What changed in FIRST ADVANTAGE CORP's 10-K — 2023 vs 2024
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Paragraph-level year-over-year comparison of FIRST ADVANTAGE CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.
+220 added−214 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-29)
Top changes in FIRST ADVANTAGE CORP's 2024 10-K
220 paragraphs added · 214 removed · 167 edited across 1 sections
- Item 1C. Cybersecurity+220 / −214 · 167 edited
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
167 edited+53 added−47 removed111 unchanged
Item 1C. Cybersecurity
Cybersecurity — threats and controls disclosure
167 edited+53 added−47 removed111 unchanged
2023 filing
2024 filing
Biggest changeOur 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. 46 Results of Operations Comparison of Results of Operations for the Year Ended December 31, 2023 compared to the Year Ended December 31, 2022 and for the Year Ended December 31, 2022 compared to the Year Ended December 31, 2021 Year Ended December 31, (in thousands, except percentages) 2023 2022 2021 Revenues $ 763,761 $ 810,023 $ 712,295 Operating Expenses: Cost of services (exclusive of depreciation and amortization below) 386,777 408,928 352,170 Product and technology expense 49,263 51,931 45,507 Selling, general, and administrative expense 116,732 116,640 107,980 Depreciation and amortization 129,473 138,246 142,815 Total operating expenses 682,245 715,745 648,472 Income from operations 81,516 94,278 63,823 Other Expense, Net: Interest expense, net 33,040 9,199 24,972 Loss on extinguishment of debt — — 13,938 Total other expense, net 33,040 9,199 38,910 Income before provision for income taxes 48,476 85,079 24,913 Provision for income taxes 11,183 20,475 8,862 Net income $ 37,293 $ 64,604 $ 16,051 Net income margin 4.9 % 8.0 % 2.3 % 47 Revenues Year Ended December 31, (in thousands) 2023 2022 2021 Revenues Americas $ 673,075 $ 694,865 $ 604,413 International 96,832 122,599 114,009 Eliminations (6,146 ) (7,441 ) (6,127 ) Total revenues $ 763,761 $ 810,023 $ 712,295 Revenues were $763.8 million for the year ended December 31, 2023, compared to $810.0 million for the year ended December 31, 2022.
Biggest changeResults of Operations Comparison of Results of Operations for the Year Ended December 31, 2024 compared to the Year Ended December 31, 2023 and for the Year Ended December 31, 2023 compared to the Year Ended December 31, 2022 Year Ended December 31, (in thousands, except percentages) 2024 2023 2022 Revenues $ 860,205 $ 763,761 $ 810,023 Operating Expenses: Cost of services (exclusive of depreciation and amortization below) 448,911 386,777 408,928 Product and technology expense 63,817 49,263 51,931 Selling, general, and administrative expense 263,942 116,732 116,640 Depreciation and amortization 145,919 129,473 138,246 Total operating expenses 922,589 682,245 715,745 (Loss) income from operations (62,384 ) 81,516 94,278 Other Expense, Net: Interest expense, net 51,848 33,040 9,199 Loss on extinguishment of debt 383 — — Total other expense, net 52,231 33,040 9,199 (Loss) income before provision for income taxes (114,615 ) 48,476 85,079 (Benefit) provision for income taxes (4,342 ) 11,183 20,475 Net (loss) income $ (110,273 ) $ 37,293 $ 64,604 Net (loss) income margin (12.8 )% 4.9 % 8.0 % 47 Revenues Year Ended December 31, (in thousands) 2024 2023 2022 Revenues First Advantage Americas $ 658,758 $ 673,075 $ 694,865 First Advantage International 96,854 96,832 122,599 Sterling 113,068 — — Eliminations (8,475 ) (6,146 ) (7,441 ) Total revenues $ 860,205 $ 763,761 $ 810,023 Revenues were $860.2 million for the year ended December 31, 2024, compared to $763.8 million for the year ended December 31, 2023.
Additional information about cybersecurity risks we face is discussed in Item 1A of Part I, “Risk Factors,” under the heading “Our business, brand, and reputation may be harmed as a result of security breaches, cyber-attacks, employee or other internal misconduct, computer viruses, or the mishandling of personal data” should be read in conjunction with the information above. It em 2.
Additional information about cybersecurity risks we face is discussed in Item 1A of Part I, “Risk Factors,” under the heading “Our business, brand, and reputation may be harmed as a result of security breaches, cyber-attacks, employee or other internal misconduct, computer viruses, or the mishandling of personal data” and should be read in conjunction with the information above.” It em 2.
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.
Our comprehensive product suite includes criminal background checks, drug and health screening, extended workforce screening, biometrics and identity, education and work verifications, resident screening, fleet and driver compliance, executive screening, data analytics, continuous monitoring, social media monitoring, and hiring tax incentives.
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.
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 and vehicle compliance, hiring tax credits and incentives, resident and tenant screening, employment eligibility, and investigative research.
We define Adjusted EBITDA as net income before interest, taxes, depreciation, and amortization, and as further adjusted for loss on extinguishment of debt, share-based compensation, transaction and acquisition-related charges, integration and restructuring charges, and other non-cash charges.
We define Adjusted EBITDA as net (loss) income before interest, taxes, depreciation, and amortization, and as further adjusted for loss on extinguishment of debt, share-based compensation, transaction and acquisition-related charges, integration and restructuring charges, and other non-cash charges.
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 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.
Gains or losses resulting from foreign currency transactions are included in the Company’s consolidated statements of operations and comprehensive income, except for gains or losses relating to intercompany transactions of a long-term investment nature, which are presented in a separate component of equity as accumulated other comprehensive loss.
Gains or losses resulting from foreign currency transactions are included in the Company’s consolidated statements of operations and comprehensive (loss) income, except for gains or losses relating to intercompany transactions of a long-term investment nature, which are presented in a separate component of equity as accumulated other comprehensive loss.
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 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 Amended First Lien Credit Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00% of the principal amount. The Amended Revolver has no amortization.
We do not allocate depreciation and amortization to selling, general, and administrative expenses. • Depreciation and Amortizatio n: 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 do not allocate depreciation and amortization to selling, general, and administrative expenses. 46 • Depreciation and Amortizatio n: 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.
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 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 peer companies using similar measures.
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 Net Income for a particular period as net (loss) income before taxes adjusted for debt-related costs, acquisition-related depreciation and amortization, share-based compensation, transaction and acquisition related charges, integration and restructuring charges, and other non-cash charges, to which we then apply the related effective tax rate.
We do not allocate depreciation and amortization to cost of services. 45 • 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.
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.
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.
Together, 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.
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 2024 First Lien Credit 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).
Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 64 Management's Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 64 Management's Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 has been audited by Deloitte & Touche LLP, the Company’s independent registered public accounting firm, as stated in their report, which appears in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K. It em 9B. Other Information.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2024 has been audited by Deloitte & Touche LLP, the Company’s independent registered public accounting firm, as stated in their report, which appears in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K. It em 9B. Other Information.
(c) 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. 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.
(c) Represents charges from organizational restructuring and integration activities, non-cash, and other charges primarily related to nonrecurring legal exposures, foreign currency (gains) losses, (gains) losses on the sale of assets, and other non-recurring items. 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.
The Company classifies interest and penalties associated with its unrecognized tax benefits as a component of income tax expense (see Note 8 to the audited consolidated financial statements included elsewhere in this Annual Report). 62 Ite m 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company classifies interest and penalties associated with its unrecognized tax benefits as a component of income tax expense (see Note 9 to the audited consolidated financial statements included elsewhere in this Annual Report). 62 Ite m 7A. Quantitative and Qualitative Disclosures About Market Risk.
It em 6. [Reserved] 41 It em 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis is intended to help the reader understand the results of operations and financial condition of First Advantage and should be read in conjunction with our consolidated financial statements included elsewhere in this Annual Report.
It em 6. [Reserved] 42 It em 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis is intended to help the reader understand the results of operations and financial condition of First Advantage and should be read in conjunction with our consolidated financial statements included elsewhere in this Annual Report.
During the three months ended December 31, 2023 , none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) 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).
During the three months ended December 31, 2024 , none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) 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).
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.
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 support compliance with their workforce onboarding criteria from the time an application is submitted to an applicant’s successful onboarding.
No goodwill impairment was recognized for 2023. See Note 2 to the audited consolidated financial statements included elsewhere in this Annual Report for more information on our goodwill impairment testing. Income Taxes In determining taxable income for our consolidated financial statements, we must make certain estimates and judgments.
No goodwill impairment was recognized for 2024. See Note 2 to the audited consolidated financial statements included elsewhere in this Annual Report for more information on our goodwill impairment testing. Income Taxes In determining taxable income for our consolidated financial statements, we must make certain estimates and judgments.
The following graph depicts the total cumulative stockholder return on our common stock from the closing price on June 23, 2021, the first day of trading of our common stock on the Nasdaq, through December 31, 2023, relative to the performance of the Russell 2000 and S&P 500 Index.
The following graph depicts the total cumulative stockholder return on our common stock from the closing price on June 23, 2021, the first day of trading of our common stock on the Nasdaq, through December 31, 2024, relative to the performance of the Russell 2000 and S&P 500 Index.
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.
The 2024 First Lien Credit Agreement 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.
Effective December 29, 2023, the first interest rate swap agreement hedged our floating SOFR rate outstanding debt with a fixed rate of 3.86%. Effective March 1, 2024, the second interest rate swap agreement will hedge our floating SOFR rate outstanding debt with a fixed rate of 3.76%. Both interest rate swap agreements mature on December 31, 2026.
Effective December 29, 2023, the first interest rate swap agreement hedged our floating SOFR rate outstanding debt with a fixed rate of 3.86%. Effective March 1, 2024, the second interest rate swap agreement hedged our floating SOFR rate outstanding debt with a fixed rate of 3.76%. Both interest rate swap agreements mature on December 31, 2026.
The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as amended 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.
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.
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.
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 finance lease obligations and the amortization of deferred financing costs.
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 relative to other markets in that segment.
In the First Advantage Americas segment, certain industry verticals were impacted by reduced hiring activity, resulting in lower revenues. In the First Advantage International segment, declines were more significantly experienced in the India and APAC markets relative to other markets in that segment.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013) .
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013) .
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.
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 technologies, proprietary internal databases, and data analytics capabilities.
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.
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 design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report.
Additionally, we lease office space in Fishers, Indiana; Nottingham, United Kingdom; Manila, Philippines; and Mumbai, India for certain significant operational and support functions. We believe that our executive and other offices are adequate for our immediate needs and that we will obtain additional or substitute space, as needed, on commercially reasonable terms.
Additionally, we lease office space in Fishers, Indiana; Manila, Philippines; and Mumbai, India for certain significant operational and support functions. We believe that our executive and other offices are adequate for our immediate needs and that we will obtain additional or substitute space, as needed, on commercially reasonable terms.
In addition to leveraging public cloud vendors, we maintain data centers across the globe. Our public cloud vendors and data centers are fully PCI compliant and equipped with redundant power, cooling, and fire suppression. We also ensure that our data centers maintain connectivity to major internet service providers and are protected and surveilled by our Global Network Operations Center.
In addition to leveraging public cloud vendors, we maintain data centers across the globe. Our public cloud vendors and data centers are equipped with redundant power, cooling, and fire suppression. We also ensure that our data centers maintain connectivity to major internet service providers and are protected and surveilled by our Global Network Operations Center.
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 2024 First Lien Credit 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.
We do not have material exposure to market risk with respect to our cash, cash equivalents, or short-term investments as these consist primarily of highly liquid investments purchased with original maturities of twelve months or less at December 31, 2023 and 2022. Our debt includes variable-rate debt and a revolving credit facility that bear interest based on SOFR.
We do not have material exposure to market risk with respect to our cash, cash equivalents, or as these consist primarily of highly liquid investments purchased with original maturities of twelve months or less at December 31, 2024 and 2023. Our debt includes variable-rate debt and a revolving credit facility that bear interest based on SOFR.
We regularly review expenses and investments in the context of revenues growth and any shifts we identify in the business in order to align with our overall financial objectives.
We regularly review expenses and investments in the context of revenue growth and any shifts we identify in the business in order to align with our overall financial objectives.
The information required under this Item 3 is set forth in Note 13 within “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this Annual Report and is incorporated herein by this reference. It em 4. Mine Safety Disclosures. Not applicable. 39 PART II It em 5.
The information required under this Item 3 is set forth in Note 14 within “Notes to Consolidated Financial Statements” included in Part IV, Item 15 of this Annual Report and is incorporated herein by this reference. It em 4. Mine Safety Disclosures. Not applicable. 40 PART II It em 5.
This decrease was partially offset by increases in depreciation related to assets placed in service during the year ended December 31, 2022.
This decrease was partially offset by increases in depreciation related to assets placed in service during the year ended December 31, 2023.
In addition, we are developing innovative solutions that align with our capabilities in areas such as biometric verification, fraud mitigation, driver and vehicle compliance, franchise screening programs, and remote drug testing. 44 Profitably Managing our Growth Our ability to grow profitably depends on our ability to manage our cost structure.
In addition, we are developing innovative solutions that align with our capabilities in areas such as biometric verification, fraud mitigation, driver and vehicle compliance, and remote drug testing. Profitably Managing our Growth Our ability to grow profitably depends on our ability to manage our cost structure.
The First Lien Agreement contains customary affirmative covenants, negative covenants and events of default (including upon a change of control).
The 2024 First Lien Credit Agreement contains customary affirmative covenants, negative covenants and events of default (including upon a change of control).
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 into 2023.
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.
The acquisition was effective as of January 1, 2022 and strategically expands the Company’s product suite offerings through the addition of new I-9 and employment eligibility solutions. Results of operations have been included in our Americas segment from the effective date of the acquisition.
The acquisition was effective as of January 1, 2022 and strategically expanded the Company’s product suite offerings through the addition of new I-9 and employment eligibility solutions. Results of operations have been included in our First Advantage Americas segment from the effective date of the acquisition.
See Note 13 to the audited consolidated financial statements included elsewhere in this Annual Report for further information. 60 Recent Accounting Pronouncements See Note 2 to the audited consolidated financial statements included elsewhere in this Annual Report for a full description of recent accounting pronouncements.
See Note 14 to the audited consolidated financial statements included elsewhere in this Annual Report for further information. Recent Accounting Pronouncements See Note 2 to the audited consolidated financial statements included elsewhere in this Annual Report for a full description of recent accounting pronouncements.
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.
Borrowings under the 2024 First Lien Credit Agreement bear interest at a rate per annum equal to an applicable margin plus, at our option, either (a) a base rate or (b) SOFR, which is subject to a floor of 0.00% per annum.
Our more than 30,000 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.
Our 80,000 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.
Refer to Note 17 to the consolidated financial statements included elsewhere in this Annual Report for a reconciliation of Adjusted EBITDA for the periods presented by segment.
Refer to Note 18 to the audited consolidated financial statements included elsewhere in this Annual Report for a reconciliation of Adjusted EBITDA for the periods presented by segment.
Purchases of Equity Securities by the Issuer or Affiliated Purchaser 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.
Issuer Purchases of Equity Securities 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 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.
Our platforms offer 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 Company evaluates all of the positive and negative evidence annually to determine the need for a valuation allowance. After consideration of all of the evidence, the Company has determined that a valuation allowance of $1.9 million and $1.5 million is necessary at December 31, 2023 and 2022, respectively.
The Company evaluates all of the positive and negative evidence quarterly to determine the need for a valuation allowance. After consideration of all of the evidence, the Company has determined that a valuation allowance of $5.6 million and $1.9 million is necessary at December 31, 2024 and 2023, respectively.
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. 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.
Due to our contract terms and the nature of the background screening industry, we determined our contract terms for ASC 606 purposes to be three years or less. 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.
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, including incremental term loan borrowings expected to be incurred to fund the Acquisition pursuant to a commitment letter entered into with certain financial institutions.
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, including incremental term loan borrowings incurred to fund the acquisition of Sterling pursuant to commitment letters entered into with certain financial institutions.
As of December 31, 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.
As of December 31, 2024, we had $2,185.0 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.
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 Exchange Act, 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.
(2) The Repurchase Program expired on December 31, 2024. 41 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.
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 $145.8 million, $156.5 million, and $142.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.
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 $123.7 million, $145.8 million, and $156.5 million for the years ended December 31, 2024, 2023, and 2022, respectively.
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 2022. 49 Product and Technology Expense Year Ended December 31, (in thousands) 2023 2022 2021 Product and technology expense $ 49,263 $ 51,931 $ 45,507 Product and technology expense was $49.3 million for the year ended December 31, 2023, compared to $51.9 million for the year ended December 31, 2022.
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. 49 Product and Technology Expense Year Ended December 31, (in thousands) 2024 2023 2022 Product and technology expense $ 63,817 $ 49,263 $ 51,931 Product and technology expense was $63.8 million for the year ended December 31, 2024, compared to $49.3 million for the year ended December 31, 2023.
The remaining investing cash flows were driven primarily by capitalized software development costs and purchases of property and equipment, which increased in 2022 as the Company continued to make incremental investments in its technology platform.
The remaining investing cash flows are driven primarily by capitalized software development costs and purchases of property and equipment as the Company continued to make incremental investments in its technology platform.
Selling, general, and administrative expense for the year ended December 31, 2023 increased by $0.1 million, or 0.1%, compared to the year ended December 31, 2022.
Selling, general, and administrative expense was $116.7 million for the year ended December 31, 2023, compared to $116.6 million for the year ended December 31, 2022. Selling, general, and administrative expense for the year ended December 31, 2023 increased by $0.1 million, or 0.1%, compared to the year ended December 31, 2022.
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 addition, any voluntary prepayment of term loans in connection with certain repricing transactions on or prior to April 30, 2025 are subject to a 1.00% prepayment premium. Otherwise, the borrower may voluntarily repay outstanding loans without premium or penalty, other than customary “breakage” costs.
Long-Lived Assets We review long-lived assets held and used by us—including property and equipment primarily consisting of capitalized internal use software, and finite-lived intangible assets—for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable.
Measurement period adjustments are recorded in the period in which they occur. 61 Long-Lived Assets We review long-lived assets held and used by us—including property and equipment primarily consisting of capitalized internal use software, and finite-lived intangible assets—for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable.
Net income for the year ended December 31, 2023 decreased by $27.3 million, or 42.3%, compared to the year ended December 31, 2022.
Net income was $37.3 million for the year ended December 31, 2023, compared to $64.6 million for the year ended December 31, 2022. Net income for the year ended December 31, 2023 decreased by $27.3 million, or 42.3%, compared to the year ended December 31, 2022.
Changes in the estimated fair values of net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will adjust the amount of the purchase price allocable to goodwill. Measurement period adjustments are recorded in the period in which they occur.
Changes in the estimated fair values of net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will adjust the amount of the purchase price allocable to goodwill.
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. 58 Cash Flow Analysis Comparison of Cash Flows for the Year Ended December 31, 2023 compared to the Year Ended December 31, 2022 and for the Year Ended December 31, 2022 compared to the Year Ended December 31, 2021 The following table is a summary of our cash flow activity for the periods presented: Year Ended December 31, (in thousands) 2023 2022 2021 Net cash provided by operating activities $ 162,820 $ 212,770 $ 148,677 Net cash used in investing activities (66,847 ) (48,596 ) (72,427 ) Net cash (used in) provided by financing activities (273,556 ) (59,154 ) 63,848 Cash Flows from Operating Activities For the years ended December 31, 2023, 2022, and 2021, net cash provided by operating activities was $162.8 million, $212.8 million, and $148.7 million, respectively.
The 2024 First Lien Credit Agreement also includes a “springing” first lien net leverage ratio test, applicable only to the Amended 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 40.0% of the Amended Revolver is utilized on such date. 58 Cash Flow Analysis Comparison of Cash Flows for the Year Ended December 31, 2024 compared to the Year Ended December 31, 2023 and for the Year Ended December 31, 2023 compared to the Year Ended December 31, 2022 The following table is a summary of our cash flow activity for the periods presented: Year Ended December 31, (in thousands) 2024 2023 2022 Net cash provided by operating activities $ 28,196 $ 162,820 $ 212,770 Net cash used in investing activities (1,651,988 ) (66,847 ) (48,596 ) Net cash provided by (used in) financing activities 1,581,065 (273,556 ) (59,154 ) Cash Flows from Operating Activities For the years ended December 31, 2024, 2023, and 2022, net cash provided by operating activities was $28.2 million, $162.8 million, and $212.8 million, respectively.
In connection with the execution of the Merger Agreement, the Company will be suspending purchases under its Repurchase Program. 40 Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
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 December 31, 2023, we had $213.8 million in cash and cash equivalents and $100.0 million available under our revolving credit facility.
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 December 31, 2024, we had $168.7 million in cash and cash equivalents and $250.0 million available under our revolving credit facility.
Cost of services for the year ended December 31, 2023 decreased by $22.2 million, or 5.4%, compared to the year ended December 31, 2022.
Cost of services was $386.8 million for the year ended December 31, 2023, compared to $408.9 million for the year ended December 31, 2022. Cost of services for the year ended December 31, 2023 decreased by $22.2 million, or 5.4%, compared to the year ended December 31, 2022.
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 expect our selling, general, and administrative expenses to increase in the short-term, primarily as a result of additional Sterling integration 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.
Net cash used in financing activities for the year ended December 31, 2023 were impacted by the Company’s one-time special cash dividend of $1.50 per share and shares repurchased under the Company’s Repurchase Program. An aggregate cash dividend of $217.7 million was paid on August 31, 2023.
These outflows were offset partially by cash inflows related to share-based compensation activity. Net cash used in financing activities for the year ended December 31, 2023 were impacted by the Company’s one-time special cash dividend of $1.50 per share and shares repurchased under the Company’s Repurchase Program. An aggregate cash dividend of $217.7 million was paid on August 31, 2023.
In 2023, we performed approximately 100 million screens on behalf of more than 30,000 customers, spanning the globe and all major industry verticals. Our customer acquisition strategy depends on our ability to continue to cost-effectively offer innovative and comprehensive products and solutions, execute our verticalized go-to-market strategy, and maintain our reputation and brand.
In 2024, we performed nearly 190 million screens on behalf of 80,000 customers, spanning the globe and all major industry verticals. Our customer acquisition strategy depends on our ability to continue to cost-effectively offer innovative and comprehensive products and solutions, execute our verticalized go-to-market strategy, and maintain our reputation and brand.
The following information relates to the Company’s purchase of its common stock during each month within the fourth 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 October 1, 2023 through October 31, 2023 80,825 $ 13.19 80,825 $ 82,486,396 November 1, 2023 through November 30, 2023 151,535 $ 13.25 151,535 $ 80,478,639 December 1, 2023 through December 31, 2023 — $ — — $ 80,478,639 Total 232,360 $ 13.23 232,360 $ 80,478,639 (1) Average price paid per share for shares purchased as part of our Repurchase Program (includes brokerage commissions).
The following information relates to the Company’s purchase of its common stock during each month within the fourth quarter of 2024: 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) October 1, 2024 through October 31, 2024 — $ — — $ 80,478,639 November 1, 2024 through November 30, 2024 — $ — — $ 80,478,639 December 1, 2024 through December 31, 2024 — $ — — $ 80,478,639 Total — $ — — (1) Average price paid per share for shares purchased as part of our Repurchase Program (includes brokerage commissions).
Adjusted EBITDA was $237.6 million, $248.9 million, and $226.3 million for the years ended December 31, 2023, 2022, and 2021, respectively. This represented an Adjusted EBITDA Margin of 31.1%, 30.7%, and 31.8% for the years ended December 31, 2023, 2022, and 2021, respectively.
Adjusted EBITDA was $249.3 million, $237.6 million, and $248.9 million for the years ended December 31, 2024, 2023, and 2022, respectively. This represented an Adjusted EBITDA Margin of 29.0%, 31.1%, and 30.7% for the years ended December 31, 2024, 2023, and 2022, respectively.
Revenues for the year ended December 31, 2023 decreased by $46.3 million, or 5.7%, compared to the year ended December 31, 2022.
Revenues were $763.8 million for the year ended December 31, 2023, compared to $810.0 million for the year ended December 31, 2022. Revenues for the year ended December 31, 2023 decreased by $46.3 million, or 5.7%, compared to the year ended December 31, 2022.
Our provision for income taxes for the year ended December 31, 2023 decreased by $9.3 million, compared to the year ended December 31, 2022.
Our provision for income taxes was $11.2 million for the year ended December 31, 2023, compared to $20.5 million for the year ended December 31, 2022. Our provision for income taxes for the year ended December 31, 2023 decreased by $9.3 million, compared to the year ended December 31, 2022.
The remaining use of investing cash flows were driven primarily by capitalized software development costs and purchases of property and equipment, which increased in 2021 as we continued to make incremental investments in our technology and operations. 59 Cash Flows from Financing Activities For the years ended December 31, 2023, 2022, and 2021, net cash (used in) provided by financing activities was $(273.6) million, $(59.2) million, and $63.8 million, respectively.
The remaining investing cash flows were driven primarily by capitalized software development costs and purchases of property and equipment, which increased in 2022 as the Company continued to make incremental investments in its technology platform. 59 Cash Flows from Financing Activities For the years ended December 31, 2024, 2023, and 2022, net cash provided by (used in) financing activities was $1,581.1 million, $(273.6) million, and $(59.2) million, respectively.
Depreciation and amortization was $138.2 million for the year ended December 31, 2022, compared to $142.8 million for the year ended December 31, 2021. Depreciation and amortization for the year ended December 31, 2022 decreased by $4.6 million, or 3.2% compared to the year ended December 31, 2021.
Depreciation and amortization was $129.5 million for the year ended December 31, 2023, compared to $138.2 million for the year ended December 31, 2022. Depreciation and amortization for the year ended December 31, 2023 decreased by $8.8 million, or 6.3% compared to the year ended December 31, 2022.
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.
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 our acquisition of Sterling.
See Note 8 to the audited consolidated financial statements included elsewhere in this Annual Report for further information. At December 31, 2023, the Company had accrued $5.2 million relating to legal proceedings in which the Company believes a loss is both probable and estimable.
See Note 9 to the audited consolidated financial statements included elsewhere in this Annual Report for further information. 60 Other Commitments At December 31, 2024, the Company had accrued $11.6 million relating to legal proceedings in which the Company believes a loss is both probable and estimable.
As a result, we are exposed to fluctuations in interest rates on our long-term debt. The carrying value of our long-term debt, excluding capital lease and other long-term obligations, was $558.5 million as of December 31, 2023.
As a result, we are exposed to fluctuations in interest rates on our long-term debt. The carrying value of our long-term debt, excluding finance lease and other long-term obligations, was $2,121.3 million as of December 31, 2024.
Software costs not meeting the criteria for capitalization are expensed as incurred. 61 Goodwill We assess goodwill for impairment annually or more frequently if events or changes in business circumstances indicate that it is more likely than not that the carrying value of a reporting unit exceeds its fair value.
Goodwill We assess goodwill for impairment annually or more frequently if events or changes in business circumstances indicate that it is more likely than not that the carrying value of a reporting unit exceeds its fair value.
Refer to Note 7 to the consolidated financial statements included elsewhere in this Annual Report for more information about our interest rate collar agreement. Foreign Currency Risk We have exposure to the effects of foreign currency exchange rate fluctuations due to our global operations. The functional currency of all of the Company’s foreign subsidiaries is the applicable local currency.
Refer to Note 8 to the audited consolidated financial statements included elsewhere in this Annual Report for more information about our interest rate collar agreement. 63 Foreign Currency Risk We have exposure to the effects of foreign currency exchange rate fluctuations due to our global operations.
Current Economic Conditions Macroeconomic factors, including inflation, interest rates, recent declines in hiring activity and job openings, stability of the global banking system, global health crises, 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.
Recent trends in macroeconomic factors, including inflation, interest rates, recent declines in hiring activity and job openings, stability of the global banking system, global health crises, global supply chain constraints, and global economic and geopolitical developments, continue to negatively impact portions of the global economy, and create volatility in the financial markets.
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