UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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:
(Exact Name of Registrant as Specified in its Charter)
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
|
|
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.
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).
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 |
|
☐ |
|
☒ |
|
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 November 8,
Table of Contents
|
|
Page |
|
|
|
PART I. |
2 |
|
|
|
|
Item 1. |
2 |
|
|
2 |
|
|
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) |
3 |
|
4 |
|
|
Condensed Consolidated Statements of Changes in Stockholders’ Equity |
5 |
|
Condensed Consolidated Statement of Changes in Members’ (Deficit) Equity |
6 |
|
Notes to Unaudited Condensed Consolidated Financial Statements |
7 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
26 |
Item 3. |
51 |
|
Item 4. |
51 |
|
|
|
|
PART II. |
52 |
|
|
|
|
Item 1. |
52 |
|
Item 1A. |
52 |
|
Item 2. |
52 |
|
Item 3. |
52 |
|
Item 4. |
52 |
|
Item 5. |
52 |
|
Item 6. |
53 |
|
54 |
||
1
PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
First Advantage Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
|
|
Successor |
|
|
Successor |
|
||
|
|
September 30, |
|
|
December 31, |
|
||
(in thousands, except share and per share amounts) |
|
2021 |
|
|
2020 |
|
||
ASSETS |
|
|
|
|
|
|
||
CURRENT ASSETS |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Short-term investments |
|
|
|
|
|
|
||
Accounts receivable (net of allowance for doubtful accounts of $ |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Income tax receivable |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Trade name, net |
|
|
|
|
|
|
||
Customer lists, net |
|
|
|
|
|
|
||
Deferred tax asset, net |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
TOTAL ASSETS |
|
$ |
|
|
$ |
|
||
LIABILITIES AND EQUITY |
|
|
|
|
|
|
||
CURRENT LIABILITIES |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued compensation |
|
|
|
|
|
|
||
Accrued liabilities |
|
|
|
|
|
|
||
Current portion of long-term debt |
|
|
|
|
|
|
||
Income tax payable |
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Long-term debt (net of deferred financing costs of $ |
|
|
|
|
|
|
||
Deferred tax liability, net |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
EQUITY |
|
|
|
|
|
|
||
Common stock - $ |
|
|
|
|
|
|
||
Additional paid-in-capital |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Accumulated other comprehensive income |
|
|
|
|
|
|
||
Total equity |
|
|
|
|
|
|
||
TOTAL LIABILITIES AND EQUITY |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
First Advantage Corporation
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
|
|
Three-Month Period (1) |
|
|
Nine-Month Period (1) |
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Successor |
|
|
|
Predecessor |
|
||||||||||||||
(in thousands, except share and per share amounts) |
|
Three Months |
|
|
Three Months |
|
|
Nine Months |
|
|
Period from |
|
|
|
Period from |
|
|||||
REVENUES |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of services (exclusive of depreciation and amortization below) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Product and technology expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Selling, general, and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
INCOME (LOSS) FROM OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
( |
) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
OTHER EXPENSE (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
( |
) |
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Transaction expenses, change in control |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total other expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
( |
) |
||
Provision (benefit) for income taxes |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
( |
) |
||
NET INCOME (LOSS) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Foreign currency translation (loss) income |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
( |
) |
|
COMPREHENSIVE INCOME (LOSS) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
$ |
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
NET INCOME (LOSS) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
||
Basic net income (loss) per share |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
n/a |
|
|||
Diluted net income (loss) per share |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
n/a |
|
|||
Weighted average number of shares outstanding - basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a |
|
|||||
Weighted average number of shares outstanding - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a |
|
|||||
Basic net (loss) per unit |
|
n/a |
|
|
n/a |
|
|
n/a |
|
|
n/a |
|
|
|
$ |
( |
) |
||||
Diluted net (loss) per unit |
|
n/a |
|
|
n/a |
|
|
n/a |
|
|
n/a |
|
|
|
$ |
( |
) |
||||
Weighted average units outstanding - basic |
|
n/a |
|
|
n/a |
|
|
n/a |
|
|
n/a |
|
|
|
|
|
|||||
Weighted average units outstanding - diluted |
|
n/a |
|
|
n/a |
|
|
n/a |
|
|
n/a |
|
|
|
|
|
|||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
First Advantage Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
Successor |
|
|
|
Predecessor |
|
||||||
(in thousands) |
|
Nine Months |
|
|
Period from |
|
|
|
Period from |
|
|||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|||
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|||
Amortization of deferred financing costs |
|
|
|
|
|
|
|
|
|
|
|||
Bad debt (recovery) expense |
|
|
( |
) |
|
|
|
|
|
|
|
||
Deferred taxes |
|
|
( |
) |
|
|
( |
) |
|
|
|
( |
) |
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|||
(Gain) on foreign currency exchange rates |
|
|
( |
) |
|
|
( |
) |
|
|
|
( |
) |
Loss on disposal of fixed assets |
|
|
|
|
|
|
|
|
|
|
|||
Change in fair value of interest rate swaps |
|
|
( |
) |
|
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Other assets |
|
|
( |
) |
|
|
( |
) |
|
|
|
( |
) |
Accounts payable |
|
|
|
|
|
|
|
|
|
( |
) |
||
Accrued compensation and accrued liabilities |
|
|
|
|
|
( |
) |
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
( |
) |
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
|
|
|
|
|||
Income taxes receivable and payable, net |
|
|
|
|
|
( |
) |
|
|
|
|
||
Net cash provided by (used in) operating activities |
|
|
|
|
|
|
|
|
|
( |
) |
||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|||
Changes in short-term investments |
|
|
|
|
|
|
|
|
|
( |
) |
||
Acquisition of business |
|
|
( |
) |
|
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
|
|
|
( |
) |
Capitalized software development costs |
|
|
( |
) |
|
|
( |
) |
|
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
( |
) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|||
Proceeds from issuance of common stock in initial public offering, net of underwriting discounts and commissions |
|
|
|
|
|
|
|
|
|
|
|||
Payments of initial public offering issuance costs |
|
|
( |
) |
|
|
|
|
|
|
|
||
Shareholder distribution |
|
|
( |
) |
|
|
|
|
|
|
|
||
Capital contributions |
|
|
|
|
|
|
|
|
|
|
|||
Distributions to Predecessor Members and Optionholders |
|
|
|
|
|
( |
) |
|
|
|
( |
) |
|
Borrowings from Successor First Lien Credit Facility |
|
|
|
|
|
|
|
|
|
|
|||
Repayments of Successor First Lien Credit Facility |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
Repayment of Successor Second Lien Credit Facility |
|
|
( |
) |
|
|
|
|
|
|
|
||
Borrowings on Successor Revolver |
|
|
|
|
|
|
|
|
|
|
|||
Repayments on Successor Revolver |
|
|
|
|
|
( |
) |
|
|
|
|
||
Repayment of Predecessor First Lien Credit Facility |
|
|
|
|
|
|
|
|
|
( |
) |
||
Payments of debt issuance costs |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
Payments on capital lease obligations |
|
|
( |
) |
|
|
( |
) |
|
|
|
( |
) |
Payments on deferred purchase agreements |
|
|
( |
) |
|
|
|
|
|
|
|
||
Proceeds from stock option exercises |
|
|
|
|
|
|
|
|
|
|
|||
Net settlement of stock option exercises |
|
|
( |
) |
|
|
|
|
|
|
|
||
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
|
|
|
( |
) |
||
Effect of exchange rate on cash. cash equivalents, and restricted cash |
|
|
( |
) |
|
|
( |
) |
|
|
|
( |
) |
Increase (decrease) in cash, cash equivalents, and restricted cash |
|
|
|
|
|
|
|
|
|
( |
) |
||
Cash, cash equivalents, and restricted cash at beginning of period |
|
|
|
|
|
|
|
|
|
|
|||
Cash, cash equivalents, and restricted cash at end of period |
|
$ |
|
|
$ |
|
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
|
|
|||
Cash paid for income taxes, net of refunds received |
|
$ |
|
|
$ |
|
|
|
$ |
|
|||
Cash paid for interest |
|||||||||||||