First Advantage Corporation (NASDAQ: FA), a leading global provider
of employment background screening and verification solutions,
today announced financial results for the second quarter ended
June 30, 2023.
Key Financials (Amounts in
millions, except per share data and percentages)
|
|
Three Months Ended June 30, |
|
|
2023 |
|
2022 |
|
Change |
Revenues |
|
$ |
185.3 |
|
|
$ |
201.6 |
|
|
(8.1 |
)% |
Income from operations |
|
$ |
17.6 |
|
|
$ |
22.8 |
|
|
(22.6 |
)% |
Net income |
|
$ |
9.8 |
|
|
$ |
14.2 |
|
|
(31.3 |
)% |
Net income margin |
|
|
5.3 |
% |
|
|
7.1 |
% |
|
NA |
|
Diluted net income per
share |
|
$ |
0.07 |
|
|
$ |
0.09 |
|
|
(22.2 |
)% |
Adjusted EBITDA¹ |
|
$ |
56.0 |
|
|
$ |
60.8 |
|
|
(8.0 |
)% |
Adjusted
EBITDA Margin¹ |
|
|
30.2 |
% |
|
|
30.2 |
% |
|
NA |
|
Adjusted Net Income¹ |
|
$ |
34.8 |
|
|
$ |
38.0 |
|
|
(8.4 |
)% |
Adjusted Diluted Earnings Per
Share¹ |
|
$ |
0.24 |
|
|
$ |
0.25 |
|
|
(4.0 |
)% |
¹ Adjusted EBITDA, Adjusted EBITDA Margin,
Adjusted Net Income, Adjusted Diluted Earnings Per Share, Constant
Currency Revenues, and Constant Currency Adjusted EBITDA are
non-GAAP measures. Please see the schedules accompanying this
earnings release for a reconciliation of these measures to their
most directly comparable respective GAAP measures.Note: “NA”
indicates not applicable information.
“We achieved second quarter Revenues and
Adjusted EBITDA results in-line with the expectations we
communicated during our first quarter 2023 earnings conference call
and delivered sequential improvement, with the Americas segment
holding up relatively well given overall market conditions. Our
ability to cross-sell and upsell solutions along with our flexible
cost structure contributed to strong industry-leading Adjusted
EBITDA Margins of 30.2% and robust operating cash flow of $33.1
million in the second quarter. Our well-capitalized balance sheet
allows us to continue to invest in market-leading solutions that
enable our customers to hire smarter and onboard faster,” said
Scott Staples, Chief Executive Officer.
“We are committed to continuing our solid
execution track record and deep focus on operational excellence.
The U.S. labor markets continue to be broadly impacted by
macroeconomic headwinds, as hiring activity trends remain at the
more modest levels that began in December 2022. While we are
reaffirming guidance today, we currently expect full-year 2023
results at the lower end of the guidance ranges. We remain focused
on long-term opportunities to drive sustainable, profitable growth
and generate strong operating cash flow, which enables us to create
stakeholder value,” added Mr. Staples.
Balance Sheet and Liquidity
As of June 30, 2023, First Advantage had
cash and cash equivalents of $399.1 million, short-term investments
of $2.2 million, and total debt of $564.7 million, resulting in net
debt of $163.4 million and a modest net leverage ratio of 0.7x. The
Company also has full availability of $100 million under its
revolving credit facility as of June 30, 2023. There are no
principal debt payments due until 2027.
Cash Flow and Capital
Allocation
During the second quarter of 2023, the Company
generated $33.1 million of cash flow from operations and spent $7.0
million on purchases of property and equipment, including
capitalized software development costs.
During the second quarter of 2023, the Company
repurchased approximately 2.0 million shares of its common stock
for an aggregate outlay of approximately $27.1 million under its
$200 million share repurchase program. As of August 3, 2023, the
Company has repurchased approximately 8.7 million shares for an
aggregate outlay of approximately $114.5 million since the
authorization of the share repurchase program. As of June 30,
2023, the Company had 145,193,679 shares of common stock
outstanding.
Subsequent to June 30, 2023, First Advantage’s
Board of Directors declared a one-time special dividend of $1.50
per share, which represents a greater than 10% return of capital to
shareholders. The one-time special dividend is expected to be paid
on August 31, 2023 to shareholders of record at the close of
business on August 21, 2023.
“We remain committed to our capital allocation
priorities to maximize shareholder value, including the return of
capital through share repurchase and a one-time special dividend.
The ability to execute on these strategic initiatives points to the
strength of our balance sheet and robust liquidity position. Taking
the one-time special dividend into account, our pro forma net
leverage ratio remains industry-leading at approximately 1.6x. We
continue to generate strong cash flow from operations, which
provides a solid foundation for future growth initiatives and gives
us ongoing flexibility to continue to pursue various capital
allocation opportunities,” commented David Gamsey, EVP and Chief
Financial Officer.
Full Year 2023 Guidance
The Company is reaffirming its previous
full-year 2023 guidance ranges, expecting results at the lower end
of the guidance ranges. This reflects the current hiring
environment and expectations that existing macroeconomic conditions
and similar labor market trends will continue through the remainder
of 2023 without significant changes. Even after taking into account
the one-time special dividend, which is expected to impact Adjusted
Net Income and Adjusted Diluted Earnings Per Share by approximately
($2.7) million and ($0.02), respectively, as a result of lower
interest income, these metrics are still expected to be within the
lower end of the guidance ranges.
The following table summarizes our reaffirmed
full-year 2023 guidance:
|
As of August 9, 2023 |
Revenues |
$770 million – $810 million |
Adjusted EBITDA2 |
$240 million – $255 million |
Adjusted Net Income2 |
$145 million – $155 million |
Adjusted Diluted Earnings Per Share2 |
$1.00 – $1.07 |
² A reconciliation of the foregoing guidance for
the non-GAAP metrics of Adjusted EBITDA and Adjusted Net Income to
GAAP net income and Adjusted Diluted Earnings Per Share to GAAP
diluted net income per share cannot be provided without
unreasonable effort because of the inherent difficulty of
accurately forecasting the occurrence and financial impact of the
various adjusting items necessary for such reconciliation that have
not yet occurred, are out of our control, or cannot be reasonably
predicted. For the same reasons, the Company is unable to assess
the probable significance of the unavailable information, which
could have a material impact on its future GAAP financial
results.
Actual results may differ materially from First
Advantage’s full-year 2023 guidance as a result of, among other
things, the factors described under “Forward-Looking Statements”
below.
Conference Call and Webcast
Information
First Advantage will host a conference call to
review its results today, August 9, 2023, at 8:30 a.m. ET.
To participate in the conference call, please
dial (800) 225-9448 (domestic) or (203) 518-9708 (international)
approximately ten minutes before the 8:30 a.m. ET start. Please
mention to the operator that you are dialing in for the First
Advantage second quarter 2023 earnings call or provide the
conference code FAQ223. The call will also be webcast live on the
Company’s investor relations website at
https://investors.fadv.com under the “News & Events” and
then “Events & Presentations” section, where related
presentation materials will be posted prior to the conference
call.
Following the conference call, a replay of the
webcast will be available on the Company’s investor relations
website, https://investors.fadv.com. Alternatively, the live
webcast and subsequent replay will be available at
https://event.on24.com/wcc/r/4261843/54850299C5A120BBA65C225DED8019C5.
Forward-Looking Statements
This press release contains “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements reflect our
current views with respect to, among other things, our operations
and financial performance. Forward-looking statements include all
statements that are not historical facts. These forward-looking
statements relate to matters such as our industry, business
strategy, goals, and expectations concerning our market position,
future operations, margins, profitability, capital expenditures,
liquidity and capital resources, and other financial and operating
information. In some cases, you can identify these forward-looking
statements by the use of words such as “anticipate,” “assume,”
“believe,” “continue,” “could,” “estimate,” “expect,” “intend,”
“may,” “plan,” “potential,” “predict,” “project,” “future,” “will,”
“seek,” “foreseeable,” "target," “guidance,” the negative version
of these words, or similar terms and phrases.
These forward-looking statements are subject to
various risks, uncertainties, assumptions, or changes in
circumstances that are difficult to predict or quantify. Such risks
and uncertainties include, but are not limited to, the
following:
- negative changes in external events
beyond our control, including our customers’ onboarding volumes,
economic drivers which are sensitive to macroeconomic cycles, such
as interest rate volatility and inflation, geopolitical unrest,
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;
- our reliance on third-party data
providers;
- due to the sensitive and
privacy-driven nature of our products and solutions, we could face
liability and legal or regulatory proceedings, which could be
costly and time-consuming to defend and may not be fully covered by
insurance;
- our international business exposes
us to a number of risks;
- the timing, manner and volume of
repurchases of common stock pursuant to our share repurchase
program;
- the continued integration of our
platforms and solutions with human resource providers such as
applicant tracking systems and human capital management systems as
well as our relationships with such human resource providers;
- our ability to obtain, maintain,
protect and enforce our intellectual property and other proprietary
information;
- disruptions, outages, or other
errors with our technology and network infrastructure, including
our data centers, servers, and third-party cloud and internet
providers and our migration to the cloud;
- our indebtedness could adversely
affect our ability to raise additional capital to fund our
operations, limit our ability to react to changes in the economy or
our industry, and prevent us from meeting our obligations; and
- control by our Sponsor, “Silver
Lake” (Silver Lake Group, L.L.C., together with its affiliates,
successors, and assignees), and its interests may conflict with
ours or those of our stockholders.
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 filings with the SEC, which are
accessible on the SEC’s website at www.sec.gov. The forward-looking
statements included in this press release are made only as of the
date of this press release, and we undertake no obligation to
publicly update or review any forward-looking statement, whether as
a result of new information, future developments, or otherwise,
except as required by law.
Non-GAAP Financial
Information
This press release contains “non-GAAP financial
measures” that are financial measures that either exclude or
include amounts that are not excluded or included in the most
directly comparable measures calculated and presented in accordance
with accounting principles generally accepted in the United States
(“GAAP”). Specifically, we make use of the non-GAAP financial
measures “Adjusted EBITDA,” “Adjusted EBITDA Margin,” “Adjusted Net
Income,” “Adjusted Diluted Earnings Per Share,” “Constant Currency
Revenues,” and “Constant Currency Adjusted EBITDA.”
Adjusted EBITDA, Adjusted EBITDA Margin,
Adjusted Net Income, Adjusted Diluted Earnings Per Share, Constant
Currency Revenues, and Constant Currency Adjusted EBITDA have been
presented in this press release as supplemental measures of
financial performance that are not required by or presented in
accordance with GAAP because we believe they assist investors and
analysts in comparing our operating performance across reporting
periods on a consistent basis by excluding items that we do not
believe are indicative of our core operating performance.
Management believes these non-GAAP measures are useful to investors
in highlighting trends in our operating performance, while other
measures can differ significantly depending on long-term strategic
decisions regarding capital structure, the tax jurisdictions in
which we operate, and capital investments. Management uses Adjusted
EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted
Diluted Earnings Per Share, Constant Currency Revenues, and
Constant Currency Adjusted EBITDA to supplement GAAP measures of
performance in the evaluation of the effectiveness of our business
strategies, to make budgeting decisions, to establish discretionary
annual incentive compensation, and to compare our performance
against that of other peer companies using similar measures.
Management supplements GAAP results with non-GAAP financial
measures to provide a more complete understanding of the factors
and trends affecting the business than GAAP results alone.
Adjusted EBITDA, Adjusted EBITDA Margin,
Adjusted Net Income, Adjusted Diluted Earnings Per Share, Constant
Currency Revenues, and Constant Currency Adjusted EBITDA are not
recognized terms under GAAP and should not be considered as an
alternative to net income (loss) as a measure of financial
performance or cash provided by (used in) operating activities as a
measure of liquidity, or any other performance measure derived in
accordance with GAAP. The presentations of these measures have
limitations as analytical tools and should not be considered in
isolation or as a substitute for analysis of our results as
reported under GAAP. Because not all companies use identical
calculations, the presentations of these measures may not be
comparable to other similarly titled measures of other companies
and can differ significantly from company to company.
We define Adjusted EBITDA as net income before
interest, taxes, depreciation, and amortization, and as further
adjusted for loss on extinguishment of debt, share-based
compensation, transaction and acquisition-related charges,
integration and restructuring charges, and other non-cash charges.
We define Adjusted EBITDA Margin as Adjusted EBITDA divided by
total revenues. We define Adjusted Net Income for a particular
period as net income before taxes adjusted for debt-related costs,
acquisition-related depreciation and amortization, share-based
compensation, transaction and acquisition-related charges,
integration and restructuring charges, and other non-cash charges,
to which we then apply the related effective tax rate. We define
Adjusted Diluted Earnings Per Share as Adjusted Net Income divided
by adjusted weighted average number of shares outstanding—diluted.
We define Constant Currency Revenues as current period revenues
translated using prior-year period exchange rates. We define
Constant Currency Adjusted EBITDA as current period Adjusted EBITDA
translated using prior-year period exchange rates. For
reconciliations of these non-GAAP financial measures to the most
directly comparable GAAP measures, see the reconciliations included
at the end of this press release. Numerical figures included in the
reconciliations have been subject to rounding adjustments.
Accordingly, numerical figures shown as totals in various tables
may not be arithmetic aggregations of the figures that precede
them.
About First Advantage
First Advantage (NASDAQ: FA) is a leading global
provider of employment background screening and verification
solutions. The Company delivers innovative services and insights
that help customers manage risk and hire the best talent. Enabled
by its proprietary technology, First Advantage’s 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.
Headquartered in Atlanta, Georgia, First Advantage performs screens
in over 200 countries and territories on behalf of its
approximately 33,000 customers. For more information about First
Advantage, visit the Company’s website at https://fadv.com/.
Investor Contact
Stephanie Gorman Vice President, Investor
Relations Investors@fadv.com(888) 314-9761
Condensed Financial
Statements
First Advantage
CorporationCondensed 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 |
|
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 |
|
First Advantage
CorporationCondensed Consolidated Statements of
Operations and Comprehensive Income (Unaudited)
|
|
Three Months Ended June 30, |
(in thousands, except share
and per share amounts) |
|
2023 |
|
2022 |
REVENUES |
|
$ |
185,315 |
|
|
$ |
201,561 |
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
Cost of services (exclusive of depreciation and amortization
below) |
|
|
92,997 |
|
|
|
100,292 |
|
Product and technology expense |
|
|
12,643 |
|
|
|
12,946 |
|
Selling, general, and administrative expense |
|
|
29,982 |
|
|
|
31,136 |
|
Depreciation and amortization |
|
|
32,056 |
|
|
|
34,407 |
|
Total operating expenses |
|
|
167,678 |
|
|
|
178,781 |
|
INCOME FROM
OPERATIONS |
|
|
17,637 |
|
|
|
22,780 |
|
|
|
|
|
|
|
|
OTHER EXPENSE, NET: |
|
|
|
|
|
|
Interest expense, net |
|
|
3,887 |
|
|
|
3,112 |
|
Total other expense, net |
|
|
3,887 |
|
|
|
3,112 |
|
INCOME BEFORE PROVISION FOR
INCOME TAXES |
|
|
13,750 |
|
|
|
19,668 |
|
Provision for income taxes |
|
|
3,968 |
|
|
|
5,432 |
|
NET
INCOME |
|
$ |
9,782 |
|
|
$ |
14,236 |
|
|
|
|
|
|
|
|
Foreign currency translation
income (loss) |
|
|
218 |
|
|
|
(11,319 |
) |
COMPREHENSIVE
INCOME |
|
$ |
10,000 |
|
|
$ |
2,917 |
|
|
|
|
|
|
|
|
NET
INCOME |
|
$ |
9,782 |
|
|
$ |
14,236 |
|
Basic net income per
share |
|
$ |
0.07 |
|
|
$ |
0.09 |
|
Diluted net income per
share |
|
$ |
0.07 |
|
|
$ |
0.09 |
|
Weighted average number of
shares outstanding - basic |
|
|
144,112,028 |
|
|
|
150,748,211 |
|
Weighted average number of
shares outstanding - diluted |
|
|
145,338,920 |
|
|
|
152,360,350 |
|
First Advantage
CorporationCondensed 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 |
|
|
$ |
— |
|
Reconciliation of Consolidated Non-GAAP
Financial Measures
|
|
Three Months Ended June 30, 2023 |
(in thousands) |
|
Americas |
|
International |
|
Eliminations |
|
Total revenues |
Revenues, as reported (GAAP) |
|
$ |
162,682 |
|
|
$ |
24,113 |
|
|
$ |
(1,480 |
) |
|
$ |
185,315 |
|
Foreign currency translation
impact(a) |
|
|
(26 |
) |
|
|
1,061 |
|
|
|
41 |
|
|
|
1,076 |
|
Constant currency
revenues |
|
$ |
162,656 |
|
|
$ |
25,174 |
|
|
$ |
(1,439 |
) |
|
$ |
186,391 |
|
(a) Constant currency revenues is calculated by
translating current period amounts using prior-year period exchange
rates.
|
|
Three Months Ended June 30, |
(in thousands, except
percentages) |
|
2023 |
|
2022 |
Net income |
|
$ |
9,782 |
|
|
$ |
14,236 |
|
Interest expense, net |
|
|
3,887 |
|
|
|
3,112 |
|
Provision for income
taxes |
|
|
3,968 |
|
|
|
5,432 |
|
Depreciation and
amortization |
|
|
32,056 |
|
|
|
34,407 |
|
Share-based compensation |
|
|
3,601 |
|
|
|
1,943 |
|
Transaction and
acquisition-related charges(a) |
|
|
1,190 |
|
|
|
1,179 |
|
Integration, restructuring,
and other charges(b) |
|
|
1,487 |
|
|
|
525 |
|
Adjusted
EBITDA |
|
$ |
55,971 |
|
|
$ |
60,834 |
|
Revenues |
|
|
185,315 |
|
|
|
201,561 |
|
Net income
margin |
|
|
5.3 |
% |
|
|
7.1 |
% |
Adjusted EBITDA
Margin |
|
|
30.2 |
% |
|
|
30.2 |
% |
Adjusted EBITDA |
|
$ |
55,971 |
|
|
|
|
Foreign currency translation
impact(c) |
|
|
145 |
|
|
|
|
Constant currency
Adjusted EBITDA |
|
$ |
56,116 |
|
|
|
|
(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
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.(c) Constant
currency Adjusted EBITDA is calculated by translating current
period amounts using prior-year period exchange rates.
Reconciliation of Consolidated Non-GAAP Financial
Measures (continued)
|
|
Three Months Ended June 30, |
(in thousands) |
|
2023 |
|
2022 |
Net income |
|
$ |
9,782 |
|
|
$ |
14,236 |
|
Provision for income
taxes |
|
|
3,968 |
|
|
|
5,432 |
|
Income before provision for
income taxes |
|
|
13,750 |
|
|
|
19,668 |
|
Debt-related charges(a) |
|
|
33 |
|
|
|
(1,669 |
) |
Acquisition-related
depreciation and amortization(b) |
|
|
25,470 |
|
|
|
29,029 |
|
Share-based compensation |
|
|
3,601 |
|
|
|
1,943 |
|
Transaction and
acquisition-related charges(c) |
|
|
1,190 |
|
|
|
1,179 |
|
Integration, restructuring,
and other charges(d) |
|
|
1,487 |
|
|
|
525 |
|
Adjusted Net Income before
income tax effect |
|
|
45,531 |
|
|
|
50,675 |
|
Less: Income tax
effect(e) |
|
|
10,705 |
|
|
|
12,669 |
|
Adjusted Net
Income |
|
$ |
34,826 |
|
|
$ |
38,006 |
|
|
|
Three Months Ended June 30, |
|
|
2023 |
|
2022 |
Diluted net income per share (GAAP) |
|
$ |
0.07 |
|
|
$ |
0.09 |
|
Adjusted Net Income
adjustments per share |
|
|
|
|
|
|
Income taxes |
|
|
0.03 |
|
|
|
0.04 |
|
Debt-related charges(a) |
|
|
0.00 |
|
|
|
(0.01 |
) |
Acquisition-related depreciation and amortization(b) |
|
|
0.18 |
|
|
|
0.19 |
|
Share-based compensation |
|
|
0.02 |
|
|
|
0.01 |
|
Transaction and acquisition related charges(c) |
|
|
0.01 |
|
|
|
0.01 |
|
Integration, restructuring, and other charges(d) |
|
|
0.01 |
|
|
|
0.00 |
|
Adjusted income taxes(e) |
|
|
(0.07 |
) |
|
|
(0.08 |
) |
Adjusted Diluted Earnings Per Share
(Non-GAAP) |
|
$ |
0.24 |
|
|
$ |
0.25 |
|
|
|
|
|
|
|
|
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 |
|
(a) Represents non-cash interest expense related
to the amortization of debt issuance costs for the Company’s First
Lien Credit Facility. 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) 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 months ended June 30, 2023 and 2022 include a transaction
bonus expense related to one of the Company’s 2021 acquisitions.(d)
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.(e) Effective tax
rates of approximately 23.5% and 25.0% have been used to compute
Adjusted Net Income and Adjusted Diluted Earnings Per Share for the
three months ended June 30, 2023 and 2022, respectively. 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.
First Advantage (NASDAQ:FA)
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First Advantage (NASDAQ:FA)
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