the six months ended June 30, 2023 decreased by $30.6 million, or 7.8%, compared to the six months ended June 30, 2022.

The decrease in revenues was primarily due to:

•

a net decrease of $47.6 million in existing customer revenues primarily driven by reduced demand from customers more impacted by macroeconomic events, the elevated levels of growth experienced in 2022 due to the post-pandemic recovery that did not sustain into 2023, and the impact of lost accounts. In the Americas segment, certain industry verticals were impacted by reduced hiring activity resulting in lower revenues. In the International segment, declines were more significantly experienced in the India and APAC markets. Together, these decreases were partially offset by ongoing strength in upselling and cross-selling existing customers, contributing $16.4 million of additional revenues, and increased revenues from certain existing customers not impacted by the macroeconomic declines.

The decrease in revenues was offset by:

•

increased revenues of $17.0 million primarily attributable to new customers in our Americas segment.

Pricing remained relatively stable across all periods.

Cost of Services


	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except percentages)	2023			2022			2023			2022
Revenues	$	185,315		$	201,561		$	360,835		$	391,442
Cost of services		92,997			100,292			184,058			196,723
Cost of services as a % of revenue		50.2	%		49.8	%		51.0	%		50.3	%

Cost of services was $93.0 million for the three months ended June 30, 2023, compared to $100.3 million for the three months ended June 30, 2022. Cost of services for the three months ended June 30, 2023 decreased by $7.3 million, or 7.3%, compared to the three months ended June 30, 2022.

The decrease in cost of services was primarily due to:

•

a $4.6 million decrease in personnel expenses in our operations and customer care functions as a result of cost savings actions taken by the Company in late 2022 and 2023, as well as productivity efficiencies from the implementation of additional automation programs; and

•

a decrease in variable third-party data expenses of $2.9 million as a result of continued automation, decreased revenues, and variation in customer ordering mix.

Cost of services as a percentage of revenues was 50.2% for the three months ended June 30, 2023, compared to 49.8% for the three months ended June 30, 2022. The cost of services percentage of revenues in the second quarter of 2023 was impacted by increases in certain third-party data costs due to variation in customer ordering mix. This increase was partially offset by cost savings from the Company’s continued implementation of automation and other process efficiencies, as well as certain cost savings actions taken by the Company in late 2022 and 2023.

Cost of services was $184.1 million for the six months ended June 30, 2023, compared to $196.7 million for the six months ended June 30, 2022. Cost of services for the six months ended June 30, 2023 decreased by $12.7 million, or 6.4%, compared to the six months ended June 30, 2022.

The decrease in cost of services was primarily due to:

•

a $7.8 million decrease in personnel expenses in our operations and customer care functions as a result of cost savings actions taken by the Company in late 2022 and 2023, as well as productivity efficiencies from the implementation of additional automation programs; and

•

a decrease in variable third-party data expenses of $5.8 million as a result of continued automation, decreased revenues, and variation in customer ordering mix.

The decrease in cost of services was partially offset by:

•

foreign currency exchange losses of $0.8 million due to the impact of foreign exchange rate volatility.

Cost of services as a percentage of revenues was 51.0% for the six months ended June 30, 2023, compared to 50.3% for the six months ended June 30, 2022. The cost of services percentage of revenues for the six months ended June 30, 2023 was impacted by increases in certain third-party data costs due to variation in customer ordering mix. This increase was partially offset by cost savings from the Company’s continued implementation of automation and other process efficiencies, as well as certain cost savings actions taken by the Company in late 2022 and 2023.

Product and Technology Expense


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Product and technology expense	$	12,643	$	12,946	$	25,267	$	26,719

Product and technology expense was $12.6 million for the three months ended June 30, 2023, compared to $12.9 million for the three months ended June 30, 2022. Product and technology expense for the three months ended June 30, 2023 decreased by a nominal amount, compared to the three months ended June 30, 2022.

Product and technology expense was $25.3 million for the six months ended June 30, 2023, compared to $26.7 million for the six months ended June 30, 2022. Product and technology expense for the six months ended June 30, 2023 decreased by $1.5 million, or 5.4%, compared to the six months ended June 30, 2022.

The decrease in product and technology expense was primarily due to:

•

a $3.0 million decrease in personnel expenses primarily due to decreases in bonus expenses.

The decrease in product and technology expense was partially offset by:

•

a $1.8 million increase in software licensing expenses.

Selling, General, and Administrative Expense


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Selling, general, and administrative expense	$	29,982	$	31,136	$	58,664	$	59,681

Selling, general, and administrative expense was $30.0 million for the three months ended June 30, 2023, compared to $31.1 million for the three months ended June 30, 2022. Selling, general, and administrative expense for the three months ended June 30, 2023 decreased by $1.2 million, or 3.7%, compared to the three months ended June 30, 2022.

Selling, general, and administrative expense decreased primarily due to:

•

a $2.1 million decrease in commissions and bonus expenses due to lower performance against internal targets;

•

a $0.7 million decrease in personnel expenses as well as certain other cost savings actions taken by the Company in late 2022 and 2023; and

•

a number of other corporate expenses that decreased primarily as a result of cost savings actions taken by the Company in 2023.

The decrease in selling, general, and administrative expense was partially offset by:

•

a $1.4 million increase in share-based compensation expense primarily as a result of a modification to the vesting terms of outstanding unvested and unearned performance-based equity awards; and

•

a $0.8 million increase in expenses related to the impairment of certain operating lease assets resulting from office space exited during the quarter.

Selling, general, and administrative expense was $58.7 million for the six months ended June 30, 2023, compared to $59.7 million for the six months ended June 30, 2022. Selling, general, and administrative expense for the six months ended June 30, 2023 decreased by $1.0 million, or 1.7%, compared to the six months ended June 30, 2022.

Selling, general, and administrative expense decreased primarily due to:

•

a $3.9 million decrease in commissions and bonus expenses due to lower performance against internal targets;

•

a $1.4 million decrease in personnel expenses as well as certain other cost savings actions taken by the Company in late 2022 and 2023; and

•

a number of other corporate expenses that decreased primarily as a result of cost savings actions taken by the Company in 2023.

The decrease in selling, general, and administrative expense was partially offset by:

•

a $2.0 million increase in expenses related to litigation activities in the ordinary course of business;

•

a $1.9 million increase in expenses related to the impairment of certain operating lease assets resulting from office space exited during the quarter;

•

a $1.3 million increase in share-based compensation expense primarily as a result of a modification to the vesting terms of outstanding unvested and unearned performance-based equity awards; and

•

foreign currency exchange losses of $0.7 million due to the impact of foreign exchange rate volatility.

Depreciation and Amortization


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Depreciation and amortization	$	32,056	$	34,407	$	63,922	$	68,441

Depreciation and amortization was $32.1 million for the three months ended June 30, 2023, compared to $34.4 million for the three months ended June 30, 2022. Depreciation and amortization for the three months ended June 30, 2023 decreased by $2.4 million, or 6.8%, compared to the three months ended June 30, 2022. This decrease was partially offset by increases in depreciation related to assets placed in service during the three months ended June 30, 2023.

Depreciation and amortization was $63.9 million for the six months ended June 30, 2023, compared to $68.4 million for the six months ended June 30, 2022. Depreciation and amortization for the six months ended June 30, 2023 decreased by $4.5 million, or 6.6%, compared to the six months ended June 30, 2022. This decrease was partially offset by increases in depreciation related to assets placed in service during the six months ended June 30, 2023.

Interest Expense, Net


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Interest expense, net	$	3,887	$	3,112	$	12,568	$	2,262

Interest expense, net was $3.9 million for the three months ended June 30, 2023, compared to $3.1 million for the three months ended June 30, 2022. Interest expense for the three months ended June 30, 2023 increased by $0.8 million, compared to the three months ended June 30, 2022.

The increase in interest expense was primarily attributable to higher interest expense on the First Lien Credit Facility as a result of increasing interest rates. Increases in interest expense were offset by interest income of $4.4 million earned on cash held within interest bearing accounts and $3.1 million of unrealized gains on the Company’s interest rate collar and swap.

Interest expense, net was $12.6 million for the six months ended June 30, 2023, compared to $2.3 million for the six months ended June 30, 2022. Interest expense for the six months ended June 30, 2023 increased by $10.3 million, compared to the six months ended June 30, 2022.

The increase in interest expense was primarily attributable to higher interest expense on the First Lien Credit Facility as a result of increasing interest rates. Increases in interest expense were offset by interest income of $8.2 million earned on cash held within interest bearing accounts and $1.2 million of unrealized gains on the Company’s interest rate collar and swap.

Provision for Income Taxes


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Provision for income taxes	$	3,968	$	5,432	$	4,649	$	10,367

Our provision for income taxes was $4.0 million for the three months ended June 30, 2023, compared to $5.4 million for the three months ended June 30, 2022. Our provision for income taxes for the three months ended June 30, 2023 decreased by $1.5 million, compared to the three months ended June 30, 2022.

The decrease in our provision for income taxes was primarily due to the decrease of income before income taxes during the three months ended June 30, 2023, as compared to the three months ended June 30, 2022.

Our provision for income taxes was $4.6 million for the six months ended June 30, 2023, compared to $10.4 million for the six months ended June 30, 2022. Our provision for income taxes for the six months ended June 30, 2023 decreased by $5.7 million, compared to the six months ended June 30, 2022.

The decrease in our provision for income taxes was primarily due to the decrease of income before income taxes during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022.

Net Income and Net Income Margin


	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except percentages)	2023			2022			2023			2022
Net income	$	9,782		$	14,236		$	11,707		$	27,249
Net income margin		5.3	%		7.1	%		3.2	%		7.0	%

Net income was $9.8 million for the three months ended June 30, 2023, compared to $14.2 million for the three months ended June 30, 2022. Net income for the three months ended June 30, 2023 decreased by $4.5 million compared to the three months ended June 30, 2022.

Net income margin was 5.3% for the three months ended June 30, 2023 compared to 7.1% for the three months ended June 30, 2022, as reduced demand from customers more impacted by macroeconomic events contributed to lower revenues and profitability, particularly as the Company cycled over the growth experienced in 2022 due to the post-pandemic recovery.

Net income was $11.7 million for the six months ended June 30, 2023, compared to $27.2 million for the six months ended June 30, 2022. Net income for the six months ended June 30, 2023 decreased by $15.5 million compared to the six months ended June 30, 2022.

Net income margin was 3.2% for the six months ended June 30, 2023 compared to 7.0% for the six months ended June 30, 2022, as reduced demand from customers more impacted by macroeconomic events contributed to lower revenues and profitability, particularly as the Company cycled over the growth experienced in 2022 due to the post-pandemic recovery.

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 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.

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 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 $56.0 million for the three months ended June 30, 2023 and represented an Adjusted EBITDA Margin of 30.2%. Adjusted EBITDA was $60.8 million for the three months ended June 30, 2022 and represented an Adjusted EBITDA Margin of 30.2%. Adjusted EBITDA for the three months ended June 30, 2023 decreased by $4.9 million, or 8.0%, compared to the three months ended June 30, 2022.

Adjusted EBITDA was $104.5 million for the six months ended June 30, 2023 and represented an Adjusted EBITDA Margin of 29.0%. Adjusted EBITDA was $114.4 million for the six months ended June 30, 2022 and represented an Adjusted EBITDA Margin of 29.2%. Adjusted EBITDA for the six months ended June 30, 2023 decreased by $9.9 million, or 8.7%, compared to the six months ended June 30, 2022.

Adjusted EBITDA declined as macroeconomic events impacted our revenues attributed to existing customers. Decreases were further impacted by the effects of changes in foreign currencies. These decreases were partially offset by increased revenues from certain existing and new customers, including ongoing strength in upselling and cross-selling, cost structure benefits due to increased automation, operational efficiencies, and certain other cost savings actions taken by the Company in late 2022 and 2023.

The following table presents a reconciliation of Adjusted EBITDA for the periods presented.


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Net income	$	9,782	$	14,236	$	11,707	$	27,249
Interest expense, net		3,887		3,112		12,568		2,262
Provision for income taxes		3,968		5,432		4,649		10,367
Depreciation and amortization		32,056		34,407		63,922		68,441
Share-based compensation		3,601		1,943		5,659		3,802
Transaction and acquisition-related charges (a)		1,190		1,179		2,261		2,677
Integration, restructuring, and other charges (b)		1,487		525		3,765		(364	)
Adjusted EBITDA	$	55,971	$	60,834	$	104,531	$	114,434

(a)

(b)

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.


	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except percentages)	2023			2022			2023			2022
Adjusted EBITDA	$	55,971		$	60,834		$	104,531		$	114,434
Revenues		185,315			201,561			360,835			391,442
Adjusted EBITDA Margin		30.2	%		30.2	%		29.0	%		29.2	%

The following table presents a calculation of Adjusted EBITDA by segment for the periods presented. See Note 14, “Reportable Segments” to the condensed consolidated financial statements for a reconciliation of Adjusted EBITDA for the periods presented by segment.


	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except percentages)	2023			2022			2023			2022
Adjusted EBITDA (1):
Americas	$	52,324		$	52,954		$	96,980		$	99,773
International		3,647			7,880			7,551			14,661
Adjusted EBITDA	$	55,971		$	60,834		$	104,531		$	114,434

Revenues
Americas	$	162,682		$	170,591		$	314,738		$	330,679
International		24,113			33,044			48,961			64,785
Less: intersegment eliminations		(1,480	)		(2,074	)		(2,864	)		(4,022	)
Total revenues	$	185,315		$	201,561		$	360,835		$	391,442

Adjusted EBITDA Margin
Americas		32.2	%		31.0	%		30.8	%		30.2	%
International		15.1	%		23.8	%		15.4	%		22.6	%
Adjusted EBITDA Margin		30.2	%		30.2	%		29.0	%		29.2	%

(1)

See the reconciliation of net income to Adjusted EBITDA above. Segment Adjusted EBITDA margins are calculated using segment gross revenues and segment Adjusted EBITDA. Consolidated Adjusted EBITDA margin is calculated using consolidated revenues and consolidated Adjusted EBITDA.

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 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 $34.8 million for the three months ended June 30, 2023, compared to $38.0 million for the three months ended June 30, 2022. Adjusted Net Income for the three months ended June 30, 2023 decreased by $3.2 million, or 8.4%, compared to the three months ended June 30, 2022.

Adjusted Diluted Earnings Per Share was $0.24 for the three months ended June 30, 2023 decreased by $0.01, or 4.0% compared to the three months ended June 30, 2022.

Adjusted Net Income was $63.2 million for the six months ended June 30, 2023, compared to $71.5 million for the six months ended June 30, 2022. Adjusted Net Income for the six months ended June 30, 2023 decreased by $8.3 million, or 11.6%, compared to the six months ended June 30, 2022.

Adjusted Diluted Earnings Per Share was $0.43 for the six months ended June 30, 2023 decreased by $0.04, or 8.5% compared to the six months ended June 30, 2022.

Adjusted Net Income and Adjusted Diluted Earnings Per Share declined as reduced demand from customers more impacted by macroeconomic events contributed to lower revenues and profitability. Adjusted Net Income and Adjusted Diluted Earnings Per Share were further impacted by changes in acquisition-related depreciation and amortization and changes in our capital structure that are captured in interest expense. 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 tables present a reconciliation of Adjusted Net Income for the periods presented.


	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands)	2023		2022			2023		2022
Net income	$	9,782	$	14,236		$	11,707	$	27,249
Provision for income taxes		3,968		5,432			4,649		10,367
Income before provision for income taxes		13,750		19,668			16,356		37,616
Debt-related charges(a)		33		(1,669	)		4,501		(6,484	)
Acquisition-related depreciation and amortization(b)		25,470		29,029			50,955		58,144
Share-based compensation		3,601		1,943			5,659		3,802
Transaction and acquisition-related charges(c)		1,190		1,179			2,261		2,677
Integration, restructuring, and other charges (d)		1,487		525			3,765		(364	)
Adjusted Net Income before income tax effect		45,531		50,675			83,497		95,391
Less: Income tax effect(e)		10,705		12,669			20,307		23,888
Adjusted Net Income	$	34,826	$	38,006		$	63,190	$	71,503

The following table presents the calculation of Adjusted Diluted Earnings Per Share for the periods presented.


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Diluted net income per share (GAAP)	$	0.07		$	0.09		$	0.08		$	0.18
Adjusted Net Income adjustments per share
Income taxes		0.03			0.04			0.03			0.07
Debt-related charges (a)		0.00			(0.01	)		0.03			(0.04	)
Acquisition-related depreciation and amortization (b)		0.18			0.19			0.35			0.38
Share-based compensation		0.02			0.01			0.04			0.02
Transaction and acquisition related charges (c)		0.01			0.01			0.02			0.02
Integration, restructuring, and other charges (d)		0.01			0.00			0.03			(0.00	)
Adjusted income taxes (e)		(0.07	)		(0.08	)		(0.14	)		(0.16	)
Adjusted Diluted Earnings Per Share (Non-GAAP)	$	0.24		$	0.25		$	0.43		$	0.47

Weighted average number of shares outstanding used in computation of Adjusted Diluted Earnings Per Share:
Weighted average number of shares outstanding—diluted (GAAP and Non-GAAP)		145,338,920			152,360,350			146,894,790			152,361,788

(a)

Represents non-cash interest expense related to the amortization of debt issuance costs for the Company’s First Lien Credit Facility (as defined below). Beginning in 2022, this adjustment also includes the impact of the change in fair value of interest rate swaps. This adjustment, which represents the difference between the fair value gains or losses and actual cash payments and receipts on the interest rate swaps, was added as a result of the increased interest rate volatility observed in 2022.

(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. As a result, the purchase accounting related depreciation and amortization expense will recur in future periods until the related assets are fully depreciated or amortized, and the related purchase accounting assets may contribute to revenue generation.

(c)

(d)

(e)

Effective tax rates of approximately 23.5% and 24.3% have been used to compute Adjusted Net Income and Adjusted Diluted Earnings Per Share for the three and six months ended June 30, 2023, respectively. Effective tax rates of approximately 25.0% have been used to compute Adjusted Net Income and Adjusted Diluted Earnings Per Share for the three and six months ended June 30, 2022. As of December 31, 2022, we had net operating loss carryforwards of approximately $11.0 million for federal income tax purposes available to reduce future income subject to income taxes. As a result, the amount of actual cash taxes we may pay for federal income taxes differs significantly from the effective income tax rate computed in accordance with GAAP and from the normalized rates shown above.

Liquidity and Capital Resources

Liquidity

The Company’s primary liquidity requirements are for working capital, continued investments in software development and other capital expenditures, and other strategic investments. In the second quarter of 2023 the Company fully utilized its remaining U.S. Federal income tax net operating loss carryforwards. As a result, income taxes will become 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. 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, 2023, we had $399.1 million in cash and cash equivalents and $100.0 million available under our revolving credit facility. As of June 30, 2023, we had $564.7 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Share Repurchase Program

On August 2, 2022, the Company’s Board of Directors authorized the repurchase of up to $50.0 million of the Company’s common stock over the 12-month period ending August 2, 2023 (the “Repurchase Program”). Stock repurchases may be effected through open market repurchases at prevailing market prices, including through the use of block trades and trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, privately-negotiated transactions, through other transactions in accordance with applicable securities laws, or a combination of these methods on such terms and in such amounts as the Company deems appropriate and will be funded from available capital. The Company is not obligated to repurchase any specific number of shares, and the timing, manner, value, and actual number of shares repurchased will depend on a variety of factors, including the Company’s stock price and liquidity requirements, other business considerations and general market and economic conditions. No shares will be purchased from SLP Fastball Aggregator, L.P. and its affiliates. The Company may discontinue or modify purchases without notice at any time. The Company has used and plans to use its existing cash to fund repurchases made under the share repurchase program.

On November 8, 2022, the Company’s Board of Directors authorized an increase to the total available amount under its Repurchase Program to $150.0 million and extended the program through December 31, 2023. On February 28, 2023, the Company’s Board of Directors authorized an increase to the total available amount under its Repurchase Program to $200.0 million. Through August 3, 2023, the Company repurchased approximately $114.5 million of shares under the Repurchase Program.

Dividends

Long-Term Debt

In February 2020, a new financing structure was established consisting of a new First Lien Credit Agreement (“First Lien Agreement”). The First Lien Agreement provided financing in the form of a $670.0 million term loan due January 31, 2027 (“First Lien Credit Facility”) and a $75.0 million new revolving credit facility due January 31, 2025 (“Revolver”).

On February 1, 2021, we amended the First Lien Agreement to fund $100.0 million of additional first lien term loans and reduce the applicable margins by 0.25%.

In connection with the IPO, the Company entered into an amendment to increase the borrowing capacity under the Revolver from $75.0 million to $100.0 million and extend the maturity date from January 31, 2025 to July 31, 2026.

Borrowings under the First Lien Agreement bear interest at a rate per annum equal to an applicable margin plus, at our option, either (a) a base rate or (b) LIBOR, which is subject to a floor of 0.00% per annum. In June 2023, the Credit Agreement was amended to transition the reference rate from LIBOR to SOFR (the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York), with the addition of an applicable margin. The applicable margins under the First Lien Agreement are subject to stepdowns based on our first lien net leverage ratio. In connection with the closing of the IPO, each applicable margin was reduced further by 0.25%. In addition, the borrower, First Advantage Holdings, LLC, which is an indirect wholly-owned subsidiary of the Company, 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 First Lien Credit Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00% of the principal amount. The Revolver has no amortization. The First Lien Credit Facility 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 August 1, 2021 were subject to a 1.00% prepayment premium. Otherwise, the borrower may voluntarily repay outstanding loans without premium or penalty, other than customary “breakage” costs.

In connection with the closing of the IPO, on June 30, 2021, the Company repaid $200.0 million of the First Lien Credit Facility outstanding, of which $44.3 million was applied to all of the remaining quarterly amortizing principal payments due under the First Lien Agreement. The remaining $564.7 million term loan is scheduled to mature on January 31, 2027.

The First Lien 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 First Lien 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 First Lien Agreement contains customary affirmative covenants, negative covenants, and events of default (including upon a change of control). The First Lien Agreement also includes a “springing” first lien net leverage ratio test, applicable only to the 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 35.0% of the Revolver is utilized on such date.

Cash Flow Analysis

Comparison of Cash Flows for the six months ended June 30, 2023 compared to the six months ended June 30, 2022

The following table is a summary of our cash flow activity for the periods presented:


	Six Months Ended June 30,
(in thousands)	2023			2022
Net cash provided by operating activities	$	71,722		$	96,412
Net cash used in investing activities		(13,318	)		(34,363	)
Net cash (used in) provided by financing activities		(50,984	)		187

Cash Flows from Operating Activities

Net cash provided by operating activities was $71.7 million for the six months ended June 30, 2023, compared to $96.4 million for the six months ended June 30, 2022. Net cash provided by operating activities for the six months ended June 30, 2023 decreased by $24.7 million compared to the six months ended June 30, 2022. Cash flows from operating activities were impacted by the continuation of more modest hiring activity in the Americas and softness internationally resulting from the ongoing uncertainty from the economic environment that began to impact hiring demand in late 2022.

Cash Flows from Investing Activities

Net cash used in investing activities was $13.3 million for the six months ended June 30, 2023, compared to $34.4 million for the six months ended June 30, 2022. Net cash used in investing activities for the six months ended June 30, 2023 decreased by $21.0 million compared to the six months ended June 30, 2022. The cash flows used in investing activities for the six months ended June 30, 2023 were driven primarily by capitalized software development costs, which increased in 2023 as the Company continued to make incremental investments in its technology platform. Cash flows used in investing activities for the six months ended June 30, 2022 were incrementally impacted by the $19.1 million acquisition of Form I-9 Compliance, net of cash acquired.

Cash Flows from Financing Activities

Net cash (used in) provided by financing activities was $(51.0) million for the six months ended June 30, 2023, compared to $0.2 million for the six months ended June 30, 2022. Cash outflows from financing activities for the six months ended June 30, 2023 were primarily driven by shares repurchased under the Company’s Repurchase Program. During the six months ended June 30, 2023, 3,895,737 shares were repurchased under the program for a total cost of $52.3 million. These outflows were offset by cash inflows related to share-based compensation activity.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of June 30, 2023, no material change had occurred in our market risks, compared with the disclosure in our Annual Report on Form 10-K filed with the SEC on February 28, 2023.

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 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 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Information in response to this Item is included in “Part I — Item 1. — Note 11 — Commitments and Contingencies” and is incorporated by reference into Part II of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors.

As of June 30, 2023, no material changes had occurred in our risk factors, compared with the disclosure in our Annual Report on Form 10-K filed with the SEC on February 28, 2023.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

Use of Proceeds

On June 25, 2021, we completed our IPO. All shares sold were registered pursuant to a registration statement on Form S-1 (File No. 333-256622), declared effective by the SEC on June 22, 2021.

There has been no material change in the expected use of the net proceeds from our IPO as described in our Annual Report on Form 10-K filed with the SEC on February 28, 2023.

Issuer Purchases of Equity Securities

The following information relates to the Company’s purchase of its common stock during each month within the second quarter of 2023:


Period	Total Number of Shares Purchased		Average Price Paid Per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
4/1/2023 - 4/30/2023		656,282	$	13.19		656,282	$	105,543,489
5/1/2023 - 5/31/2023		675,859	$	12.90		675,859	$	96,828,280
6/1/2023 - 6/30/2023		691,905	$	14.01		691,905	$	87,134,769
Total		2,024,046	$	13.37		2,024,046	$	87,134,769

(1)

Average price paid per share for shares purchased as part of our Repurchase Program (includes brokerage commissions).

(2)

On August 2, 2022, the Company’s Board of Directors authorized the repurchase of up to $50.0 million of the Company’s common stock over the 12-month period ending August 2, 2023 (the “Repurchase Program”). On November 8, 2022, the Company’s Board of Directors authorized an increase to the total available amount under its Repurchase Program to $150.0 million and extended the program through December 31, 2023. On February 28, 2023, the Company’s Board of Directors authorized an increase to the total available amount under its Repurchase Program to $200.0 million. Through August 3, 2023, the Company repurchased approximately $114.5 million of shares under the Repurchase Program.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable

Item 5. Other Information.

During the three months ended June 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) 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).

Item 6. Exhibits.


Exhibit Number		Description
3.1		Amended and Restated Certificate of Incorporation of First Advantage Corporation (incorporated herein by reference to Exhibit 3.1 of First Advantage’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’s Form 8-K filed on June 25, 2021).
10.1†		First Amendment to First Advantage Corporation 2021 Omnibus Incentive Plan.
10.2†		Form of Notice re Amendment to Performance Award Vesting for previously issued grants, dated May 10, 2023.
10.3		Amendment No. 3 to First Lien Credit Agreement, dated as of June 23, 2023, among First Advantage Holdings, LLC, the revolving lenders party thereto, and Bank of America, N.A. as administrative agent.
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 Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in the Exhibit 101 attachments).

† 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 9, 2023	By:	/s/ Scott Staples
		Scott Staples
		Chief Executive Officer (principal executive officer)

Date: August 9, 2023	By:	/s/ David L. Gamsey
		David L. Gamsey
		Executive Vice President & Chief Financial Officer (principal financial officer)

EX-10.1 2 fa-ex10_1.htm EX-10.1 EX-10.1

Exhibit 10.1

FIRST AMENDMENT TO

FIRST ADVANTAGE CORPORATION 2021 OMNIBUS INCENTIVE PLAN

THIS FIRST AMENDMENT TO the First Advantage 2021 Omnibus Incentive Plan (this “Amendment”), made as of May 10, 2023, is made and adopted by First Advantage Corporation, a Delaware corporation (the “Company”). Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to them in the Plan (as defined below).

WHEREAS, the Company maintains the First Advantage 2021 Omnibus Incentive Plan (the “Plan”);

WHEREAS, pursuant to Section 13(a) of the Plan, the Plan may be amended from time to time by the Company’s Board of Directors (the “Board”); and

WHEREAS, the Board desires to amend the Plan as set forth herein.

NOW, THEREFORE BE IT RESOLVED, that the Plan be amended as follows:

Section 2(i) of the Plan be revised in its entirety as follows:

“Change in Control” means (i) the acquisition of beneficial ownership by any Person, other than the Permitted Holders, of Equity Interests of the Company representing more than 50% of the aggregate votes entitled to vote for the election of directors of the Company, unless the Permitted Holders otherwise have the right (pursuant to contract, proxy or otherwise), directly or indirectly, to designate, nominate or appoint at least half of the Board or (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company Group (taken as a whole) to any Person that is not an Affiliate, other than a Permitted Holder.

For purposes of this definition, including other defined terms used herein in connection with this definition and notwithstanding anything to the contrary in this definition or any provision of Section 13d- 3 of the Exchange Act, (A) “beneficial ownership” shall be as defined in Rules 13d-3 and 13d-5 under the Exchange Act as in effect on May 10, 2023, (B) if any group includes one or more Permitted Holders, the issued and outstanding Equity Interests of the Company, directly or indirectly owned by the Permitted Holders that are part of such group shall not be treated as being beneficially owned by such group or any other member of such group, (C) a Person or group shall not be deemed to beneficially own Equity Interests (x) to be acquired by such Person or group pursuant to a stock or asset purchase agreement, merger agreement, option agreement, warrant agreement or similar agreement (or voting or option or similar agreement related thereto) until the consummation of the acquisition of the Equity Interests in connection with the transactions contemplated by such agreement or (y) as a result of veto or approval rights in any joint venture agreement, shareholder agreement, investor rights agreement or other similar agreement and (D) a Person or group will not be deemed to beneficially own the Equity Interests of another Person as a result of its ownership of Equity Interests or other securities of such other Person’s parent (or related contractual rights) unless it owns 50% or more of the total voting power of the Equity Interests entitled to vote for the election of directors of such Person’s parent. and Section 2 of the Plan be revised to include the following additional definitions:

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person.

“Management Investors” means current and/or former directors, officers, partners, members and employees of the Company, any parent entity thereof and/or any of their respective subsidiaries who are (directly or indirectly through one or more investment vehicles) holders of Equity Interests of the Company or any such parent entity or subsidiary on the May 10, 2023.

“Permitted Holder” means (i) the Sponsor, (ii) the Management Investors and their Permitted Transferees, and (iii) any group of which the Persons described in clauses (i) and/or (ii) are members and any other member of such group; provided, that the Persons described in clauses (i) and (ii), without giving effect to the existence of such group or any other group, collectively own, directly or indirectly, 50% or more of the Equity Interests of the Company held by such group and (iv) any employee benefit plan of the Company or its subsidiaries and any Person acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan.

“Permitted Transferees” means, with respect to any Person that is a natural person (and any Permitted Transferee of such Person), (i) such Person’s Immediate Family Members, including his or her spouse,

ex-spouse, children, step-children and their respective lineal descendants and (ii) without duplication with any of the foregoing, such Person’s heirs, legatees, executors and/or administrators upon the death of such Person and any other Person who was an affiliate of such Person upon the death of such Person and who, upon such death, directly or indirectly owned Equity Interests of the Company.

“Sponsor” means Silver Lake Partners V, L.P., its affiliates and any funds, partnerships, co-investment entities and other investment vehicles managed, advised or controlled thereby or by one or more directors thereof or under common control therewith (other than any portfolio company of any of the foregoing).

This Amendment shall be, and is hereby incorporated in and forms, a part of the Plan.

All other terms and provisions of the Plan shall remain unchanged except as specifically modified herein.

[Remaining of page intentionally left blank]

I hereby certify that the foregoing Amendment was duly adopted by the Board of Directors of First Advantage Corporation as of May 9, 2023.

Executed on this 9th day of May, 2023.

/s/ Bret T. Jardine

Bret T. Jardine

EVP, General Counsel & Corporate Secretary

EX-10.2 3 fa-ex10_2.htm EX-10.2 EX-10.2

Exhibit 10.2

First Advantage Corporation

May 10, 2023

[Name]
[Email]

Re: Amendment to Performance Award Vesting for Grant ID:

Dear [Name],

Congratulations! Upon the recommendation of its Compensation Committee, the Board of Directors of First Advantage Corporation (the “Company”) has approved an amendment to each of your currently outstanding unearned and unvested performance-based equity awards (whether in the form of options, SARs, restricted shares or RSUs, each such unearned and unvested award, a “Performance Award”) that is designed to allow those Performance Awards to vest based solely on your continued employment or service to the Company through the applicable vesting dates, while preserving their eligibility to vest upon future “Realization Events” (as that term is defined in the award agreement(s) pursuant to which the Performance Awards were granted to you). This letter constitutes an amendment to the award agreement(s) pursuant to which the Performance Awards were granted to you, so please keep a copy with your award agreement(s). For the avoidance of doubt, this letter does not apply to any of your equity awards that vest based solely on your continued employment or service to the Company.

Subject only to your continued employment or service with the Company and its subsidiaries through the applicable vesting date set forth in the table below, a number of additional Performance Awards, if any, shall vest on each such vesting date as is necessary to ensure that the applicable percentage of the Performance Awards that is vested on such vesting date is equal to the percentage set forth in the table below next to such vesting date, such that 100% of the Performance Awards will be vested on [ ] even if no additional Realization Events occur prior to [ ]:


Percentage of Performance Awards Vesting	Vesting Date
20%, or [ ] of Performance Awards	[ ]
40%, or [ ] of Performance Awards	[ ]
40%, or [ ] of Performance Awards	[ ]

Subject to your continued employment or service with the Company and its subsidiaries through such Realization Event, if a Realization Event occurs prior to [ ], the number of Performance Awards that will vest as a result of such Realization Event will be determined based on the applicable vesting criteria for Performance Awards in the award agreement(s), including, without limitation, the 20% per year time-based vesting schedule that applies to your Performance Awards in addition to the purely performance vesting criteria (collectively, the “Performance Vesting Criteria”). However, given the new time-based vesting schedule above, the total number of Performance Awards that will be vested following the occurrence of such Realization Event will equal the greater of (i) the total number of Performance Awards that would be vested following such Realization Event applying the Performance Vesting Criteria (including the application of the 20% per year time-based vesting schedule) and (ii) the percentage of Performance Awards that are vested as of such Realization Event as provided in the new time-based vesting schedule above.

For purposes of illustration only, if the first Realization Event since the date hereof occurs on [ ] and (i) the application of the Performance Vesting Criteria would result in the vesting of 50% of the Performance Awards, then no additional Performance Awards will vest in connection with the Realization Event as 60% of the Performance Awards are already vested as a result of the application of the new time-based vesting schedule above, and (ii) the application of the Performance Vesting Criteria would result in the vesting of 70% of the Performance Awards, then additional Performance Awards will vest in connection with the Realization Event so that 70% of the total number of Performance Awards will be vested following such Realization Event and, assuming no additional Realization Event occurs before such date, the remaining 30% of the Performance Awards would vest on [ ], subject to your continued employment or service with the Company and its subsidiaries on that date.

If a “Change in Control” (as that term, or if instead applicable, the term “Change of Control,” is defined in the award agreement(s) pursuant to which the Performance Awards were granted to you) occurs prior to [ ], any Performance Awards that do not vest in connection with such Change in Control will not be forfeited but will instead either (i) be assumed (including, if applicable, through the grant of substitute awards) by the acquirer of the Company or an affiliate thereof in such Change in Control and (A) if the “Investor Group” (as that term is defined in the award agreement(s) pursuant to which the Performance Awards were granted to you) does not retain any direct or indirect interest in the Company or any successor entity following such Change in Control, be subject only to the time-based vesting schedule set forth above (i.e., such time-based vesting schedule is not deemed to be satisfied as a result of such Change in Control, but the Performance Vesting Criteria will no longer apply following the Change in Control) and, if your employment or service with the Company and its subsidiaries is terminated at any time during the 12-month period following such Change in Control, by the Company or its subsidiaries without “Cause” (as that term is defined in the award agreement(s) pursuant to which the Performance Awards were granted to you), all unvested Performance Awards shall become fully vested upon the date of such termination and (B) if the Investor Group retains any direct or indirect interest in the Company or any successor entity following such Change in Control and the Board of Directors of the Company, acting in its sole discretion, does not decide to accelerate the vesting of the unvested Performance Awards in connection with or following such Change in Control, remain subject to the applicable vesting terms (including, without limitation, the ability of the Compensation Committee to test Performance Awards that remain eligible for performance-based vesting following a termination of employment for vesting based on the occurrence of a hypothetical Realization Event during the 12-month period following such termination), as modified by this letter (but, for the avoidance of doubt, there will be no further vesting based on the new time-based vesting schedule set forth in this letter following a termination of employment for any reason); and (ii) vest in full on the closing of the Change in Control if not assumed (including, if applicable, through the grant of substitute awards) by the acquirer or an affiliate thereof.

Except as amended hereby, the award agreement(s) governing the Performance Awards shall remain in full force and effect in accordance with their terms, including, without limitation, provisions relating to the treatment of Performance Awards on a termination of your employment or service with the Company and its subsidiaries that occurs prior to a Change in Control.

This amendment is governed by and construed and enforced in accordance with the laws of the State of Delaware, without regard to conflicts of law principles thereof.

This amendment is effective as of the date hereof and does not require any action on your part. As noted above, please retain a copy of this amendment for your own records. Thank you for your continued service to the Company.

Sincerely,

_______________________

By: Scott Staples

Title: Chief Executive Officer

First Advantage Corporation

EX-10.3 4 fa-ex10_3.htm EX-10.3 EX-10.3

Exhibit 10.3

EXECUTION VERSION

AMENDMENT NO. 3 to the FIRST LIEN CREDIT AGREEMENT, dated as of June 23, 2023 (this “Amendment”), by and among FIRST ADVANTAGE HOLDINGS, LLC, a Delaware limited liability company (the “Borrower”), the Revolving Lenders party hereto, and BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”).

WHEREAS, reference is hereby made to the First Lien Credit Agreement dated as of January 31, 2020 (as amended by Amendment No. 1 dated as of February 1, 2021, as amended by Amendment No. 2, dated as of May 28, 2021 and as further amended, supplemented, amended and restated or otherwise modified from time to time, the “Credit Agreement”; the Credit Agreement as amended by this Amendment the “Amended Credit Agreement”) among FASTBALL PARENT, INC., a Delaware corporation (“Holdings”), the Borrower, each lender from time to time party thereto (collectively, the “Lenders” and each, individually, a “Lender”), the Administrative Agent, the Collateral Agent, and the Issuing Banks party thereto.

WHEREAS, certain loans and/or other extensions of credit under the Credit Agreement denominated in dollars incur or are permitted to incur interest, fees, commissions or other amounts based on the London Interbank Offered Rate as administered by the ICE Benchmark Administration (“LIBOR”) in accordance with the terms of the Credit Agreement; and

WHEREAS, the Administrative Agent and the Borrower have agreed to amend the Credit Agreement to replace the LIBOR Rate with the LIBOR Successor Rate, which LIBOR Successor Rate is a SOFR-Based Rate, set forth in Annex A hereto and to implement the related LIBOR Successor Rate Conforming Changes;

WHEREAS, in accordance with Section 2.14(b) of the Credit Agreement, any such LIBOR Successor Rate amendment, together with the related LIBOR Successor Rate Conforming Changes, shall become effective at 5:00 p.m. (New York time) on the fifth Business Day after the Administrative Agent shall have posted such proposed amendment to all Lenders and the Borrower unless, prior to such time, Lenders comprising Required Lenders have delivered to the Administrative Agent written notice that such Required Lenders do not accept the “credit spread adjustments” (the “Term Loan Adjustments”) to the Term SOFR Rate (as defined in the Amended Credit Agreement) as set forth in clause (a) of the definition of “Adjusted Term SOFR Rate” (as defined in the Amended Credit Agreement);

WHEREAS, notwithstanding anything in Section 2.14(b) of the Credit Agreement to the contrary, in accordance with Section 9.02(b) of the Credit Agreement, the Administrative Agent, the Borrower and the Revolving Lenders desire to amend the Credit Agreement to reflect the Revolving Loan “credit spread adjustments” to the Term SOFR Rate (as defined in the Amended Credit Agreement) as set forth in clause (b) the definition of “Adjusted Term SOFR Rate” (as defined in the Amended Credit Agreement).

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto hereby agree as follows:

SECTION 1. Defined Terms.

Capitalized terms used but not defined herein shall have the respective meanings assigned to such terms in the Credit Agreement.

SECTION 2. Amendments. Effective as of the Amendment No. 3 Effective Date (as defined below), the Credit Agreement is hereby amended to delete the stricken text (indicated textually in the same manner as the following example: ) and to add the double-underlined text (indicated textually in the same manner as the following example: double-underlined text) as set forth in the pages of the Credit Agreement attached as Annex A hereto (the “Amended Credit Agreement”).

SECTION 3. Representations and Warranties.

(a)

To induce the other parties hereto to enter into this Amendment, the Borrower represents and warrants to the Administrative Agent that, as of the Amendment No. 3 Effective Date, this Amendment has been duly authorized, executed and delivered by the Borrower and constitutes, and upon the occurrence of the Amendment No. 3 Effective Date and after giving effect to the transactions and amendments to occur on the Amendment No. 3 Effective Date, the Amended Credit Agreement will constitute, its legal, valid and binding obligation, enforceable against each of the Loan Parties in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

(b)

The representations and warranties of each Loan Party set forth in the Loan Documents are, after giving effect to this Amendment on the Amendment No. 3 Effective Date, true and correct in all material respects on and as of such date, except to the extent such representations and warranties specifically refer to an earlier date, in which case such representations and warranties were true and correct in all material respects as of such earlier date; provided that any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct in all respects on the Amendment No. 3 Effective Date hereof or on such earlier date, as the case may be.

SECTION 4. Conditions of Effectiveness. This Amendment shall become effective as of the first date (the “Amendment No. 3 Effective Date”) on which the applicable conditions set forth below shall have been satisfied:

(a)

The Administrative Agent shall have received counterparts of this Amendment executed by the Borrower, each Revolving Lender and the Administrative Agent; and

(b)

The Administrative Agent shall have posted this Amendment to all Lenders and the Borrower five Business Days in advance of the date hereof, and as of 5:00 p.m. (New York time) on the date hereof, the Administrative Agent shall not have received written notice of objection to the Term Loan Adjustments from Lenders comprising Required Lenders.

SECTION 5. Governing Law. This Amendment shall be construed in accordance with and governed by the law of the State of New York. The provisions of Sections 9.09 and 9.10 of the Credit Agreement shall apply to this Amendment to the same extent as if fully set forth herein.

SECTION 6. Costs and Expenses. The Borrower agrees to reimburse the Administrative Agent for its reasonable out of pocket expenses in connection with this Amendment and the transactions contemplated hereby, including the reasonable fees, charges and disbursements of Cahill Gordon & Reindel LLP, counsel for the Administrative Agent.

SECTION 7. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Delivery of any executed counterpart of a signature page of this Amendment by facsimile transmission or other electronic imaging means shall be effective as delivery of a manually executed counterpart hereof. This Amendment and any document, amendment, approval, consent, information, notice, certificate, request, statement, disclosure or authorization related to this Amendment (each a “Communication”), including Communications required to be in writing, may be in the form of an Electronic Record and may be executed using Electronic Signatures.

Each of the Loan Parties agrees that any Electronic Signature on or associated with any Communication shall be valid and binding on each of the Loan Parties to the same extent as a manual, original signature, and that any Communication entered into by Electronic Signature, will constitute the legal, valid and binding obligation of each of the Loan Parties enforceable against such in accordance with the terms thereof to the same extent as if a manually executed original signature was delivered. Any Communication may be executed in as many counterparts as necessary or convenient, including both paper and electronic counterparts, but all such counterparts are one and the same Communication. For the avoidance of doubt, the authorization under this paragraph may include, without limitation, use or acceptance by the Administrative Agent and each of the Secured Parties of a manually signed paper Communication which has been converted into electronic form (such as scanned into PDF format), or an electronically signed Communication converted into another format, for transmission, delivery and/or retention. The Administrative Agent and each of the Secured Parties may, at its option, create one or more copies of any Communication in the form of an imaged Electronic Record (“Electronic Copy”), which shall be deemed created in the ordinary course of such Person’s business, and destroy the original paper document. All Communications in the form of an Electronic Record, including an Electronic Copy, shall be considered an original for all purposes, and shall have the same legal effect, validity and enforceability as a paper record. Notwithstanding anything contained herein to the contrary, the Administrative Agent is under no obligation to accept an Electronic Signature in any form or in any format unless expressly agreed to by the Administrative Agent pursuant to procedures approved by it; provided, further, without limiting the foregoing, (a) to the extent the Administrative Agent has agreed to accept such Electronic Signature, the Administrative Agent and each of the Secured Parties shall be entitled to rely on any such Electronic Signature purportedly given by or on behalf of any Loan Party without further verification and (b) upon the request of the Administrative Agent or any Lender, any Electronic Signature shall be promptly followed by such manually executed counterpart. For purposes hereof, “Electronic Record” and “Electronic Signature” shall have the meanings assigned to them, respectively, by 15 USC §7006, as it may be amended from time to time.

SECTION 8. Effect of Amendment.

(a)

Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of, the Lenders or the Agents under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. The parties hereto acknowledge and agree that the amendment of the Credit Agreement pursuant to this Amendment and all other Loan Documents amended and/or executed and delivered in connection herewith shall not constitute a novation of the Credit Agreement and the other Loan Documents as in effect prior to the Amendment No. 3 Effective Date. The Borrower agrees that (i) the Security Documents continue to be in full force and effect and are not impaired or adversely affected in any manner whatsoever, (ii) confirms its grant of security interests pursuant to the Security Documents to which it is a party as Collateral for the obligations and (iii) acknowledges that all Liens granted (or purported to be granted) pursuant to the Security Documents remain and continue in full force and effect in respect of, and to secure, the obligations. Nothing herein shall be deemed to establish a precedent for purposes of interpreting the provisions of the Amended Credit Agreement or entitle any Loan Party to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Amended Credit Agreement or any other Loan Document in similar or different circumstances. This Amendment shall apply to and be effective only with respect to the provisions of the Credit Agreement and the other Loan Documents specifically referred to herein.

(b)

On and after the Amendment No. 3 Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import, and each reference to the Credit Agreement, “thereunder”, “thereof”, “therein” or words of like import in any other Loan Document, shall be deemed a reference to the Credit Agreement, as amended hereby.

On and after the Amendment No. 3 Effective Date, this Amendment shall constitute a Refinancing Amendment entered into pursuant to Section 2.21 of the Credit Agreement, an Incremental Facility Amendment entered into pursuant to Section 2.20 of the Credit Agreement and a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents.

SECTION 9. Transition to Term SOFR. Notwithstanding any other provision herein or in any other Loan Document, any Term Loan and Revolving Loan that constitutes a Eurocurrency Loan that is outstanding as of the Amendment No. 3 Effective Date shall continue until the end of the applicable Interest Period for such Eurocurrency Loan for each Class and the provisions of the Credit Agreement applicable thereto shall continue and remain in effect (notwithstanding the entry into this Amendment and the occurrence of the Amendment No. 3 Effective Date) until the end of the applicable Interest Period (the “Current Interest Period”) for such Eurocurrency Loan for each such Class, after which such provisions shall have no further force or effect and upon which date the terms of the Amended Credit Agreement notwithstanding this Section 11 shall automatically apply to such Term Loans and Revolving Loans without any further action by any party party hereto; provided that, for the avoidance of doubt, at any time from and after the Amendment No. 3 Effective Date, the Borrower shall not be permitted to request a Borrowing of, conversion to, or continuation of, any Eurocurrency Loan that is a Loan outstanding as of the Amendment No. 3 Effective Date and shall instead request that any such Borrowing is made in, converted to or continued to, as applicable, Term SOFR Loans (as defined in the Amended Credit Agreement); provided, further, that if the Borrower has not delivered an Interest Election Request specifying an Interest Period (as defined in the Amended Credit Agreement) at the end of the Current Interest Period for such Eurocurrency Loan, the Borrower shall be deemed to have selected an Interest Period (as defined in the Amended Credit Agreement) of one month’s duration. For the avoidance of doubt, from and after the Amendment No. 3 Effective Date, dollars shall not be considered a currency for which there is a published LIBOR rate.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.


FIRST ADVANTAGE HOLDINGS, LLC

By:	/s/ David Gamsey
	Name:	David Gamsey
	Title:	Chief Financial Officer