10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

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: 001-31666

 

First Advantage Corporation

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

84-3884690

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

1 Concourse Parkway NE, Suite 200

Atlanta, GA

30328

(Address of principal executive offices)

(Zip Code)

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.001 par value per share

 

FA

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of August 1, 2022, the registrant had 153,236,293 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

2

 

 

 

Item 1.

Financial Statements (Unaudited)

2

 

Condensed Consolidated Balance Sheets

2

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

44

Item 4.

Controls and Procedures

44

 

 

 

PART II.

OTHER INFORMATION

45

 

 

 

Item 1.

Legal Proceedings

45

Item 1A.

Risk Factors

45

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

45

Item 3.

Defaults Upon Senior Securities

45

Item 4.

Mine Safety Disclosures

45

Item 5.

Other Information

45

Item 6.

Exhibits

46

Signatures

47

 

1


 

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

First Advantage Corporation

Condensed Consolidated Balance Sheets

(Unaudited)

 

(in thousands, except share and per share amounts)

 

June 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

352,251

 

 

$

292,642

 

Restricted cash

 

 

229

 

 

 

148

 

Short-term investments

 

 

904

 

 

 

941

 

Accounts receivable (net of allowance for doubtful accounts of $1,128 and $1,258 at June 30, 2022 and December 31, 2021, respectively)

 

 

144,376

 

 

 

155,772

 

Prepaid expenses and other current assets

 

 

23,368

 

 

 

14,365

 

Income tax receivable

 

 

1,608

 

 

 

2,292

 

Total current assets

 

 

522,736

 

 

 

466,160

 

Property and equipment, net

 

 

136,536

 

 

 

154,309

 

Goodwill

 

 

796,556

 

 

 

793,892

 

Trade name, net

 

 

75,235

 

 

 

79,585

 

Customer lists, net

 

 

357,697

 

 

 

384,766

 

Deferred tax asset, net

 

 

1,719

 

 

 

1,413

 

Other assets

 

 

20,698

 

 

 

6,456

 

TOTAL ASSETS

 

$

1,911,177

 

 

$

1,886,581

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable

 

$

49,534

 

 

$

53,977

 

Accrued compensation

 

 

24,750

 

 

 

30,054

 

Accrued liabilities

 

 

17,779

 

 

 

21,829

 

Current portion of operating lease liability

 

 

6,070

 

 

 

 

Income tax payable

 

 

2,608

 

 

 

2,573

 

Deferred revenues

 

 

697

 

 

 

873

 

Total current liabilities

 

 

101,438

 

 

 

109,306

 

Long-term debt (net of deferred financing costs of $8,985 and $9,879 at June 30, 2022 and December 31, 2021, respectively)

 

 

555,739

 

 

 

554,845

 

Deferred tax liability, net

 

 

87,757

 

 

 

84,653

 

Operating lease liability, less current portion

 

 

11,514

 

 

 

 

Other liabilities

 

 

3,104

 

 

 

5,539

 

Total liabilities

 

 

759,552

 

 

 

754,343

 

COMMITMENTS AND CONTINGENCIES (Note 12)

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Common stock - $0.001 par value; 1,000,000,000 shares authorized, 153,125,085 and 152,901,040 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

 

 

153

 

 

 

153

 

Additional paid-in-capital

 

 

1,170,137

 

 

 

1,165,163

 

Accumulated deficit

 

 

(4,192

)

 

 

(31,441

)

Accumulated other comprehensive (loss)

 

 

(14,473

)

 

 

(1,637

)

Total equity

 

 

1,151,625

 

 

 

1,132,238

 

TOTAL LIABILITIES AND EQUITY

 

$

1,911,177

 

 

$

1,886,581

 

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 Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands, except share and per share amounts)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

REVENUES

 

$

201,561

 

 

$

174,826

 

 

$

391,442

 

 

$

306,896

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services (exclusive of depreciation and amortization below)

 

 

100,292

 

 

 

84,868

 

 

 

196,723

 

 

 

150,813

 

Product and technology expense

 

 

12,946

 

 

 

11,680

 

 

 

26,719

 

 

 

22,233

 

Selling, general, and administrative expense

 

 

31,136

 

 

 

25,075

 

 

 

59,681

 

 

 

49,053

 

Depreciation and amortization

 

 

34,407

 

 

 

35,918

 

 

 

68,441

 

 

 

70,681

 

Total operating expenses

 

 

178,781

 

 

 

157,541

 

 

 

351,564

 

 

 

292,780

 

INCOME FROM OPERATIONS

 

 

22,780

 

 

 

17,285

 

 

 

39,878

 

 

 

14,116

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER EXPENSE (INCOME):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

3,112

 

 

 

10,452

 

 

 

2,262

 

 

 

17,169

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

13,938

 

Total other expense (income)

 

 

3,112

 

 

 

10,452

 

 

 

2,262

 

 

 

31,107

 

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES

 

 

19,668

 

 

 

6,833

 

 

 

37,616

 

 

 

(16,991

)

Provision (benefit) for income taxes

 

 

5,432

 

 

 

3,063

 

 

 

10,367

 

 

 

(1,372

)

NET INCOME (LOSS)

 

$

14,236

 

 

$

3,770

 

 

$

27,249

 

 

$

(15,619

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation (loss) income

 

 

(11,319

)

 

 

(1,295

)

 

 

(12,836

)

 

 

1,465

 

COMPREHENSIVE INCOME (LOSS)

 

$

2,917

 

 

$

2,475

 

 

$

14,413

 

 

$

(14,154

)

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

14,236

 

 

$

3,770

 

 

$

27,249

 

 

$

(15,619

)

Basic net income (loss) per share

 

$

0.09

 

 

$

0.03

 

 

$

0.18

 

 

$

(0.12

)

Diluted net income (loss) per share

 

$

0.09

 

 

$

0.03

 

 

$

0.18

 

 

$

(0.12

)

Weighted average number of shares outstanding - basic

 

 

150,748,211

 

 

 

131,507,005

 

 

 

150,644,034

 



 

130,757,666

 

Weighted average number of shares outstanding - diluted

 

 

152,360,350

 

 

 

135,368,909

 

 

 

152,361,788

 

 

 

130,757,666

 

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

3


 

First Advantage Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income (loss)

 

$

27,249

 

 

$

(15,619

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

68,441

 

 

 

70,681

 

Loss on extinguishment of debt

 

 

 

 

 

13,938

 

Amortization of deferred financing costs

 

 

894

 

 

 

5,059

 

Bad debt (recovery)

 

 

(120

)

 

 

(367

)

Deferred taxes

 

 

3,773

 

 

 

(5,975

)

Share-based compensation

 

 

3,802

 

 

 

3,226

 

Loss (gain) on foreign currency exchange rates

 

 

37

 

 

 

(319

)

Loss on disposal of property and equipment

 

 

162

 

 

 

81

 

Change in fair value of interest rate swaps

 

 

(7,378

)

 

 

(953

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

11,199

 

 

 

(16,895

)

Prepaid expenses and other assets

 

 

38

 

 

 

(3,686

)

Accounts payable

 

 

(2,748

)

 

 

2,590

 

Accrued compensation and accrued liabilities

 

 

(8,780

)

 

 

2,780

 

Deferred revenues

 

 

(272

)

 

 

106

 

Operating lease liabilities

 

 

(596

)

 

 

 

Other liabilities

 

 

557

 

 

 

545

 

Income taxes receivable and payable, net

 

 

154

 

 

 

906

 

Net cash provided by operating activities

 

 

96,412

 

 

 

56,098

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Changes in short-term investments

 

 

 

 

 

(92

)

Acquisitions of businesses, net of cash acquired

 

 

(19,044

)

 

 

(7,588

)

Purchases of property and equipment

 

 

(5,165

)

 

 

(3,841

)

Capitalized software development costs

 

 

(10,236

)

 

 

(7,482

)

Proceeds from disposal of property and equipment

 

 

82

 

 

 

 

Net cash used in investing activities

 

 

(34,363

)

 

 

(19,003

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Proceeds from issuance of common stock in initial public offering, net of underwriting discounts and commissions

 

 

 

 

 

320,559

 

Payments of initial public offering issuance costs

 

 

 

 

 

(1,028

)

Shareholder distribution

 

 

 

 

 

(313

)

Capital contributions

 

 

 

 

 

241

 

Borrowings from Successor First Lien Credit Facility

 

 

 

 

 

261,413

 

Repayments of Successor First Lien Credit Facility

 

 

 

 

 

(363,875

)

Repayment of Successor Second Lien Credit Facility

 

 

 

 

 

(146,584

)

Payments of debt issuance costs

 

 

 

 

 

(1,257

)

Payments on capital and finance lease obligations

 

 

(459

)

 

 

(925

)

Payments on deferred purchase agreements

 

 

(526

)

 

 

(362

)

Proceeds from stock option exercises

 

 

1,270

 

 

 

 

Taxes paid for net settlements of restricted stock units

 

 

(98

)

 

 

 

Net cash provided by financing activities

 

 

187

 

 

 

67,869

 

Effect of exchange rate on cash, cash equivalents, and restricted cash

 

 

(2,546

)

 

 

(656

)

Increase in cash, cash equivalents, and restricted cash

 

 

59,690

 

 

 

104,308

 

Cash, cash equivalents, and restricted cash at beginning of period

 

 

292,790

 

 

 

152,970

 

Cash, cash equivalents, and restricted cash at end of period

 

$

352,480

 

 

$

257,278

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid for income taxes, net of refunds received

 

$

6,181

 

 

$

3,736

 

Cash paid for interest

 

$

10,191

 

 

$

13,721

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

Offering costs included in accounts payable and accrued liabilities

 

$

 

 

$

3,006

 

Property and equipment acquired on account

 

$

23

 

 

$

2,797

 

 

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

4


 

First Advantage Corporation

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

 

(in thousands)

 

Common Stock

 

 

Additional
Paid-In-Capital

 

 

Accumulated
Deficit

 

 

Accumulated Other
Comprehensive
(Loss)

 

 

Total Stockholders’
Equity

 

BALANCE – December 31, 2021

 

$

153

 

 

$

1,165,163

 

 

$

(31,441

)

 

$

(1,637

)

 

$

1,132,238

 

Share-based compensation

 

 

 

 

 

1,859

 

 

 

 

 

 

 

 

 

1,859

 

Exercise of stock options

 

 

0

 

 

 

547

 

 

 

 

 

 

 

 

 

547

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

(1,517

)

 

 

(1,517

)

Net income

 

 

 

 

 

 

 

 

13,013

 

 

 

 

 

 

13,013

 

BALANCE – March 31, 2022

 

$

153

 

 

$

1,167,569

 

 

$

(18,428

)

 

$

(3,154

)

 

$

1,146,140

 

Share-based compensation

 

 

 

 

 

1,943

 

 

 

 

 

 

 

 

 

1,943

 

Exercise of stock options

 

 

0

 

 

 

723

 

 

 

 

 

 

 

 

 

723

 

Common stock withheld for tax obligations on restricted stock unit settlement

 

 

 

 

 

(98

)

 

 

 

 

 

 

 

 

(98

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

(11,319

)

 

 

(11,319

)

Net income

 

 

 

 

 

 

 

 

14,236

 

 

 

 

 

 

14,236

 

BALANCE – June 30, 2022

 

$

153

 

 

$

1,170,137

 

 

$

(4,192

)

 

$

(14,473

)

 

$

1,151,625

 

 

(in thousands)

 

Common Stock

 

 

Additional
Paid-In-Capital

 

 

Accumulated
Deficit

 

 

Accumulated Other
Comprehensive
Income

 

 

Total Stockholders’
Equity

 

BALANCE – December 31, 2020

 

$

130

 

 

$

839,148

 

 

$

(47,492

)

 

$

2,484

 

 

$

794,270

 

Share-based compensation

 

 

 

 

 

562

 

 

 

 

 

 

 

 

 

562

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

2,760

 

 

 

2,760

 

Net (loss)

 

 

 

 

 

 

 

 

(19,389

)

 

 

 

 

 

(19,389

)

BALANCE – March 31, 2021

 

$

130

 

 

$

839,710

 

 

$

(66,881

)

 

$

5,244

 

 

$

778,203

 

Share-based compensation

 

 

 

 

 

2,664

 

 

 

 

 

 

 

 

 

2,664

 

Capital contributions

 

 

 

 

 

241

 

 

 

 

 

 

 

 

 

241

 

Issuance of common stock in connection with initial public offering, net of offering costs, underwriting discounts and commissions

 

 

23

 

 

 

316,502

 

 

 

 

 

 

 

 

 

316,525

 

Shareholder distribution

 

 

 

 

 

(313

)

 

 

 

 

 

 

 

 

(313

)

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

(1,295

)

 

 

(1,295

)

Net income

 

 

 

 

 

 

 

 

3,770

 

 

 

 

 

 

3,770

 

BALANCE – June 30, 2021

 

$

153

 

 

$

1,158,804

 

 

$

(63,111

)

 

$

3,949

 

 

$

1,099,795

 

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

 

5


 

First Advantage Corporation

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Organization, Nature of Business, and Basis of Presentation

Fastball Intermediate, Inc., a Delaware corporation, was formed on November 15, 2019 and subsequently changed its name to First Advantage Corporation in March 2021. Hereafter, First Advantage Corporation and its subsidiaries will collectively be referred to as the “Company.”

The Company derives its revenues from a variety of background check and compliance services performed across all phases of the workforce lifecycle from pre-onboarding services to post-onboarding and ongoing monitoring services, covering employees, contractors, contingent and extended workers, drivers, tenants, and volunteers. We generally classify our service offerings into three categories: pre-onboarding, post-onboarding, and adjacent products.

Pre-onboarding services are comprised of an extensive array of products and solutions that customers typically utilize to enhance their evaluation process and support compliance from the time a job or other application is submitted to a successful applicant’s onboarding date. This includes searches such as criminal background checks, drug / health screenings, extended workforce screening, biometrics and identity checks, education / workforce verification, driver records and compliance, healthcare credentials, and executive screening.

Post-onboarding services are comprised of continuous monitoring and re-screening solutions which are important tools to help keep their end customers, workforces, and other stakeholders safer, productive, and compliant. Our post-monitoring solutions include criminal records, healthcare sanctions, motor vehicle records, social media, and global sanctions screening continuously or at regular intervals selected by our customers.

Adjacent products include products that complement our pre-onboarding and post-onboarding products and solutions. This includes fleet / vehicle compliance, hiring tax credits and incentives, resident / tenant screening, employment eligibility, and investigative research.

Basis of Presentation —The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated. The Company includes the results of operations of acquired companies prospectively from the date of acquisition.

The condensed consolidated financial statements included herein are unaudited, but in the opinion of management, such financial statements include all adjustments, consisting of normal recurring adjustments, necessary to summarize fairly the Company’s financial position, results of operations, and cash flows for the interim periods presented. The interim results reported in these condensed consolidated financial statements should not be taken as indicative of results that may be expected for future interim periods or the full year. For a more comprehensive understanding of the Company and its condensed consolidated financial statements, these interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The Company has historically experienced seasonality with respect to certain customer industries as a result of fluctuations in hiring volumes and other economic activities. Generally, the Company’s highest revenues have historically occurred between September and November of each year, driven by many customers’ pre-holiday season hiring initiatives.

Segments — Operating segments are businesses for which separate financial information is available and evaluated regularly by our chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance.

During the first quarter of 2022, the Company made organizational changes and modified information provided to its CODM to better align with how its CODM assesses performance and allocates resources. As a result, the Company now has two reportable segments, Americas and International:

Americas provides technology solutions for screening, verifications, safety, and compliance in the United States, Canada, and Latin America markets; and
International provides technology solutions for screening, verifications, safety, and compliance outside of the Americas.

Accordingly, prior period results have been recast to conform to the current presentation of segments. These changes do not impact the Company’s consolidated results.

The Company’s segment disclosure is intended to provide the users of its consolidated financial statements with a view of the business that is consistent with management of the Company. Details of segment results are discussed in Note 16, “Reportable Segments.”

6


 

Use of Estimates — The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Changes in these estimates and assumptions may have a material impact on the condensed consolidated financial statements and accompanying notes.

Significant estimates, judgments, and assumptions, include, but are not limited to, the determination of the fair value and useful lives of assets acquired and liabilities assumed through business combinations, the impairment of long-lived assets, goodwill impairment, collectability of receivables, revenue recognition, capitalized software, assumptions used for purposes of determining share-based compensation and income tax liabilities and assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.

Note 2. Summary of Significant Accounting Policies

Fair Value of Financial Instruments — Certain financial assets and liabilities are reported at fair value in the accompanying consolidated balance sheets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurement. ASC 820 establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 defines fair value as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation techniques required by ASC 820 are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 — Significant inputs to the valuation model are unobservable (supported by little or no market activities). These inputs may be used with internally developed methodologies that reflect the Company’s best estimate of fair value from a market participant.

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

The carrying amounts of cash and cash equivalents, short-term investments, receivables, short-term debt, and accounts payable approximate fair value due to the short-term maturities of these financial instruments (Level 1). The fair values and carrying values of the Company’s long-term debt are disclosed in Note 6.

The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of June 30, 2022 (in thousands):

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

 

 

$

8,036

 

 

$

 


Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Other intangible assets are subject to nonrecurring fair value measurement as the result of business acquisitions. The fair values of these assets were estimated using the present value of expected future cash flows through unobservable inputs (Level 3).

7


 

Business Combinations — The Company records business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Under the acquisition method of accounting, identifiable assets acquired and liabilities assumed are recorded at their acquisition-date fair values. The excess of the purchase price over the estimated fair value is recorded as goodwill. 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 reflected in the period in which they occur.

In valuing the trade names, customer lists, and software developed for internal use, the Company utilizes variations of the income approach, which relies on historical financial and qualitative information, as well as assumptions and estimates for projected financial information. The Company considers the income approach the most appropriate valuation technique because the inherent value of these assets is their ability to generate current and future income. Projected financial information is subject to risk if estimates are incorrect. The most significant estimate relates to projected revenues and profitability. If the projected revenues and profitability used in the valuation calculations are not met, then the asset could be impaired.

Goodwill, Trade Name, and Customer Lists — The Company tests goodwill for impairment annually as of December 31 or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or indefinite-lived intangible asset below its carrying value. Goodwill is tested for impairment at the reporting unit level using a fair value approach. At December 31, 2021, the Company had two reporting units comprised of the Americas and International. When testing goodwill for impairment, the Company may first perform an optional qualitative assessment. If the Company determines it is not more likely than not the reporting unit’s fair value is less than its carrying value, then no further analysis is necessary. If the Company determines that it is more likely than not that the fair value of its reporting unit is less than its carrying amount, then the quantitative impairment test will be performed. Under the quantitative impairment test, if the carrying amount of the Company’s reporting unit exceeds its fair value, the Company will recognize an impairment loss in an amount equal to that excess but limited to the total amount of goodwill. No impairment charges have been required.

The Company’s trade name is amortized on an accelerated basis over its expected useful life of twenty years. The Company recorded $1.9 million and $2.0 million of amortization expense related to the trade name for the three months ended June 30, 2022 and 2021, respectively. Amortization expense related to the trade name was $3.8 million and $4.0 million for the six months ended June 30, 2022 and 2021, respectively.

Customer lists are amortized on an accelerated basis based upon their estimated useful life of thirteen to fourteen years. The Company recorded $15.2 million and $16.4 million of amortization expense related to customer lists for the three months ended June 30, 2022 and 2021, respectively. Amortization expense related to customer lists was $30.5 million and $32.7 million for the six months ended June 30, 2022 and 2021, respectively.

The Company regularly evaluates the amortization period assigned to each intangible asset to determine whether there have been any events or circumstances that warrant revised estimates of useful lives. In December 2021, and since that time, the Company determined that there have been no triggering events that would require impairment of trade names or customer lists.

Revenue Recognition — Revenues are recognized when control of the Company’s services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. In accordance with ASC 606, Revenue from Contracts with Customers, which was adopted as of January 1, 2019 using the modified retrospective method, revenues are recognized based on the following steps:

a)
Identify the contract with a customer
b)
Identify the performance obligations in the contract
c)
Determine the transaction price
d)
Allocate the transaction price to the performance obligations in the contract
e)
Recognize revenue when (or as) the entity satisfies a performance obligation

8


 

A substantial majority of the Company’s revenues are derived from pre-onboarding and related services to our customers on a transactional basis, in which an individual background screening package or selection of services is ordered by a customer related to a single individual. Substantially all of the Company’s customers are employers, staffing, or related businesses. The Company satisfies its performance obligations and recognizes revenues for services rendered as the orders are completed and the completed reports are transmitted, or otherwise made available. The Company’s remaining services, substantially consisting of tax consulting, fleet management, and driver qualification services, are delivered over time as the customer simultaneously receives and consumes the benefits of the services delivered. To measure the Company’s performance over time, the output method is utilized to measure the value to the customer based on the transfer to date of the services promised, with no rights of return once consumed. In these cases, revenues on transactional contracts with a defined price but an undefined quantity are recognized utilizing the right to invoice expedient resulting in revenues being recognized when the service is provided and becomes billable. Additionally, under this practical expedient, the Company is not required to estimate the transaction price.

The Company considers negotiated and anticipated incentives and estimated adjustments, including historical collections experience, when recording revenues.

The Company’s contracts with customers generally include standard commercial payment terms acceptable in each region, and do not include any financing components. The Company does not have any significant obligations for refunds, warranties, or similar obligations. The Company records revenues net of sales taxes. Due to the Company’s contract terms and the nature of the background screening industry, the Company determined its contract terms for ASC 606 purposes are less than one year. As a result, the Company uses the practical expedient which allows it to expense incremental costs of obtaining a contract, primarily consisting of sales commissions, as incurred.

The Company records third-party pass-through fees incurred as part of screening related services on a gross revenue basis, with the related expense recorded as a cost of services expense, as the Company has control over the transaction and is therefore considered to be acting as a principal. The Company records motor vehicle registration and other tax payments paid on behalf of the Company’s fleet management customers on a net revenue basis as the Company does not have control over the transaction and therefore is considered to be acting as an agent of the customer. Amounts received from fleet management customers are recorded in cash and cash equivalents in the accompanying consolidated balance sheets as the funds are not legally restricted.

Contract balances are generated when the revenues recognized in a given period varies from billing. A contract asset is created when the Company performs a service for a customer and recognizes more revenues than what has been billed. Contract assets are included in accounts receivable in the accompanying condensed consolidated balance sheets. A contract liability is created when the Company transfers a good or service to a customer and recognizes less than what has been billed. The Company recognizes these contract liabilities as deferred revenues when the Company has an obligation to perform services for a customer in the future and has already received consideration from the customer. Contract liabilities are included in deferred revenues in the accompanying condensed consolidated balance sheets.

Foreign Currency — The functional currency of all of the Company’s foreign subsidiaries is the applicable local currency. The translation of the applicable foreign currencies into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenues and expense accounts using average exchange rates prevailing during the fiscal year. Adjustments resulting from the translation of foreign currency financial statements are accumulated net of tax in a separate component of equity. Currency translation (loss) income included in accumulated other comprehensive income (loss) was approximately $(11.3) million and $(1.3) million for the three months ended June 30, 2022 and 2021, respectively. Currency translation (loss) income included in accumulated other comprehensive income (loss) was approximately $(12.8) million and $1.5 million for the six months ended June 30, 2022 and 2021, respectively.

Gains or losses resulting from foreign currency transactions are included in the accompanying condensed consolidated statements of operations and comprehensive income (loss), except for those relating to intercompany transactions of a long-term investment nature, which are captured in a separate component of equity as accumulated other comprehensive income (loss). Currency transaction income included in the accompanying condensed consolidated statements of operations and comprehensive income (loss) was approximately $0.3 million and $0.2 million for the three months ended June 30, 2022 and 2021, respectively. Currency transaction income included in the accompanying condensed consolidated statements of operations and comprehensive income (loss) was approximately $1.3 million and $0.3 million for the six months ended June 30, 2022 and 2021, respectively.

Recent Accounting Pronouncements — The Company qualifies as an emerging growth company under the Jumpstart Our Business Startups (“JOBS”) Act. The JOBS Act permits the Company an extended transition period for complying with new or revised accounting standards affecting public companies. The Company has elected to use this extended transition period and adopt certain new accounting standards on the private company timeline, which means that the Company’s financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards on a non-delayed basis.

There were no accounting pronouncements issued during the six months ended June 30, 2022 that are expected to have a material impact on the condensed consolidated financial statements.

9


 

Recently Adopted Accounting Pronouncements — In February 2016, the FASB issued ASU 2016-02, Leases, and subsequently issued additional ASUs amending this ASU (collectively ASC 842, Leases). ASC 842 was issued to increase transparency and comparability among organizations by requiring the recognition of right of use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted the provisions of ASC 842 on January 1, 2022 using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption in line with the new transition method allowed under ASU 2018-11. ASC 842 provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients” which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight and elected the practical expedient pertaining to land easements. The new standard also provides practical expedients for an entity’s ongoing accounting for leases. The Company elected the short-term lease exemption for all leases that qualify, meaning the Company will not recognize ROU assets or lease liabilities for leases with terms shorter than twelve months. The Company also elected the practical expedient to not separate lease and non-lease components for a majority of its asset classes, including real estate and most equipment.

The adoption of ASC 842 had a material impact on the Company’s condensed consolidated balance sheets but did not have a material impact on our condensed consolidated statements of operations or cash flow. The most significant impact was the recognition of ROU assets of $12.7 million and lease liabilities for operating leases of $15.0 million based on the present value of the future minimum rental payments for existing operating leases. The difference in the balances is due to deferred rent, tenant incentive allowances, and prepaid amounts taken into account for adoption. Our accounting for finance leases, described in Note 13, remained unchanged.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU removes specific exceptions to the general principles in Topic 740. Among other things it eliminates the need for an organization to analyze whether the following apply in a given period: exception to the incremental approach for intra-period tax allocation; exceptions to accounting for basis differences when there are ownership changes in foreign investments; and exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. This amendment also improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP for: franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; separate financial statements of legal entities that are not subject to tax; and enacted changes in tax laws in interim periods. Adoption of this standard on January 1, 2022 did not have a material impact on the condensed consolidated financial statements.

 

10


 

Note 3. Acquisitions

2021 Acquisitions

On March 31, 2021, the Company completed its acquisition of selected assets and specified liabilities comprising the United Kingdom background screening business unit of a United Kingdom based company for cash consideration of $7.6 million. The Company recognized $3.1 million of goodwill and $3.0 million of intangible assets subject to amortization. Goodwill recognized is primarily attributable to assembled workforce and the expected growth of the Company and is not deductible for tax purposes. Results of operations have been included in the condensed consolidated financial statements of the Company’s International segment since the closing date.

On November 30, 2021, the Company completed its acquisition of a background screening and verification provider based in Mexico. Goodwill recognized as result of this acquisition was not deductible for tax purposes. Results of operations have been included in the condensed consolidated financial statements of the Company’s Americas segment since the closing date.

On November 30, 2021, the Company, through one of its wholly-owned subsidiaries in the United States, entered into an agreement to acquire 100% of the outstanding equity of Corporate Screening Services, LLC (“Corporate Screening”), a U.S.-based screening and compliance solutions provider which strengthened the Company’s healthcare and higher education solutions by adding technology and expertise tailored to those customers, for cash consideration of $39.4 million. The acquisition was considered an acquisition of assets for tax purposes and, accordingly, a significant portion of the $22.2 million of goodwill recognized was deductible for tax purposes. Identifiable intangible assets related to this acquisition totaled $15.5 million, of which $11.8 million was attributable to a customer related intangible asset, with an estimated useful life of fourteen years and $3.6 million was attributable to developed technology with a useful life of five years. In addition, the Company acquired current assets of $2.9 million and assumed liabilities of $1.6 million. The allocation was finalized as of June 30, 2022. Results of operations have been included in the condensed consolidated financial statements of the Company’s Americas segment since the closing date.

2022 Acquisition

The Company completed its asset purchase of Form I-9 Compliance, a U.S.-based technology solution and consulting service provider for I-9 and E-Verify compliance, for cash consideration of approximately $19.8 million. The transfer of ownership became 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. The acquired assets were determined to constitute a business and the Company was deemed to be the acquirer under ASC 805. The Company recorded a preliminary allocation of the purchase price to assets acquired and liabilities assumed based on their estimated fair values as of January 1, 2022.

As of the date these condensed consolidated financial statements were issued, the purchase accounting related to the acquisition of Form I-9 Compliance was incomplete as the valuations of deferred taxes and purchase price were still in the process of being finalized, and certain customary transaction adjustments were not yet finalized. The Company has reflected the provisional amounts for goodwill and deferred taxes in these condensed consolidated financial statements. As such, the above balances may be adjusted in a future period as the valuation is finalized and these adjustments may be material to the consolidated financial statements.

The allocation of the purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date. The following table summarizes the consideration paid and the amounts recognized for the assets acquired and liabilities assumed (in thousands):

Consideration

 

 

 

Cash, net of cash acquired

 

$

19,087

 

Total fair value of consideration transferred

 

$

19,087

 

Current assets

 

$

1,151

 

Property and equipment, including software developed for internal use

 

 

3,045

 

Customer lists

 

 

6,100

 

Current liabilities

 

 

(325

)

Total identifiable net assets

 

$

9,971

 

Goodwill

 

$

9,116

 

Goodwill recognized in the acquisition of Form I-9 Compliance is deductible for tax purposes. Results of operations have been included in the condensed consolidated financial statements of the Company’s Americas segment since the effective date of the acquisition.

11


 

Note 4. Property and Equipment, net

Property and equipment, net as of June 30, 2022 and December 31, 2021 consisted of the following (in thousands):

 

 

June 30, 2022

 

 

December 31, 2021

 

Furniture and equipment

 

$

23,450

 

 

$

20,462

 

Capitalized software for internal use, acquired by business combination

 

 

231,105

 

 

 

225,005

 

Capitalized software for internal use, developed internally or otherwise purchased

 

 

44,192

 

 

 

37,326

 

Leasehold improvements

 

 

2,902

 

 

 

3,001

 

Total property and equipment

 

 

301,649

 

 

 

285,794

 

Less: accumulated depreciation and amortization

 

 

(165,113

)

 

 

(131,485

)

Property and equipment, net

 

$

136,536

 

 

$

154,309

 

Depreciation and amortization expense of property and equipment was approximately $17.3 million and $17.5 million for the three months ended June 30, 2022 and 2021, respectively. Depreciation and amortization expense of property and equipment was approximately $34.1 million and $34.0 million for the six months ended June 30, 2022 and 2021, respectively.

Note 5. Goodwill, Trade Name, and Customer Lists

The changes in the carrying amount of goodwill for the six months ended June 30, 2022 by reportable segment were as follows (in thousands):

 

 

Americas

 

 

International

 

 

Total

 

Balance – December 31, 2021

 

$

668,048

 

 

$

125,844

 

 

$

793,892

 

Acquisitions

 

 

9,116

 

 

 

 

 

 

9,116

 

Adjustments to initial purchase price allocations

 

 

(167

)

 

 

 

 

 

(167

)

Foreign currency translation

 

 

156

 

 

 

(6,441

)

 

 

(6,285

)

Balance – June 30, 2022

 

$

677,153

 

 

$

119,403

 

 

$

796,556

 

The following summarizes the gross carrying value and accumulated amortization for the Company’s trade name and customer lists as of June 30, 2022 and December 31, 2021 (in thousands):

 

 

June 30, 2022

 

 

Gross
Carrying Value

 

 

Accumulated
Amortization

 

 

Net
Carrying Value

 

 

Useful Life
(in years)

Trade name

 

$

94,346

 

 

$

(19,111

)

 

$

75,235

 

 

20 years

Customer lists

 

 

517,866

 

 

 

(160,169

)

 

 

357,697

 

 

13-14 years

Total

 

$

612,212

 

 

$

(179,280

)

 

$

432,932

 

 

 

 

 

 

December 31, 2021

 

 

Gross
Carrying Value

 

 

Accumulated
Amortization

 

 

Net
Carrying Value

 

 

Useful Life
(in years)

Trade name

 

$

95,026

 

 

$

(15,441

)

 

$

79,585

 

 

20 years

Customer lists

 

 

515,524

 

 

 

(130,758

)

 

 

384,766

 

 

14 years

Total

 

$

610,550

 

 

$

(146,199

)

 

$

464,351

 

 

 

Amortization expense of trade name and customer lists was approximately $17.1 million and $18.4 million for the three months ended June 30, 2022 and 2021, respectively. Amortization expense of trade name and customer lists was approximately $34.3 million and $36.7 million for the six months ended June 30, 2022 and 2021, respectively.

 

12


 

Note 6. Long-term Debt

The fair value of the Company’s long-term debt obligations approximated their book value as of June 30, 2022 and December 31, 2021 and consisted of the following (in thousands):

 

 

June 30, 2022

 

 

December 31, 2021

 

Successor First Lien Credit Facility

 

$

564,724

 

 

$

564,724

 

Less: Deferred financing costs

 

 

(8,985

)

 

 

(9,879

)

Long-term debt, net

 

$

555,739

 

 

$

554,845

 

In February 2020, a new financing structure was established consisting of a new First Lien Credit Agreement (“Successor First Lien Agreement”) and a new Second Lien Credit Agreement (“Successor Second Lien Agreement”) (collectively, the “Successor Credit Agreements”). The Successor First Lien Agreement provided financing in the form of a $670.0 million term loan due January 31, 2027, carrying an interest rate of 3.25% to 3.50%, based on the first lien leverage ratio, plus LIBOR (“Successor First Lien Credit Facility”) and a new $75.0 million revolving credit facility due January 31, 2025 (“Successor Revolver”). The Successor First Lien Credit Facility required mandatory quarterly repayments of 0.25% of the original loan balance commencing September 30, 2020. Beginning with the year ending December 31, 2021, the Successor First Lien Credit Facility required mandatory payments based on calculated excess cash flow, as defined within the Successor First Lien Credit Agreement. The Successor Second Lien Agreement provided financing in the form of a $145.0 million term loan due January 31, 2028, carrying an interest rate of 8.50% plus LIBOR (“Successor Second Lien Credit Facility”). The Successor Credit Agreements are collateralized by substantially all assets and capital stock owned by direct and indirect domestic subsidiaries and are governed by certain restrictive covenants including limitations on indebtedness, liens, and other corporate actions such as investments and acquisitions. In the event the Company’s outstanding indebtedness under the Successor Revolver exceeds 35% of the aggregate principal amount of the revolving commitments then in effect, it is required to maintain a consolidated first lien leverage ratio no greater than 7.75 to 1:00.

In February 2021, the Company refinanced its Successor First Lien Credit Facility at an increased principal amount of $766.6 million due January 31, 2027, carrying a reduced interest rate of 3.00% to 3.25%, based on the first lien leverage ratio, plus LIBOR. No changes were made to the associated revolving credit facility due January 31, 2025. In connection with the refinancing of the Successor First Lien Credit Facility, the Company fully repaid its Successor Second Lien Credit Facility. As a result of these transactions the Company recorded a total loss on extinguishment of debt of $13.9 million, composed of the write-off of unamortized deferred financing costs plus a prepayment premium, accrued interest, and other fees.

In connection with the closing of the Company’s initial public offering (“IPO”), on June 30, 2021, the Company repaid $200.0 million of its Successor First Lien Credit Facility outstanding, of which $44.3 million was applied to the remaining quarterly principal payments due under the Successor First Lien Agreement. As a result of the IPO, the Company’s interest rate under the Successor First Lien Credit Facility was reduced by 0.25% to a range of 2.75% to 3.00%, based on the first lien ratio, plus LIBOR. The remaining $564.7 million term loan is scheduled to mature on January 31, 2027. As a result of the prepayment, the Company recorded additional interest expense of $3.7 million associated with the accelerated amortization of the related deferred financing costs.

Additionally, in connection with the closing of the IPO, the Company entered into an amendment that increased the borrowing capacity under the Successor Revolver from $75.0 million to $100.0 million and extended the maturity date from January 31, 2025 to July 31, 2026. As of June 30, 2022, the Company had no outstanding amounts under the Successor Revolver, and therefore was not subject to the consolidated first lien leverage ratio covenant and was compliant with all other covenants under the agreement.

 

13


 

Note 7. Derivatives

In February 2020, the Company entered into an interest rate collar agreement with a counterparty bank in order to reduce its exposure to interest rate volatility. In this agreement, the Company and the counterparty bank agreed to a one-month USD LIBOR floor of 0.48% and a cap of 1.50% on a portion of the Company’s Successor First Lien Facility. The notional amount of this agreement was $405.0 million through February 2022 at which time the notional amount was reduced to $300.0 million through February 2024.

The following is a summary of location and fair value of the financial position recorded related to the derivative instruments (in thousands):

 

 

 

 

Fair Value

 

Derivatives
not designated
as hedging
instruments

 

Balance Sheet
Location

 

As of
June 30, 2022

 

 

As of
 December 31, 2021

 

Interest rate swaps

 

Prepaid expenses and other current assets

 

$

8,036

 

 

$

197

 

 

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

 

 

 

 

Gain/(Loss)

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

Derivatives
not designated
as hedging
instruments

 

Income Statement
Location

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Interest rate swaps

 

Interest expense, net

 

$

2,119

 

 

$

(79

)

 

$

7,378

 

 

$

953

 

 

Note 8. Income Taxes

The Company’s income tax expense and balance sheet accounts reflect the results of the Company and its subsidiaries.

For the three and six months ended June 30, 2022, the Company estimated the annual effective tax rate based on projected income for the full year and recorded a quarterly tax provision in accordance with the annual effective tax rate and adjusted for discrete tax items in the period.

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

The Company’s effective income tax rate for the three and six months ended June 30, 2021 was 44.8% and 8.1%, respectively. The Company’s effective income tax rate for the three months ended June 30, 2021 was higher than the U.S. federal statutory rate of 21% primarily due to the increase of the deferred income tax liability on intangibles as a result of the UK corporate income tax rate increase and U.S. state income taxes. The Company’s effective income tax rate for the six months ended June 30, 2021 was lower than the U.S. federal statutory rate of 21% primarily due to the increase of the deferred income tax liability on intangibles as a result of the UK corporate income tax rate increase, foreign withholding tax and U.S. state income tax expenses on losses before provision for income taxes for the six months ended June 30, 2021.

14


 

Note 9. Revenues

Performance obligations

Substantially all of the Company’s revenues are recognized at a point in time when the orders are completed and the completed reports are reported, or otherwise made available. For revenues delivered over time, the output method is utilized to measure the value to the customer based on the transfer to date of the services promised, with no rights of return once consumed. In these cases, revenues on transactional contracts with a defined price but an undefined quantity is recognized utilizing the right to invoice expedient resulting in revenues being recognized when the service is provided and becomes billable. Additionally, under this practical expedient, the Company is not required to estimate the transaction price.

Accordingly, in any period, the Company does not recognize a significant amount of revenues from performance obligations satisfied or partially satisfied in prior periods and the amount of such revenues recognized during the three and six months ended June 30, 2022 and 2021 were immaterial.

Contract assets and liabilities

The contract asset balance was $9.4 million and $7.4 million as of June 30, 2022 and December 31, 2021, respectively, and is included in accounts receivable, net in the accompanying condensed consolidated balance sheets. The contract liability balance was $0.7 million and $0.9 million as of June 30, 2022 and December 31, 2021, respectively, and is included in deferred revenues in the accompanying condensed consolidated balance sheets. An immaterial amount of revenues was recognized in the current period related to the beginning balance of deferred revenues.

Concentrations

The Company did not have any customers which represented 10% or more of consolidated revenues for the three and six months ended June 30, 2022 and 2021. Additionally, the Company did not have any customers which represented 10% or more of consolidated accounts receivable, net for any period presented.

For additional disclosures about the disaggregation of our revenues see Note 16, “Reportable Segments.”

 

15


 

Note 10. Share-based Compensation

Share-based compensation expense is recognized in cost of services, product and technology expense, and selling, general, and administrative expense, in the accompanying condensed consolidated statements of operations and comprehensive income (loss) as follows (in thousands):

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

$

277

 

 

$

41

 

 

$

551

 

 

$

73

 

Product and technology expense

 

 

312

 

 

 

67

 

 

 

516

 

 

 

121

 

Selling, general, and administrative expense

 

 

1,354

 

 

 

2,556

 

 

 

2,735

 

 

 

3,032

 

Total share-based compensation expense

 

$

1,943

 

 

$

2,664

 

 

$

3,802

 

 

$

3,226

 

Successor Plan

Prior to the IPO, all share-based awards were issued by Fastball Holdco, L.P., the Company’s previous parent company under individual grant agreements and the partnership agreement of such parent company (collectively the “Successor Plan”).

Awards issued under the Successor Plan consist of options and profits interests and vest based on two criteria (50% each): (1) Time — awards vest over five years at a rate of 20% per year; and (2) Performance — awards vest based upon a combination of the five year time vesting, subject to the Company’s investors receiving a targeted money-on-money return. Options issued under the Successor Plan generally expire ten years after the grant date. No awards were issued under the plan during the period from January 1, 2021 through June 30, 2021.

In connection with the Company’s IPO, the Company’s parent was dissolved. Awards issued by the Company’s parent were converted in accordance with non-discretionary anti-dilution provisions of the Successor grants as follows:

All vested outstanding profits interest grants issued by the Company’s parent were converted to common stock in the Company and all unvested outstanding profits interest grants issued by the Company’s parent were converted to restricted stock in the Company under the 2021 Omnibus Incentive Plan (the “2021 Equity Plan”). The number of common stock and restricted stock shares issued to each profits interest holder was ratably adjusted to preserve the fair value of the awards. Additionally, the vesting conditions and equity classification of the awards remained unchanged as a result of the conversion.
All outstanding stock option grants issued by the Company’s parent were converted into stock options issued by the Company under the terms of the individual grant agreements. The number of options granted and the strike price of the options was ratably adjusted using an exchange ratio calculated to preserve the fair value of the awards. Additionally, the vesting, vesting conditions, and equity classification of the awards remained unchanged as a result of the conversion.

 

 

 

Options

 

 

Weighted Average
Exercise Price

 

 

Weighted Average Remaining Contractual Term

 

Aggregate Intrinsic Value

December 31, 2021

Grants outstanding

 

 

3,519,563

 

 

$

6.66

 

 

 

 

 

 

Grants exercised

 

 

(192,230

)

 

$

6.67

 

 

 

 

 

 

Grants cancelled/forfeited

 

 

(113,264

)

 

$

6.61

 

 

 

 

 

June 30, 2022

Grants outstanding

 

 

3,214,069

 

 

$

6.66

 

 

7.7 Years

 

$19.3 million

June 30, 2022

Grants vested

 

 

820,282

 

 

$

6.64

 

 

7.7 Years

 

$4.9 million

June 30, 2022

Grants unvested

 

 

2,393,787

 

 

$

6.67

 

 

 

 

 

 

16


 

2021 Equity Plan

In connection with the IPO, the Company adopted the 2021 Equity Plan. The 2021 Equity Plan is intended to provide a means through which to attract and retain key personnel and to provide a means whereby our directors, officers, employees, consultants, and advisors can acquire and maintain an equity interest in us, or be paid incentive compensation, including incentive compensation measured by reference to the value of our common stock, thereby strengthening their commitment to our welfare and aligning their interests with those of our stockholders. The 2021 Equity Plan provides for the grant of awards of stock options, stock appreciation rights, restricted shares, restricted stock units, and other equity-based or cash-based awards as determined by the Company’s Compensation Committee. The 2021 Equity Plan initially had a total of 17,525,000 shares of common stock reserved. The number of reserved shares automatically increases on the first day of each calendar year commencing on January 1, 2022 and ending on January 1, 2030, in an amount equal to the lesser of (x) 2.5% of the total number of shares of common stock outstanding on the last day of the immediately preceding calendar year and (y) a number of shares as determined by the Board of Directors. As of June 30, 2022, 13,711,950 shares were available for issuance under the 2021 Equity Plan.

Stock Options

Stock options issued immediately prior to the IPO vest based on two criteria (50% each): (1) Time — awards vest over five years at a rate of 20% per year; and (2) Performance — awards vest based upon a combination of the five year time vesting, subject to the Company’s investors receiving a targeted money-on-money return. Stock options issued after the IPO vest annually, generally over four to five years. Stock options generally expire ten years after the grant date.

A summary of the option activity for the six months ended June 30, 2022 is as follows:

 

 

 

Options

 

 

Weighted Average
Exercise Price

 

 

Weighted Average Remaining Contractual Term

 

Aggregate Intrinsic Value

 

December 31, 2021

Grants outstanding

 

 

3,714,540

 

 

$

15.33

 

 

 

 

 

 

 

Grants issued

 

 

496,627

 

 

$

14.82

 

 

 

 

 

 

 

Grants cancelled/forfeited

 

 

(8,800

)

 

$

17.52

 

 

 

 

 

 

June 30, 2022

Grants outstanding

 

 

4,202,367

 

 

$

15.27

 

 

9.1 Years

 

 

 

June 30, 2022

Grants vested

 

 

999,352

 

 

$

15.07

 

 

9.0 Years

 

 

 

June 30, 2022

Grants unvested

 

 

3,203,015

 

 

$

15.33

 

 

 

 

 

 

The fair value for stock options granted for the six months ended June 30, 2022 was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighed average assumptions:

 

 

Options

 

Expected stock price volatility

 

 

34.60

%

Risk-free interest rate

 

 

2.78

%

Expected term (in years)

 

 

6.2

 

Estimated fair-value of the underlying unit

 

$

14.82

 

Restricted Stock Units

Restricted stock units (“RSU”) vest annually, generally over three to five years.

A summary of the RSU activity for the six months ended June 30, 2022 is as follows:

 

 

 

Shares

 

 

Weighted Average
Grant Date Fair Value

 

December 31, 2021

Nonvested RSUs

 

 

340,875

 

 

$

17.19

 

 

Granted

 

 

178,650

 

 

$

14.40

 

 

Vested

 

 

(38,600

)

 

$

16.54

 

 

Forfeited

 

 

(4,400

)

 

$

17.52

 

June 30, 2022

Nonvested RSUs

 

 

476,525

 

 

$

16.19

 

 

17


 

Restricted Stock

The following table summarizes the restricted stock issued by the Company. These include grants of unvested Successor profits interests grants that were converted into restricted stock as described above, as well as restricted stock issued to new recipients. The restricted stock granted as a result of the conversion of Successor profits interests retain the vesting attributes (including original service period vesting start date) of the original award. A summary of the restricted stock activity for the six months ended June 30, 2022 is as follows:

 

 

 

Shares

 

 

Weighted Average
Grant Date Fair Value

 

December 31, 2021

Nonvested restricted stock

 

 

2,613,359

 

 

$

3.85

 

 

Granted

 

 

 

 

$

 

 

Vested

 

 

(332,059

)

 

$

3.85

 

June 30, 2022

Nonvested restricted stock

 

 

2,281,300

 

 

$

3.85

 

As of June 30, 2022, the Company had approximately $38.1 million of unrecognized pre-tax noncash compensation expense, comprised of approximately $8.3 million related to restricted stock, $7.2 million related to restricted stock units, and approximately $22.6 million related to stock options, which the Company expects to recognize over a weighted average period of 3.4 years.

2021 Employee Stock Purchase Plan

On June 25, 2021, in connection with the IPO, the Company adopted the First Advantage Corporation 2021 Employee Stock Purchase Plan (“ESPP”) that allows eligible employees to voluntarily make after-tax contributions of up to 15% of such employee’s cash compensation to acquire Company stock during designated offering periods. During each offering period, there will be one six-month purchase period, which will have the same duration and coincide with the length of the offering period. During the holding period, ESPP purchased shares are not eligible for sale or broker transfer. No purchases have been made under the ESPP as of June 30, 2022.

Note 11. Equity

The Company operates with one class of stock.

On June 11, 2021, the Company’s Board of Directors approved and made effective a 1,300,000-for-one stock split of the Company’s common stock and filed an Amended and Restated Certificate of Incorporation, which authorized a total of 1,000,000,000 shares of Common Stock, $0.001 par value per share and 250,000,000 shares of Preferred Stock, par value $0.001 per share (the “Preferred Stock”). The par value per share of common stock remained unchanged at $0.001 per share. Authorized shares were increased from 10,000 shares to 1,000,000,000 shares. The condensed consolidated financial statements and accompanying notes give retroactive effect to the stock split for all periods presented. After giving retroactive effect to the stock split, as of December 31, 2020, 130,000,000 shares of common stock were issued and outstanding.

In connection with the IPO, Fastball Holdco, L.P., the Company’s parent, was dissolved and all outstanding Class A LP Units, Class B LP Units, and Class C LP Units of Fastball Holdco, L.P. were exchanged for 130,000,000 shares of the Company’s common stock.

As of June 30, 2022, no preferred stock had been issued and 153,125,085 shares of common stock were issued and outstanding.

18


 

Note 12. Commitments and Contingencies

Except for certain changes to our lease agreements discussed in Note 13, there have been no material changes to the Company’s contractual obligations as compared to December 31, 2021.

Litigation — The Company is involved in litigation from time to time in the ordinary course of business. At times, the Company, given the nature of its background screening business, could become subject to lawsuits, or potential class action lawsuits, in multiple jurisdictions, related to claims brought primarily by consumers or individuals who were the subject of its screening services.

For all pending matters, the Company believes it has meritorious defenses and intends to defend vigorously or otherwise seek indemnification from other parties as appropriate. However, the Company has recorded a liability of $3.6 million and $7.9 million at June 30, 2022 and December 31, 2021, respectively, for matters that it believes a loss is both probable and estimable. This is included in accrued liabilities in the accompanying condensed consolidated balance sheets.

In February 2022, the Company settled and paid $5.5 million related to a settlement agreement the parties had agreed upon in April 2020 and was approved by the court in December 2021. In March 2022, the Company received a recovery of $2.2 million, which represented the portion of the legal settlement and legal fees incurred by the Company and recoverable from the Company’s insurers related to this case.

The Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable.

Note 13. Leases

Effective January 1, 2022 the Company adopted ASC 842, which requires recognition of right of use (“ROU”) assets and lease liabilities on the balance sheet, based on the present value of the future minimum rental payments for existing operating leases. The Company adopted the provisions of ASC 842 on January 1, 2022 using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption in line with the new transition method allowed under ASU 2018-11. ASC 842 provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients” which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight and elected the practical expedient pertaining to land easements. The new standard also provides practical expedients for an entity’s ongoing accounting for leases. The Company elected the short-term lease exemption for all leases that qualify, meaning the Company will not recognize ROU assets or lease liabilities for leases with terms shorter than twelve months. The Company also elected the practical expedient to not separate lease and non-lease components for a majority of its asset classes, including real estate and most equipment.

The Company measures the ROU assets and liabilities based on the present value of the future minimum lease payments over the lease term at the commencement date. Minimum lease payments include the fixed lease and non-lease components of the agreement, as well as any variable rent payments that depend on an index, initially measured using the index at the lease commencement date. The ROU assets are adjusted for any initial direct costs incurred less any lease incentives received, in addition to payments made on or before the commencement date of the lease. The Company recognizes lease expense for leases on a straight-line basis over the lease term.

As the implicit rate is not readily determinable for most of the Company’s lease agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments.

The Company determines if a contract is or contains a lease at inception. The Company has operating and finance leases for office space, data centers, and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company enters into lease contracts ranging from 1 to 9 years with a majority of the Company’s lease terms ranging from 3 to 5 years.

Some leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 5 years or more. The exercise of these lease renewal options is at the Company’s sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease term.

Certain of our leases include rental payments that will adjust periodically for inflation or certain adjustments based on step increases. An insignificant number of our leases contain residual value guarantees and none of our agreements contain material restrictive covenants. Variable rent expenses consist primarily of maintenance, property taxes, and charges based on usage.

19


 

The components of lease costs are as follows (in thousands):

 

 

Three Months
Ended
June 30, 2022

 

 

Six Months
Ended
June 30, 2022

 

Operating lease costs

 

 

 

 

 

 

Fixed

 

$

1,828

 

 

$

3,587

 

Short-term

 

 

55

 

 

 

113

 

Variable

 

 

8

 

 

 

14

 

Sub-leases

 

 

(12

)

 

 

(12

)

Total operating lease costs

 

$

1,878

 

 

$

3,701

 

 

 

 

 

 

 

 

Finance lease costs

 

 

 

 

 

 

Amortization of leased assets

 

$

190

 

 

$

400

 

Interest on lease liabilities

 

 

10

 

 

 

21

 

Total finance lease costs

 

$

200

 

 

$

421

 

Total lease cost

 

$

2,078

 

 

$

4,122

 

Supplemental balance sheet information related to leases is as follows (in thousands):

 

 

Classification

 

June 30, 2022

 

Assets

 

 

 

 

 

Operating leases

 

 

 

 

 

Right of use operating lease assets

 

Other assets

 

$

16,008

 

Finance leases

 

 

 

 

 

Property and equipment, gross

 

Property and equipment, net

 

 

5,098

 

Accumulated depreciation

 

Property and equipment, net

 

 

(4,706

)

Property and equipment, net

 

Property and equipment, net

 

 

392

 

Total lease assets

 

 

 

$

16,400

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Operating leases

 

 

 

 

 

Other current

 

Current portion of operating lease liability

 

$

6,070

 

Non-current

 

Operating lease liability, less current portion

 

 

11,514

 

Total operating liabilities

 

 

 

 

17,584

 

Finance leases

 

 

 

 

 

Other current

 

Accrued liabilities

 

 

502

 

Non-current

 

Other liabilities

 

 

30

 

Total finance liabilities

 

 

 

 

532

 

Total lease liabilities

 

 

 

$

18,116

 

Maturities of lease liabilities are as follows (in thousands):

Years Ending December 31,

 

 

 

 

 

 

 

 

 

 

 

Finance Leases

 

 

Operating Leases

 

 

Total

 

2022 (excluding the six months ended June 30, 2022)

 

$

435

 

 

$

3,919

 

 

$

4,354

 

2023

 

 

108

 

 

 

6,153

 

 

 

6,261

 

2024

 

 

 

 

 

5,357

 

 

 

5,357

 

2025

 

 

 

 

 

2,096

 

 

 

2,096

 

2026

 

 

 

 

 

1,584

 

 

 

1,584

 

Thereafter

 

 

 

 

 

402

 

 

 

402

 

Total minimum lease payments

 

$

543

 

 

$

19,511

 

 

$

20,054

 

Less: Imputed interest

 

 

(11

)

 

 

(1,511

)

 

 

 

Present value of minimum lease payments

 

$

532

 

 

$

18,000

 

 

 

 

 

20


 

For additional information regarding the Company’s Commitments and Contingencies as of December 31, 2021 as disclosed for capital and operating leases, see Note 12 in its 2021 Annual Report filed on Form 10-K.

Lease term and discount rates are as follows:

 

 

June 30, 2022

 

Weighted average remaining lease term

 

 

 

Operating leases

 

3.2 Years

 

Finance leases

 

0.7 Years

 

 

 

 

 

Weighted average discount rate

 

 

 

Operating leases

 

 

4.81

%

Finance leases

 

 

5.39

%

Supplemental cash flow information related to leases was as follows (in thousands):

 

 

Six Months
Ended
June 30, 2022

 

Cash paid for amounts included in measurement of lease liabilities:

 

 

 

Operating cash flows from operating leases

 

$

3,906

 

Operating cash flows from finance leases

 

 

20

 

Financing cash flows from finance leases

 

 

459

 

Right-of-use assets obtained in exchange for lease obligations:

 

 

 

Operating leases

 

$

19,783

 

Finance leases

 

 

 

Amortization:

 

 

 

Amortization of right-of-use operating lease assets (1)

 

$

3,200

 

 

(1)
Amortization of right of use operating lease assets during the period is reflected in operating lease liabilities on the condensed consolidated statements of cash flows.

Note 14. Related Party Transactions

The Company has no material related party transactions.

Note 15. Net Income (Loss) Per Share

Basic weighted-average shares outstanding excludes nonvested restricted stock. Diluted weighted average shares outstanding is similar to basic weighted-average shares outstanding, except that the weighted-average number of shares is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common share had been issued, including the dilutive impact of nonvested restricted stock. The Company did not have any potentially dilutive securities during the six months ended June 30, 2022. Basic and diluted net income (loss) per share was calculated as follows:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 



 

2022

 

 

2021

 

 

2022

 

 

2021

 

Basic net income (loss) per share

 

$

0.09

 

 

$

0.03

 

 

$

0.18

 

 

$

(0.12

)

Diluted net income (loss) per share

 

$

0.09

 

 

$

0.03

 

 

$

0.18

 

 

$

(0.12

)

Numerator:

 



 





 

 



 





 

Net income (loss) (in thousands)

 

$

14,236

 

 

$

3,770

 

 

$

27,249

 

 

$

(15,619

)

Denominator:

 



 





 

 



 





 

Weighted average number of shares outstanding - basic

 

 

150,748,211

 



 

131,507,005

 

 

 

150,644,034

 



 

130,757,666

 

Add stock options to purchase shares and restricted stock units

 

 

1,612,139

 

 

 

3,861,904

 

 

 

1,717,754

 

 

 

 

Weighted average number of shares outstanding - diluted

 

 

152,360,350

 

 

 

135,368,909

 

 

 

152,361,788

 

 

 

130,757,666

 

For the three and six months ended June 30, 2022, 2,533,594 and 2,292,520 stock options were excluded from the calculation of diluted net income (loss) per share, respectively, because their effects were anti-dilutive.

21


 

Note 16. Reportable Segments

During the first quarter of 2022, the Company made organizational changes and modified additional information provided to its CODM to better align with how its CODM assesses performance and allocates resources. As a result, we have two reportable segments, Americas and International. Our CODM uses the profit measure of Adjusted EBITDA, on both a consolidated and a segment basis, to allocate resources and assess performance of our businesses. We use Adjusted EBITDA as our profit measure because it eliminates the impact of certain items that we do not consider indicative of operating performance, which is useful to compare operating results between periods. Our board of directors and executive management team also use Adjusted EBITDA as a compensation measure for both segment and corporate management under our incentive compensation plans. Adjusted EBITDA is also a measure frequently used by securities analysts, investors, and other interested parties in their evaluation of the operating performance of companies similar to ours.

We define Adjusted EBITDA as net income before interest, taxes, depreciation, and amortization, and as further adjusted for loss on extinguishment of debt, share-based compensation, transaction and acquisition-related charges, integration and restructuring charges, and other non-cash charges. We exclude the impact of share-based compensation because it is a non-cash expense and we believe that excluding this item provides meaningful supplemental information regarding performance and ongoing cash generation potential. We exclude loss on extinguishment of debt, transaction and acquisition related charges, integration and restructuring charges, and other charges because such expenses are episodic in nature and have no direct correlation to the cost of operating our business on an ongoing basis.

The segment financial information below aligns with how we report information to our CODM to assess operating performance and how the Company manages the business. Corporate costs are generally allocated to the segments based upon estimated revenues levels and other assumptions that management considers reasonable. The CODM does not review the Company’s assets by segment; therefore, such information is not presented. The accounting policies of the segments are the same as described in Note 2, “Significant Accounting and Reporting Policies” and Note 9, “Revenues.”

The following is a description of our two reportable segments:

Americas. This segment performs a variety of background check and compliance services across all phases of the workforce lifecycle from pre-onboarding services to post-onboarding and ongoing monitoring services, covering employees, contractors, contingent and extended workers, drivers, tenants, and volunteers. We generally classify our service offerings into three categories: pre-onboarding, post-onboarding, and adjacent products. We deliver our solutions across multiple vertical industries in the United States, Canada, and Latin America markets.

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

A reconciliation of Segment Adjusted EBITDA to net income (loss) for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands):

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

52,954

 

 

$

49,208

 

 

$

99,773

 

 

$

83,055

 

International

 

 

7,880

 

 

 

7,114

 

 

 

14,661

 

 

 

9,857

 

Total

 

$

60,834

 

 

$

56,322

 

 

$

114,434

 

 

$

92,912

 

Adjustments to reconcile to net income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

3,112

 

 

 

10,452

 

 

 

2,262

 

 

 

17,169

 

Provision (benefit) for income taxes

 

 

5,432

 

 

 

3,063

 

 

 

10,367

 

 

 

(1,372

)

Depreciation and amortization

 

 

34,407

 

 

 

35,918

 

 

 

68,441

 

 

 

70,681

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

13,938

 

Share-based compensation

 

 

1,943

 

 

 

2,664

 

 

 

3,802

 

 

 

3,226

 

Transaction and acquisition-related charges (a)

 

 

1,179

 

 

 

382

 

 

 

2,677

 

 

 

4,366

 

Integration, restructuring, and other charges (b)

 

 

525

 

 

 

73

 

 

 

(364

)

 

 

523

 

Net income (loss)

 

$

14,236

 

 

$

3,770

 

 

$

27,249

 

 

$

(15,619

)

(a)
Represents charges incurred related to acquisitions and similar transactions, primarily consisting of change in control-related costs, professional service fees, and other third-party costs. Additionally includes incremental professional service fees incurred related to the initial public offering and subsequent one-time compliance efforts. The three and six months ended June 30, 2022 includes 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 legal exposures inherited from legacy acquisitions, foreign currency (gains) losses, and (gains) losses on the sale of assets.

22


 

Geographic Information

The Company bases revenues by geographic region in which the revenues and invoicing are recorded. Other than the United States, no single country accounted for 10% or more of our total revenues during these periods.

The following summarizes revenues by geographical region for the three and six months ended June 30, 2022 and 2021 (in thousands):

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

170,591

 

 

$

146,300

 

 

$

330,679

 

 

$

262,823

 

International

 

 

33,044

 

 

 

30,080

 

 

 

64,785

 

 

 

46,642

 

Eliminations

 

 

(2,074

)

 

 

(1,554

)

 

 

(4,022

)

 

 

(2,569

)

Total revenues

 

$

201,561

 

 

$

174,826

 

 

$

391,442

 

 

$

306,896

 

The following table sets forth net long-lived assets by geographic area as of June 30, 2022 and December 31, 2021 (in thousands):

 

 

June 30, 2022

 

 

December 31, 2021

 

Long-lived assets, net

 

 

 

 

 

 

United States, country of domicile

 

$

1,186,972

 

 

$

1,213,093

 

All other countries

 

 

195,060

 

 

 

199,459

 

Total long-lived assets, net

 

$

1,382,032

 

 

$

1,412,552

 

 

Note 17. Subsequent Events

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

23


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of First Advantage Corporation’s financial condition and results of operations is provided as a supplement to the condensed consolidated financial statements for the three and six months ended June 30, 2022, and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021, our “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, our operations and financial performance. Forward-looking statements include all statements that are not historical facts. These forward-looking statements relate to matters such as our industry, business strategy, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information. In some cases, you can identify these forward-looking statements by the use of words such as “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “future,” “will,” “seek,” “foreseeable,” the negative version of these words, or similar terms and phrases.

These forward-looking statements are subject to various risks, uncertainties, assumptions, or changes in circumstances that are difficult to predict or quantify. Such risks and uncertainties include, but are not limited to, the following: the impact of COVID-19 and related continuously evolving risks to our results of operations, financial position and/or liquidity; our operations in a highly regulated industry and the fact that we are subject to numerous and evolving laws and regulations, including with respect to personal data and data security; our reliance on third-party data providers; negative changes in external events beyond our control, including our customers’ onboarding volumes, economic drivers which are sensitive to macroeconomic cycles, such as interest rate volatility and inflation, geopolitical unrest, and the COVID-19 pandemic; potential harm to our business, brand, and reputation as a result of security breaches, cyber-attacks or the mishandling of personal data; liability and litigation due to the sensitive and privacy-driven nature of our products and solutions, which could be costly and time-consuming to defend and may not be fully covered by insurance; the continued integration of our platforms and solutions with human resource providers such as applicant tracking systems and human capital management systems as well as our relationships with such human resource providers; risks relating to public opinion, which may be magnified by incidents or adverse publicity concerning our industry or operations; our contracts with our customers, which do not guarantee exclusivity or contracted volumes; our reliance on third-party vendors to carry out certain portions of our operations; 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; disruptions at our Global Operating Center and other operating centers; operating in a penetrated and competitive market; our ability to obtain, maintain, protect, and enforce our intellectual property and other proprietary information; our indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and prevent us from meeting our obligations; Silver Lake’s control of us and the potential conflict of its interest with ours or those of our stockholders; our ability to maintain, protect, and enforce the confidentiality of our trade secrets; the use of open-source software in our applications; the indemnification provisions in our contracts with our customers and third-party data suppliers; our ability to identify attractive targets or successfully complete such transactions; our international business; our dependence on the service of our key executive and other employees, and our ability to find and retain qualified employees; seasonality in our operations from quarter to quarter; failure to comply with anti-corruption laws and regulations; and changing interpretations of tax laws.

For additional information on these and other factors that could cause First Advantage’s actual results to differ materially from expected results, please see our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”), as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. The forward-looking statements included in this Quarterly Report on Form 10-Q speak only as of the date of this Form 10-Q, and we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by law.

24


 

Glossary of Selected Terminology

The following terms are used in this Form 10-Q, unless otherwise noted or indicated by the context:

“Americas” in regards to our business, means the United States, Canada, and Latin America;
“Enterprise customers” means our customers who contribute $500,000 or more to our revenues in a calendar year;
“First Advantage,” the “Company,” “we,” “us,” and “our” mean the business of First Advantage
Corporation and its subsidiaries;
“International” in regards to our business, means all geographical regions outside of the United States, Canada, and Latin America;
“Revenues attributable to the Company’s acquisitions” means revenues recognized in the first year following each acquisition; and
“Silver Lake” means Silver Lake Group, L.L.C., together with its affiliates, successors, and assignees.

Certain monetary amounts, percentages, and other figures included in this Quarterly Report on Form 10-Q have been subject to rounding adjustments. Percentage amounts included in this Quarterly Report on Form 10-Q have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Quarterly Report on Form 10-Q may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Certain other amounts that appear in this Quarterly Report on Form 10-Q may not sum due to rounding.

Website and Social Media Disclosure

We use our websites (https://fadv.com/ and https://investors.fadv.com/) to distribute company information. We make available free of charge a variety of information for investors, including our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file that material with or furnish it to the Securities and Exchange Commission (“SEC”). The information we post on our websites may be deemed material. Accordingly, investors should monitor our websites, in addition to following our press releases, filings with the SEC, and public conference calls and webcasts. In addition, you may opt in to automatically receive email alerts and other information about First Advantage when you enroll your email address by visiting the “Email Alerts” section of our investor website at https://investors.fadv.com/. The contents of our websites and social media channels are not, however, a part of this Quarterly Report on Form 10-Q.

Overview

First Advantage is a leading global provider of HR technology solutions for screening, verifications, safety, and compliance. We deliver innovative solutions and insights that help our customers manage risk and hire the best talent. Enabled by our core proprietary technology, our products and solutions help companies protect their brands and provide safer environments for their customers and their most important resources: employees, contractors, contingent and extended workers, drivers, tenants, and volunteers.

Our comprehensive product suite includes criminal background checks, drug / health screening, extended workforce screening, biometrics and identity, education / work verifications, resident screening, fleet / driver compliance, executive screening, data analytics, continuous monitoring, social media monitoring, and hiring tax incentives. We derive a substantial majority of our revenues from pre-onboarding screening and perform screens in over 200 countries and territories, enabling us to serve as a one-stop-shop provider to both multinational companies and growth companies. Our more than 33,000 customers are global enterprises, mid-sized companies, and small companies, and our products and solutions are used by personnel in recruiting, human resources, risk, compliance, vendor management, safety, and/or security.

Our products are sold both individually and bundled. 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 bundled background screening package or selected combination of screens related to a single individual before they onboard that individual. The type and mix of products and solutions we sell to a customer vary by customer size, their screening requirements, and industry vertical. Therefore, order volumes are not comparable across both customers and periods. Pricing can also vary considerably by customer depending on the product mix in their screening packages, order volumes, screening requirements and preferences, pass-through and third-party out of pocket costs, and bundling of products.
 

25


 

We enter into contracts with our customers that are typically three years in length. These contracts set forth the general terms and pricing of our products and solutions but generally do not include minimum order volumes or committed order volumes. Accordingly, contracts do not provide guarantees of future revenues. Due to our contract terms and the nature of the background screening industry, we determined our contract terms for ASC 606 purposes are less than one year. Through our ongoing dialogue with our customers, we have some visibility into their expected future order volumes, although these can be difficult to accurately forecast. We typically bill our customers at the end of each month and recognize revenues as completed orders are reported or otherwise made available to our customers. Over 90% of the criminal searches performed in the United States are completed the same day they are submitted.

We generated revenues of $201.6 million for the three months ended June 30, 2022, as compared to $174.8 million for the three months ended June 30, 2021 and generated revenues of $391.4 million for the six months ended June 30, 2022, as compared to $306.9 million for the six months ended June 30, 2021.These increases were driven by continued strength across our business, favorable trends in the jobs market, as well as the addition of a number of large new customers, upselling and cross-selling existing customers, and continued demand across our existing customer base. We have experienced additional increases as a result of our recent acquisitions. Approximately 83% of our revenues for the six months ended June 30, 2022 was generated in the Americas, predominantly in the United States, while the remaining 17% was generated internationally. Other than the United States, no single country accounted for 10% or more of our total revenues for the three and six months ended June 30, 2022. Please refer to “Results of Operations” for further details.

Segments

During the first quarter of 2022, the Company made organizational changes and modified additional information provided to its chief operating decision maker (“CODM”) to better align with how its CODM assesses performance and allocates resources. As a result, the Company now has two reportable segments, Americas and International:

Americas. This segment performs a variety of background check and compliance services across all phases of the workforce lifecycle from pre-onboarding services to post-onboarding and ongoing monitoring services, covering employees, contractors, contingent and extended workers, drivers, tenants, and volunteers. We generally classify our service offerings into three categories: pre-onboarding, post-onboarding, and adjacent products. We deliver our solutions across multiple vertical industries in the United States, Canada, and Latin America markets.
International. The International segment provides services similar to our Americas segment in regions outside of the Americas. We primarily deliver our solutions across multiple vertical industries in the Europe, India, and Asia Pacific markets.

Seasonality

We experience seasonality with respect to certain industries due to fluctuations in hiring volumes and other economic activity. For example, pre-onboarding revenues generated from our customers in the retail and transportation industries are historically highest during the September through November months leading up to the holiday season and lowest at the beginning of the new year, following the holiday season. Certain customers across various industries also historically ramp up their hiring throughout the second quarter of the year as winter concludes, commercial activity tied to outdoor activities increases, and the school year ends, giving rise to student and graduate hiring. We expect that further growth in e-commerce, the continued digital transformation of the economy, and other economic forces may impact future seasonality, but we are unable to predict these potential shifts and how our business may be impacted.

Recent Developments

M&A

The Company completed its asset purchase of Form I-9 Compliance, a U.S.-based technology solution and consulting service provider for I-9 and E-Verify compliance. The acquisition is 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. The results of Form I-9 Compliance, which were not material, have been included in our Americas segment from the effective date of the acquisition.

26


 

COVID-19 Update

The Company continues to monitor how COVID-19 is affecting its employees, customers, and business operations. In our continued response to the COVID-19 pandemic, we implemented operational changes to promote the safety of our workforce and to allow us to continue to serve our customers. In the markets in which we operate, we saw generally improving macroeconomic conditions and steady improvements in our results of operations in 2021 and into 2022.

In the United States, we saw positive macroeconomic and labor market conditions throughout 2021 and into 2022, including overall gross domestic product (“GDP”) growth and low unemployment rates. We saw similar improvements in our international markets, although in certain of these markets there are higher ongoing concerns about the impact of COVID-19. These overall positive economic conditions have helped support our 2022 results, with revenues for the six months ended June 30, 2022 growing 27.5% compared to the six months ended June 30, 2021. Further discussion regarding the impact of the pandemic on our operations for the three and six months ended June 30, 2022 and 2021 is provided within this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Given the ongoing uncertainty and unpredictable nature of the pandemic and related macroeconomic factors, including the impact of virus variants and the effectiveness of vaccines against those variants, COVID-19 may have a material and adverse impact on various aspects of our business in the future, including our results of operations. The Company will continue to monitor the associated impacts and take appropriate actions in an effort to mitigate the COVID-19 pandemic’s negative effects on the Company’s operations and financial results. For additional information, see our “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Recently Issued Accounting Standards

See Note 2 to the condensed consolidated financial statements for disclosure of the impact that recent accounting pronouncements may have on the condensed consolidated financial statements.

 

27


 

Components of our Results of Operations

Revenues

The Company derives revenues from a variety of background screening and adjacent products that cover all phases of the workforce lifecycle from pre-onboarding screening services to post-onboarding and ongoing monitoring services, covering employees, contractors, contingent and extended workers, drivers, tenants, and volunteers. 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 databases, and data analytics capabilities. Pre-onboarding products, which comprise the substantial majority of our revenues, span an extensive array of products that customers typically utilize to enhance their applicant evaluation process and ensure compliance with their workforce onboarding criteria from the time an application is submitted to an applicant’s successful onboarding. Post-onboarding products are comprised of continuous monitoring, re-screening, and other solutions to help our customers keep their end customers, workforces, and other stakeholders safer, productive, and compliant. Adjacent products include products that complement our pre-onboarding and post-onboarding solutions such as fleet / vehicle compliance, hiring tax credits and incentives, resident / tenant screening, employment eligibility, and investigative research.

Our suite of products is available individually or through bundled solutions that can be configured and tailored according to our customers’ needs. We typically bill our customers at the end of each month and recognize revenues after completed orders are reported or otherwise made available to our customers, with a substantial majority of our customers’ orders completed the same day they are submitted. We recognize revenues for other products over time as the customer simultaneously receives and consumes the benefits of the products and solutions delivered.

Operating Expenses

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

Cost of Services: Consists of amounts paid to third parties for access to government records, other third-party data and services, and our internal processing fulfillment and customer care functions. In addition, cost of services includes expenses from our drug screening lab and collection site network as well as our court runner network. Third-party cost of services are largely variable in nature and are typically invoiced to our customers as direct pass-through costs. Cost of services also includes our salaries and benefits expense for personnel involved in the processing and fulfilment of our screening products and solutions, as well as our customer care organization and robotics process automation implementation team. Other costs included in cost of services relate to allocations of certain overhead costs for our revenue-generating products and solutions, primarily consisting of certain facility costs and administrative services allocated by headcount or another related metric. We do not allocate depreciation and amortization to cost of services.
Product and Technology Expense: Consists of salaries and benefits of personnel involved in the maintenance of our technology and its integrations and APIs, product marketing, management of our network and infrastructure capabilities, and maintenance of our information security and business continuity functions. A portion of the personnel costs are related to the development of new products and features that are primarily developed through agile methodologies. These costs are partially capitalized, and therefore, are partially reflected as amortization expense within the depreciation and amortization cost line item. Product and technology expense also includes third-party costs related to our cloud computing services, software licensing and maintenance, telecommunications, and other data processing functions. We do not allocate depreciation and amortization to product and technology expense.
Selling, General, and Administrative Expense: Consists of sales, customer success, marketing, and general and administrative expenses. Sales, customer success, and marketing expenses consist primarily of employee compensation such as salaries, bonuses, sales commissions, stock-based compensation, and other employee benefits for our verticalized Sales and Customer Success teams. General and administrative expenses include travel expenses and various corporate functions including finance, human resources, legal, and other administrative roles, in addition to certain professional service fees and expenses incurred in connection with our IPO and now as a public company. We expect our selling, general, and administrative expenses to increase in the short-term, primarily as a result of additional public company related reporting and compliance costs. Over the long-term, we expect our selling, general, and administrative expenses to decrease as a percentage of revenues as we leverage our past investments. We do not allocate depreciation and amortization to selling, general, and administrative expenses.
Depreciation and Amortization: Property and equipment consisting mainly of capitalized software costs, furniture, hardware, and leasehold improvements are depreciated or amortized and reflected as operating expenses. We also amortize the capitalized costs of finite-life intangible assets acquired in connection with business combinations.

28


 

We have a flexible cost structure that allows our business to adjust quickly to the impacts of macroeconomic events and scale to meet the needs of large new customers. Operating expenses are influenced by the amount of revenues and mix of customers that contribute to our revenues for any given period. As revenues grow, we would generally expect cost of services to grow in a similar fashion, albeit influenced by the effects of automation, productivity, and other efficiency initiatives as well as customer and product mix shifts. We regularly review expenses and investments in the context of revenues growth and any shifts we see in cost of services in order to align with our overall financial objectives. While we expect operating expenses to increase in absolute dollars to support our continued growth, we believe that operating expenses will decline gradually as a percentage of total revenues in the future as our business grows and our operating efficiency continues to improve.

Other Expense (Income)

Our other expense (income) 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 swaps and, to a lesser extent, the interest on our capital lease obligations and the amortization of deferred financing costs. Additionally, interest expense, net includes interest income earnings on our cash and cash equivalent balances held in interest-bearing accounts. We also earn interest income on our short-term investments which are fixed-time deposits having a maturity date within twelve months.
Loss on Extinguishment of Debt: Reflects losses on the extinguishment of certain debt.

Provision for Income Taxes

Provision for income taxes consists of domestic and foreign corporate income taxes related to earnings from our sale of services, with statutory tax rates that differ by jurisdiction. Our effective tax rate may be affected by many other factors including changes in tax laws, regulations or rates, new interpretations of existing laws or regulations, shifts in the allocation of income earned throughout the world, and changes in overall levels of income before tax. For example, there are several proposals to change the current tax law, including changes in GILTI. If any or all of these (or similar) proposals are ultimately enacted into law, in whole or in part, they could increase our effective tax rate.

 

29


 

Results of Operations

The information contained below should be read in conjunction with our accompanying historical condensed consolidated financial statements and the related notes.

Comparison of Results of Operations for the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands, except percentages)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues

 

$

201,561

 

 

$

174,826

 

 

$

391,442

 

 

$

306,896

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services (exclusive of depreciation and amortization below)

 

 

100,292

 

 

 

84,868

 

 

 

196,723

 

 

 

150,813

 

Product and technology expense

 

 

12,946

 

 

 

11,680

 

 

 

26,719

 

 

 

22,233

 

Selling, general, and administrative expense

 

 

31,136

 

 

 

25,075

 

 

 

59,681

 

 

 

49,053

 

Depreciation and amortization

 

 

34,407

 

 

 

35,918

 

 

 

68,441

 

 

 

70,681

 

Total operating expenses

 

 

178,781

 

 

 

157,541

 

 

 

351,564

 

 

 

292,780

 

Income from operations

 

 

22,780

 

 

 

17,285

 

 

 

39,878

 

 

 

14,116

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Expense (Income):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

3,112

 

 

 

10,452

 

 

 

2,262

 

 

 

17,169

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

13,938

 

Total other expense (income)

 

 

3,112

 

 

 

10,452

 

 

 

2,262

 

 

 

31,107

 

Income (loss) before provision for income taxes

 

 

19,668

 

 

 

6,833

 

 

 

37,616

 

 

 

(16,991

)

Provision (benefit) for income taxes

 

 

5,432

 

 

 

3,063

 

 

 

10,367

 

 

 

(1,372

)

Net income (loss)

 

$

14,236

 

 

$

3,770

 

 

$

27,249

 

 

$

(15,619

)

Net income (loss) margin

 

 

7.1

%

 

 

2.2

%

 

 

7.0

%

 

 

(5.1

)%

 

 

30


 

Revenues

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

170,591

 

 

$

146,300

 

 

$

330,679

 

 

$

262,823

 

International

 

 

33,044

 

 

 

30,080

 

 

 

64,785

 

 

 

46,642

 

Eliminations

 

 

(2,074

)

 

 

(1,554

)

 

 

(4,022

)

 

 

(2,569

)

Total revenues

 

$

201,561

 

 

$

174,826

 

 

$

391,442

 

 

$

306,896

 

Revenues were $201.6 million for the three months ended June 30, 2022, compared to $174.8 million for the three months ended June 30, 2021. Revenues for the three months ended June 30, 2022 increased by $26.7 million, or 15.3%, compared to the three months ended June 30, 2021.

The increase in revenues was primarily due to:

a net increase of $9.6 million in existing customer revenues as compared to the three months ended June 30, 2021, primarily driven by continued strength across our business, which was supported by positive jobs market trends including sustained job switching and churn. These existing customer increases were offset by the impact of lost accounts;
increased revenues of $8.8 million attributable to new customers in both the Americas and International segments; and
revenues of $8.3 million attributable to the Company’s acquisitions in the Americas segment.

Revenues were $391.4 million for the six months ended June 30, 2022, compared to $306.9 million for the six months ended June 30, 2021. Revenues for the six months ended June 30, 2022 increased by $84.5 million, or 27.5%, compared to the six months ended June 30, 2021.

The increase in revenues was primarily due to:

a net increase of $43.5 million in existing customer revenues as compared to the six months ended June 30, 2021, primarily driven by continued strength across our business, which was supported by positive jobs market trends including sustained job switching and churn. These existing customer increases were offset by the impact of lost accounts;
revenues of $23.1 million attributable to the Company’s acquisitions in the Americas and International segments; and
increased revenues of $17.9 million attributable to new customers in both the Americas and International segments.

The Company experienced high demand among customers across numerous industry verticals and account sizes in both its Americas and International segments. Pricing remained relatively stable across all periods.

 

31


 

Cost of Services

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands, except percentages)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues

 

$

201,561

 

 

$

174,826

 

 

$

391,442

 

 

$

306,896

 

Cost of services

 

 

100,292

 

 

 

84,868

 

 

 

196,723

 

 

 

150,813

 

Cost of services as a % of revenue

 

 

49.8

%

 

 

48.5

%

 

 

50.3

%

 

 

49.1

%

Cost of services was $100.3 million for the three months ended June 30, 2022, compared to $84.9 million for the three months ended June 30, 2021. Cost of services for the three months ended June 30, 2022 increased by $15.4 million, or 18.2%, compared to the three months ended June 30, 2021.

The increase in cost of services was primarily due to:

an increase in variable third-party data expenses of $10.1 million as a direct result of increased revenues, increases in the prices of certain third-party data usage, and variation in customer ordering mix;
a $4.7 million increase in personnel related expenses in our operations and customer care functions as a result of additional operational support headcount to process and fulfill the Company’s order volume growth; and
a number of cost of services related operating expense increases attributable to insurance, travel, and other expenses related to the increased revenue volumes experienced in 2022. This was partially offset by foreign exchange gains.

Cost of services as a percentage of revenues was 49.8% for the three months ended June 30, 2022, compared to 48.5% for the three months ended June 30, 2021. The cost of services percentage of revenues in the second quarter 2022 was impacted by increases in certain third-party data costs, variation in customer ordering mix, and acquisitions having a larger mix of third-party data expenses. This increase was partially offset by cost savings from the Company’s continued internal operating efficiencies and automation.

Cost of services was $196.7 million for the six months ended June 30, 2022, compared to $150.8 million for the six months ended June 30, 2021. Cost of services for the six months ended June 30, 2022 increased by $45.9 million, or 30.4%, compared to the six months ended June 30, 2021.

The increase in cost of services was primarily due to:

an increase in variable third-party data expenses of $34.1 million as a direct result of increased revenues, increases in the prices of certain third-party data usage, variation in customer ordering mix, and acquisitions having a larger mix of third-party data expenses;
a $10.7 million increase in personnel related expenses in our operations and customer care functions as a result of additional operational support headcount to process and fulfill the Company’s order volume growth; and
a number of cost of services related operating expense increases attributable to insurance, travel, software licenses, and other expenses related to the increased revenue volumes experienced in 2022.

The increase in cost of services was partially offset by:

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

Cost of services as a percentage of revenues was 50.3% for the six months ended June 30, 2022, compared to 49.1% for the six months ended June 30, 2021. The cost of services percentage of revenues for the six months ended June 30, 2022 was impacted by increases in certain third-party data costs, variation in customer ordering mix, and acquisitions having a larger mix of third-party data expenses. This increase was partially offset by cost savings from the Company’s continued internal operating efficiencies and automation.

 

32


 

Product and Technology Expense

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Product and technology expense

 

$

12,946

 

 

$

11,680

 

 

$

26,719

 

 

$

22,233

 

Product and technology expense was $12.9 million for the three months ended June 30, 2022, compared to $11.7 million for the three months ended June 30, 2021. Product and technology expense for the three months ended June 30, 2022 increased by $1.3 million, or 10.8%, compared to the three months ended June 30, 2021.

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

a $1.5 million increase in software licensing related expenses.

Product and technology expense was $26.7 million for the six months ended June 30, 2022, compared to $22.2 million for the six months ended June 30, 2021. Product and technology expense for the six months ended June 30, 2022 increased by $4.5 million, or 20.2%, compared to the six months ended June 30, 2021.

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

a $2.6 million increase in software licensing related expenses; and
a $1.4 million increase in personnel-related expenses as a result of additional investments made to enhance our product, solutions, and technology platform.

 

33


 

Selling, General, and Administrative Expense

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Selling, general, and administrative expense

 

$

31,136

 

 

$

25,075

 

 

$

59,681

 

 

$

49,053

 

Selling, general, and administrative expense was $31.1 million for the three months ended June 30, 2022, compared to $25.1 million for the three months ended June 30, 2021. Selling, general, and administrative expense for the three months ended June 30, 2022 increased by $6.1 million, or 24.2%, compared to the three months ended June 30, 2021.

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

a $2.1 million increase in personnel related expenses primarily due to additional investments made in the Company’s Sales and Customer Success functions and additional headcount related to the Company’s growth and operating as a public company;
a $1.3 million increase in expenses related to litigation activities in the ordinary course of business;
a $0.9 million increase in marketing related expenses;
a $0.9 million increase in liability insurance related expenses; and
a number of other corporate expenses that increased primarily as a result of the Company now being a publicly traded company and the Company’s M&A activity.

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

a $1.2 million decrease in share-based compensation expenses as a result of performance related vesting due to the Company’s IPO and incremental awards granted in conjunction with the IPO in 2021 which did not reoccur in 2022.

Selling, general, and administrative expense was $59.7 million for the six months ended June 30, 2022, compared to $49.1 million for the six months ended June 30, 2021. Selling, general, and administrative expense for the six months ended June 30, 2022 increased by $10.6 million, or 21.7%, compared to the six months ended June 30, 2021.

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

a $5.0 million increase in personnel related expenses primarily due to additional investments made in the Company’s Sales and Customer Success functions and additional headcount related to the Company’s growth and operating as a public company;
a $1.8 million increase in liability insurance related expenses;
a $1.6 million increase in commissions and bonus related expenses due to the Company’s improved operating results during the six months ended June 30, 2022, as well as a transaction bonus expense related to one of the Company’s 2021 acquisitions;
a $1.1 million increase in marketing related expenses;
a $0.9 million increase in expenses related to litigation activities in the ordinary course of business; and
a number of other corporate expenses that increased primarily as a result of the Company now being a publicly traded company and the Company’s M&A activity.

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

a $3.2 million decrease in professional service fees incurred related to the Company’s preparation for its 2021 IPO that did not reoccur in 2022.

 

34


 

Depreciation and Amortization

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Depreciation and amortization

 

$

34,407

 

 

$

35,918

 

 

$

68,441

 

 

$

70,681

 

Depreciation and amortization was $34.4 million for the three months ended June 30, 2022, compared to $35.9 million for the three months ended June 30, 2021. Depreciation and amortization for the three months ended June 30, 2022 decreased by $1.5 million, or 4.2%, compared to the three months ended June 30, 2021. This decrease was partially offset by increases in depreciation related to assets placed in service during the three months ended June 30, 2022.

Depreciation and amortization was $68.4 million for the six months ended June 30, 2022, compared to $70.7 million for the six months ended June 30, 2021. Depreciation and amortization for the six months ended June 30, 2022 decreased by $2.2 million, or 3.2% compared to the six months ended June 30, 2021. This decrease was partially offset by increases in depreciation related to assets placed in service during the six months ended June 30, 2022.

Interest Expense, Net

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Interest expense, net

 

$

3,112

 

 

$

10,452

 

 

$

2,262

 

 

$

17,169

 

Interest expense, net was $3.1 million for the three months ended June 30, 2022, compared to $10.5 million for the three months ended June 30, 2021. Interest expense for the three months ended June 30, 2022 decreased by $7.3 million, or 70.2%, compared to the three months ended June 30, 2021.

The decrease in interest cost was primarily attributable to $2.1 million of unrealized gains on the interest rate swap as a result of the increased interest rate volatility observed in the second quarter of 2022. This decrease was further impacted by the prepayment of $200.0 million of the Successor First Lien Credit Facility in June 2021, resulting in interest rate savings due to lower principal and more favorable interest rate margins. These decreases were partially offset by higher interest expense on the Successor First Lien Credit Facility as a result of rising interest rates.

Interest expense, net was $2.3 million for the six months ended June 30, 2022, compared to $17.2 million for the six months ended June 30, 2021. Interest expense for the six months ended June 30, 2022 decreased by $14.9 million, or 86.8%, compared to the six months ended June 30, 2021.

The decrease in interest cost was primarily attributable to $7.4 million of unrealized gains on the interest rate swap as a result of the increased interest rate volatility observed in 2022. This decrease was further impacted by the Company’s February 2021 refinancing of the Successor First Lien Credit Facility, early repayment of the Successor Second Lien Credit Facility, and the prepayment of $200.0 million of the Successor First Lien Credit Facility in June 2021, resulting in interest rate savings due to lower principal and more favorable interest rate margins. These decreases were partially offset by higher interest expense on the Successor First Lien Credit Facility as a result of rising interest rates in 2022.

Loss on Extinguishment of Debt

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Loss on extinguishment of debt

 

$

 

 

$

 

 

$

 

 

$

13,938

 

Loss on extinguishment of debt for the six months ended June 30, 2021 relates to expenses stemming from the write-off of debt issuance costs associated with the February 2021 refinancing of the Successor First Lien Credit Facility.

 

35


 

Provision for Income Taxes

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Provision (benefit) for income taxes

 

$

5,432

 

 

$

3,063

 

 

$

10,367

 

 

$

(1,372

)

Our provision for income taxes was $5.4 million for the three months ended June 30, 2022, compared to $3.1 million for the three months ended June 30, 2021. Our provision for income taxes for the three months ended June 30, 2022 increased by $2.4 million, compared to the three months ended June 30, 2021.

The increase in our provision for income taxes was primarily due to the increase of income before income taxes during the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, due to improved operating results.

Our provision for income taxes was $10.4 million for the six months ended June 30, 2022, compared to a (benefit) for income taxes of $(1.4) million for the six months ended June 30, 2021. Our provision for income taxes for the six months ended June 30, 2022 increased by $11.7 million, compared to the six months ended June 30, 2021.

The increase in our provision for income taxes was primarily due to the increase of income before income taxes during the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, due to improved operating results.

Net Income (Loss) and Net Income (Loss) Margin

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands, except percentages)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

14,236

 

 

$

3,770

 

 

$

27,249

 

 

$

(15,619

)

Net income (loss) margin

 

 

7.1

%

 

 

2.2

%

 

 

7.0

%

 

 

(5.1

)%

Net income was $14.2 million for the three months ended June 30, 2022, compared to $3.8 million for the three months ended June 30, 2021. Net income for the three months ended June 30, 2022 increased by $10.5 million compared to the three months ended June 30, 2021.

Net income margin was 7.1% for the three months ended June 30, 2022, compared to 2.2% the three months ended June 30, 2021.

The improvement in our net income margin is attributable to our ability to leverage operating efficiencies to control our overall expenses while increasing revenues and our reduction in interest expense.

Net income was $27.2 million for the six months ended June 30, 2022, compared to a net (loss) of $(15.6) million for the six months ended June 30, 2021. Net income for the six months ended June 30, 2022 increased by $42.9 million compared to the six months ended June 30, 2021.

Net income (loss) margin was 7.0% for the six months ended June 30, 2022, compared to (5.1)% the six months ended June 30, 2021.

The improvement in our net income (loss) margin is attributable to our ability to leverage operating efficiencies to control our overall expenses while increasing revenues and our reduction in interest expense.

36


 

Key Operating and Financial Metrics

In addition to our results determined in accordance with GAAP, we believe certain measures are useful in evaluating our operating performance. Management believes these non-GAAP measures are useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate, and capital investments. Management uses Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Diluted Earnings Per Share to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation, and to compare our performance against that of other peer companies using similar measures. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.

The presentations of these measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP.

Adjusted EBITDA and Adjusted EBITDA Margin

Management believes that Adjusted EBITDA is a strong indicator of our overall operating performance and is useful to management and investors as a measure of comparative operating performance from period to period. We define Adjusted EBITDA as net income before interest, taxes, depreciation, and amortization, and as further adjusted for loss on extinguishment of debt, share-based compensation, transaction and acquisition-related charges, integration and restructuring charges, and other non-cash charges. We exclude the impact of share-based compensation because it is a non-cash expense and we believe that excluding this item provides meaningful supplemental information regarding performance and ongoing cash generation potential. We exclude loss on extinguishment of debt, transaction and acquisition related charges, integration and restructuring charges, and other charges because such expenses are episodic in nature and have no direct correlation to the cost of operating our business on an ongoing basis.

Adjusted EBITDA was $60.8 million for the three months ended June 30, 2022 and represented an Adjusted EBITDA Margin of 30.2%. Adjusted EBITDA was $56.3 million for the three months ended June 30, 2021 and represented an Adjusted EBITDA Margin of 32.2%. Adjusted EBITDA for the three months ended June 30, 2022 increased by $4.5 million, or 8.0%, compared to the three months ended June 30, 2021.

Adjusted EBITDA was $114.4 million for the six months ended June 30, 2022 and represented an Adjusted EBITDA Margin of 29.2%. Adjusted EBITDA was $92.9 million for the six months ended June 30, 2021 and represented an Adjusted EBITDA Margin of 30.3%. Adjusted EBITDA for the six months ended June 30, 2022 increased by $21.5 million, or 23.2%, compared to the six months ended June 30, 2021.

Growth in Adjusted EBITDA was driven primarily from revenue growth attributed to new and existing customers and the cost structure benefits of increased automation, operational efficiencies, and operating leverage, but partially offset by higher third-party data costs, incremental public company costs, increased insurance premiums, additional investments in technology and sales, and lower margin results from our acquisitions.

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

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

14,236

 

 

$

3,770

 

 

$

27,249

 

 

$

(15,619

)

Interest expense, net

 

 

3,112

 

 

 

10,452

 

 

 

2,262

 

 

 

17,169

 

Provision (benefit) for income taxes

 

 

5,432

 

 

 

3,063

 

 

 

10,367

 

 

 

(1,372

)

Depreciation and amortization

 

 

34,407

 

 

 

35,918

 

 

 

68,441

 

 

 

70,681

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

13,938

 

Share-based compensation

 

 

1,943

 

 

 

2,664

 

 

 

3,802

 

 

 

3,226

 

Transaction and acquisition-related charges (a)

 

 

1,179

 

 

 

382

 

 

 

2,677

 

 

 

4,366

 

Integration, restructuring, and other charges (b)

 

 

525

 

 

 

73

 

 

 

(364

)

 

 

523

 

Adjusted EBITDA

 

$

60,834

 

 

$

56,322

 

 

$

114,434

 

 

$

92,912

 

(a)
Represents charges incurred related to acquisitions and similar transactions, primarily consisting of change in control-related costs, professional service fees, and other third-party costs. Additionally includes incremental professional service fees incurred related to the initial public offering and subsequent one-time compliance efforts. The three and six months ended June 30, 2022 includes 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 legal exposures inherited from legacy acquisitions, foreign currency (gains) losses, and (gains) losses on the sale of assets.

37


 

We define Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenues. The following table presents the calculation of Adjusted EBITDA Margin for the periods presented.

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands, except percentages)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Adjusted EBITDA

 

$

60,834

 

 

$

56,322

 

 

$

114,434

 

 

$

92,912

 

Revenues

 

 

201,561

 

 

 

174,826

 

 

 

391,442

 

 

 

306,896

 

Adjusted EBITDA Margin

 

 

30.2

%

 

 

32.2

%

 

 

29.2

%

 

 

30.3

%

The following table presents a reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin by segment for the periods presented.

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands, except percentages)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Adjusted EBITDA (1):

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

52,954

 

 

$

49,208

 

 

$

99,773

 

 

$

83,055

 

International

 

 

7,880

 

 

 

7,114

 

 

 

14,661

 

 

 

9,857

 

Adjusted EBITDA

 

$

60,834

 

 

$

56,322

 

 

$

114,434

 

 

$

92,912

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

170,591

 

 

$

146,300

 

 

$

330,679

 

 

$

262,823

 

International

 

 

33,044

 

 

 

30,080

 

 

 

64,785

 

 

 

46,642

 

Less: intersegment eliminations

 

 

(2,074

)

 

 

(1,554

)

 

 

(4,022

)

 

 

(2,569

)

Total revenues

 

$

201,561

 

 

$

174,826

 

 

$

391,442

 

 

$

306,896

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

 

31.0

%

 

 

33.6

%

 

 

30.2

%

 

 

31.6

%

International

 

 

23.8

%

 

 

23.7

%

 

 

22.6

%

 

 

21.1

%

Adjusted EBITDA Margin

 

 

30.2

%

 

 

32.2

%

 

 

29.2

%

 

 

30.3

%

(1)
See the reconciliation of net income to Adjusted EBITDA above. Segment Adjusted EBITDA margins are calculated using segment gross revenues and segment Adjusted EBITDA. Consolidated Adjusted EBITDA margin is calculated using consolidated revenues and consolidated Adjusted EBITDA.

 

38


 

Adjusted Net Income and Adjusted Diluted Earnings Per Share

Similar to Adjusted EBITDA, management believes that Adjusted Net Income and Adjusted Diluted Earnings Per Share are strong indicators of our overall operating performance and are useful to our management and investors as measures of comparative operating performance from period to period. We define Adjusted Net Income for a particular period as net income before taxes adjusted for debt-related costs, acquisition-related depreciation and amortization, share-based compensation, transaction and acquisition related charges, integration and restructuring charges, and other non-cash charges, to which we then apply the related effective tax rate. We define Adjusted Diluted Earnings Per Share as Adjusted Net Income divided by adjusted weighted average number of shares outstanding—diluted.

Adjusted Net Income was $38.0 million for the three months ended June 30, 2022, compared to $33.2 million for the three months ended June 30, 2021. Adjusted Net Income for the three months ended June 30, 2022 increased by $4.8 million, or 14.5%, compared to the three months ended June 30, 2021.

Adjusted Diluted Earnings Per Share was $0.25 for the three months ended June 30, 2022 consistent with the three months ended June 30, 2021.

Adjusted Net Income was $71.5 million for the six months ended June 30, 2022, compared to $53.7 million for the six months ended June 30, 2021. Adjusted Net Income for the six months ended June 30, 2022 increased by $17.8 million, or 33.2%, compared to the six months ended June 30, 2021.

Adjusted Diluted Earnings Per Share was $0.47 for the six months ended June 30, 2022, compared to $0.40 for the six months ended June 30, 2021. Adjusted Diluted Earnings Per Share for the six months ended June 30, 2022 increased by $0.07, or 17.5% compared to the six months ended June 30, 2021.

This growth was driven primarily by the same factors contributing to Adjusted EBITDA growth, though Adjusted Net Income and Adjusted Diluted Earnings Per Share are also impacted by changes in acquisition-related depreciation and amortization and changes in our capital structure that are captured in interest expense. The prepayment of the Company’s Successor First Lien and Successor Second Lien debt and gains or losses on the Company’s interest rate swaps impact the comparability of Adjusted Net Income and Adjusted Diluted Earnings Per Share across historical periods. The IPO issuance of shares impacts the comparability of Adjusted Diluted Earnings Per Share across historical periods.

The following tables present a reconciliation of Adjusted Net Income for the periods presented.

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

14,236

 

 

$

3,770

 

 

$

27,249

 

 

$

(15,619

)

Provision (benefit) for income taxes

 

 

5,432

 

 

 

3,063

 

 

 

10,367

 

 

 

(1,372

)

Income (loss) before provision for income taxes

 

 

19,668

 

 

 

6,833

 

 

 

37,616

 

 

 

(16,991

)

Debt-related charges(a)

 

 

(1,669

)

 

 

4,355

 

 

 

(6,484

)

 

 

19,266

 

Acquisition-related depreciation and amortization(b)

 

 

29,029

 

 

 

31,786

 

 

 

58,144

 

 

 

63,298

 

Share-based compensation

 

 

1,943

 

 

 

2,664

 

 

 

3,802

 

 

 

3,226

 

Transaction and acquisition-related charges(c)

 

 

1,179

 

 

 

382

 

 

 

2,677

 

 

 

4,366

 

Integration, restructuring, and other charges (d)

 

 

525

 

 

 

73

 

 

 

(364

)

 

 

523

 

Adjusted Net Income before income tax effect

 

 

50,675

 

 

 

46,093

 

 

 

95,391

 

 

 

73,688

 

Less: Income tax effect(e)

 

 

12,669

 

 

 

12,896

 

 

 

23,888

 

 

 

19,988

 

Adjusted Net Income

 

$

38,006

 

 

$

33,197

 

 

$

71,503

 

 

$

53,700

 

 

39


 

The following table presents the calculation of Adjusted Diluted Earnings Per Share for the periods presented. Prior to the IPO, the equity awards under the Successor Plan were issued by the Company’s Parent. As a result, these awards are not considered equity awards issued by the Company, and therefore not included in the calculation of adjusted weighted average number of shares outstanding—diluted.

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Diluted net income (loss) per share (GAAP)

 

$

0.09

 

 

$

0.03

 

 

$

0.18

 

 

$

(0.12

)

Adjusted Net Income adjustments per share

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

0.04

 

 

 

0.02

 

 

 

0.07

 

 

 

(0.01

)

Debt-related charges (a)

 

 

(0.01

)

 

 

0.03

 

 

 

(0.04

)

 

 

0.14

 

Acquisition-related depreciation and amortization (b)

 

 

0.19

 

 

 

0.25

 

 

 

0.38

 

 

 

0.49

 

Share-based compensation

 

 

0.01

 

 

 

0.02

 

 

 

0.02

 

 

 

0.02

 

Transaction and acquisition related charges (c)

 

 

0.01

 

 

 

0.00

 

 

 

0.02

 

 

 

0.03

 

Integration, restructuring, and other charges (d)

 

 

0.00

 

 

 

0.00

 

 

 

(0.00

)

 

 

0.00

 

Adjusted income taxes (e)

 

 

(0.08

)

 

 

(0.10

)

 

 

(0.16

)

 

 

(0.15

)

Adjusted Diluted Earnings Per Share (Non-GAAP)

 

$

0.25

 

 

$

0.25

 

 

$

0.47

 

 

$

0.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding used in computation of Adjusted Diluted Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding—diluted (GAAP)

 

 

152,360,350

 

 

 

135,368,909

 

 

 

152,361,788

 

 

 

130,757,666

 

Options and restricted stock not included in weighted average number of shares outstanding—diluted (GAAP) (using treasury stock method)

 

 

 

 

 

 

 

 

 

 

 

3,861,904

 

Adjusted weighted average number of shares outstanding—diluted (Non-GAAP)

 

 

152,360,350

 

 

 

135,368,909

 

 

 

152,361,788

 

 

 

134,619,570

 

(a)
Represents the loss on extinguishment of debt and non-cash interest expense related to the amortization of debt issuance costs for the 2021 February refinancing and repayment of the Company’s Successor First Lien Credit Facility (as defined below) and Successor Second Lien Credit Facility (as defined below), respectively. Beginning in 2022, this adjustment also includes the impact of the change in fair value of interest rate swaps. This adjustment, which represents the fair value gains or losses on the interest rate swaps, was added as a result of the increased interest rate volatility observed in 2022. The Company determined that the impact to the previous year, ($0.1) million and $1.0 million for the three and six months ended June 30, 2021, respectively, was not significant and therefore the previously reported amounts will not be recast.
(b)
Represents the depreciation and amortization expense related to intangible assets and developed technology assets recorded due to the application of ASC 805, Business Combinations.
(c)
Represents charges incurred related to acquisitions and similar transactions, primarily consisting of change in control-related costs, professional service fees, and other third-party costs. Additionally includes incremental professional service fees incurred related to the initial public offering and subsequent one-time compliance efforts. The three and six months ended June 30, 2022 includes 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 legal exposures inherited from legacy acquisitions, foreign currency (gains) losses, and (gains) losses on the sale of assets.
(e)
Effective tax rates of approximately 25.0% have been used to compute Adjusted Net Income and Adjusted Diluted Earnings Per Share for the three and six months ended June 30, 2022. Effective tax rates of approximately 28.0% and 27.1% have been used to compute Adjusted Net Income and Adjusted Diluted Earnings Per Share for the three and six months ended June 30, 2021, respectively. As of December 31, 2021, we had net operating loss carryforwards of approximately $120.1 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 rate shown above.

 

40


 

Liquidity and Capital Resources

Liquidity

The Company’s primary liquidity requirements are for working capital, continued investments in software development and other capital expenditures, and other strategic investments. Income taxes are currently not a significant use of funds but after the benefits of our net operating loss carryforwards are fully recognized, could become a material use of funds, depending on our future profitability and future tax rates. The Company’s liquidity needs are met primarily through cash flows from operations, as well as funds available under our revolving credit facility and proceeds from our term loan borrowings. Our cash flows from operations include cash received from customers, less cash costs to provide services to our customers, which includes general and administrative costs and interest payments.

As of June 30, 2022, we had $352.3 million in cash and cash equivalents and $100.0 million available under our revolving credit facility. As of June 30, 2022, we had $564.7 million of total debt outstanding. We believe our cash on hand, together with amounts available under our revolving credit facility, and cash provided by operating activities are and will continue to be adequate to meet our operational and business needs in the next twelve months. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings, or a combination of these potential sources of funds. In the event that we need access to additional cash, we may not be able to access the credit markets on commercially acceptable terms or at all. Our ability to fund future operating expenses and capital expenditures and our ability to meet future debt service obligations or refinance our indebtedness will depend on our future operating performance, which will be affected by general economic, financial, and other factors that may be beyond our control, including those described under our “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Share Repurchase Program

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

 

41


 

Long-Term Debt

In February 2020, a new financing structure was established consisting of a new First Lien Credit Agreement (“Successor First Lien Agreement”) and a new Second Lien Credit Agreement (“Successor Second Lien Agreement”) (collectively, the “Successor Credit Agreements”). The Successor First Lien Agreement provided financing in the form of a $670.0 million term loan due January 31, 2027 (“Successor First Lien Credit Facility”) and a $75.0 million new revolving credit facility due January 31, 2025 (“Successor Revolver”). The Successor Second Lien Agreement provided financing in the form of a $145.0 million term loan due January 31, 2028 (“Successor Second Lien Credit Facility”).

On February 1, 2021, we amended the Successor First Lien Agreement to fund $100.0 million of additional first lien term loans and reduce the applicable margins by 0.25%. The refinancing resulted in a loss on extinguishment of debt of $5.1 million, composed of the write-off of $4.5 million of unamortized deferred financing costs and $0.6 million of accrued interest and miscellaneous fees. In addition, we fully repaid the outstanding Successor Second Lien Agreement and recorded a loss on extinguishment of debt of $8.9 million, composed of the write-off of $7.3 million of unamortized deferred financing costs plus a $1.5 million prepayment premium, and $0.1 million of accrued interest and other miscellaneous fees.

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

Borrowings under the Successor 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. The applicable margins under the Successor First Lien Agreement are subject to stepdowns based on our first lien net leverage ratio. In connection with the closing of the IPO, each applicable margin was reduced further by 0.25%. In addition, the borrower, First Advantage Holdings, LLC, which is an indirect wholly-owned subsidiary of the Company, is required to pay a commitment fee on any unutilized commitments under the revolving credit facility. The commitment fee rate ranges between 0.25% and 0.50% per annum based on our first lien net leverage ratio. The borrower is also required to pay customary letter of credit fees.

The Successor First Lien Credit Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00% of the principal amount. The Successor Revolver has no amortization. The Successor First Lien Credit Facility requires the borrower to prepay outstanding term loans, subject to certain exceptions, with certain proceeds from non-ordinary course asset sales, issuance of debt not permitted by the credit agreement to be incurred and annual excess cash flows. In addition, any voluntary prepayment of term loans in connection with certain repricing transactions on or prior to August 1, 2021 were subject to a 1.00% prepayment premium. Otherwise, the borrower may voluntarily repay outstanding loans without premium or penalty, other than customary “breakage” costs.

In connection with the closing of the IPO, on June 30, 2021, the Company repaid $200.0 million of the Successor First Lien Credit Facility outstanding, of which $44.3 million was applied to all of the remaining quarterly amortizing principal payments due under the Successor First Lien Agreement. The remaining $564.7 million term loan is scheduled to mature on January 31, 2027. As a result of the prepayment, the Company recorded additional interest expense of $3.7 million associated with the accelerated amortization of the related deferred financing costs.

The Successor 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 Successor 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 credit agreement contains customary affirmative covenants, negative covenants, and events of default (including upon a change of control). The credit agreement also includes a “springing” first lien net leverage ratio test, applicable only to the revolving credit facility, 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 revolving credit facility is utilized on such date.

 

42


 

Cash Flow Analysis

Comparison of Cash Flows for the six months ended June 30, 2022 compared to the six months ended June 30, 2021

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

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

Net cash provided by operating activities

 

$

96,412

 

 

$

56,098

 

Net cash used in investing activities

 

 

(34,363

)

 

 

(19,003

)

Net cash provided by financing activities

 

 

187

 

 

 

67,869

 

Cash Flows from Operating Activities

Net cash provided by operating activities was $96.4 million for the six months ended June 30, 20222, compared to $56.1 million for the six months ended June 30, 2021. Net cash provided by operating activities for the six months ended June 30, 2022 increased by $40.3 million compared to the six months ended June 30, 2021. Cash flows from operating activities was positively impacted by increased profitability related to the Company’s revenue growth from existing customers, new customer go-lives, and recent acquisitions and lower accounts receivable driven by increased cash collections.

Cash Flows from Investing Activities

Net cash used in investing activities was $34.4 million for the six months ended June 30, 2022, compared to $19.0 million for the six months ended June 30, 2021. Net cash used in investing activities for the six months ended June 30, 2022 increased by $15.4 million compared to the six months ended June 30, 2021. The cash flows used in investing activities for the six months ended June 30, 2022 were impacted by the $19.1 million acquisition of Form I-9 Compliance, net of cash acquired. The remaining investing cash flows are driven primarily by capitalized software development costs and purchases of property and equipment, which increased in 2022 as we continued to make incremental investments in our technology platform.

Cash Flows from Financing Activities

Net cash used in financing activities was $0.2 million for the six months ended June 30, 2022, compared to $67.9 million for the six months ended June 30, 2021. Net cash used in financing activities for the six months ended June 30, 2022 decreased by $67.7 million compared to the six months ended June 30, 2021. Cash flows from financing activities for the six months ended June 30, 2022 were primarily driven by share-based compensation activity. These inflows were offset by cash outflows related to payments on capital lease obligations and a deferred purchase of a software platform.

Net cash provided by financing activities for the six months ended June 30, 2021 was primarily driven by the Company's completion of its IPO on June 25, 2021. Cash inflows related to the IPO were $320.6 million, partially offset by the use of proceeds which consisted of a $200.0 million repayment of the Company’s Successor First Lien Credit Facility and $1.0 million of offering cost payments.

Net cash provided by financing activities for the six months ended June 30, 2021 was incrementally driven by the Company’s February 2021 debt refinancing which consisted of a refinancing of the Successor First Lien Credit Facility and the full repayment of the Successor Second Lien Credit Facility. Cash outflows related to this refinancing were $308.5 million, partially offset by cash inflows of $261.4 million. As part of the refinancing, the Company paid $1.3 million related to new debt issuance costs. The remaining outflows primarily consisted of amortizing principal payments due under the first lien term loan facility.

43


 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of June 30, 2022, no material change had occurred in our market risks, compared with the disclosure in our Annual Report on Form 10-K filed with the SEC on March 23, 2022.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosures.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving their desired control objectives. Based on the evaluation of management’s disclosure controls and procedures as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, the disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control

During the quarter covered by this report, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

44


 

PART II—OTHER INFORMATION

Information in response to this Item is included in “Part I — Item 1. — Note 12 — Commitments and Contingencies” and is incorporated by reference into Part II of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors.

As of June 30, 2022, no material changes had occurred in our risk factors, compared with the disclosure in our Annual Report on Form 10-K filed with the SEC on March 23, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

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

There has been no material change in the expected use of the net proceeds from our IPO as described in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 23, 2022.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable

Item 5. Other Information.

None

 

45


 

Item 6. Exhibits.

Exhibit

Number

 

Description

3.1

 

Amended and Restated Certificate of Incorporation of First Advantage Corporation (incorporated herein by reference to Exhibit 3.1 of First Advantage’s Form 8-K filed on June 25, 2021).

3.2

 

Amended and Restated Bylaws of First Advantage Corporation (incorporated herein by reference to Exhibit 3.2 of First Advantage’s Form 8-K filed on June 25, 2021).

10.1

 

Form of Non-Employee Director Restricted Stock Unit Initial Award Grant Notice and Agreement under the First Advantage Corporation 2021 Omnibus Incentive Plan.

10.2

 

Form of Non-Employee Director Restricted Stock Unit Annual Award Grant Notice and Agreement under the First Advantage Corporation 2021 Omnibus Incentive Plan.

10.3

 

Form of Standard Option Award Grant Notice and Agreement under the First Advantage Corporation 2021 Omnibus Incentive Plan.

10.4

 

Form of Restricted Stock Unit Award Grant Notice and Agreement under the First Advantage Corporation 2021 Omnibus Incentive Plan.

31.1

 

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

 

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

 

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

 

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

 

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

46


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

FIRST ADVANTAGE CORPORATION

 

 

 

 

Date: August 4, 2022

 

By:

/s/ Scott Staples

 

 

 

Scott Staples

 

 

 

Chief Executive Officer

(principal executive officer)

 

 

 

 

Date: August 4, 2022

 

By:

/s/ David L. Gamsey

 

 

 

David L. Gamsey

 

 

 

Executive Vice President & Chief Financial Officer

(principal financial officer)

 

47


EX-10.1

 

Exhibit 10.1

 

Grant ID:

RESTRICTED STOCK UNIT GRANT NOTICE
UNDER
FIRST ADVANTAGE CORPORATION
2021 OMNIBUS INCENTIVE PLAN

First Advantage Corporation (the “Company”), pursuant to its 2021 Omnibus Incentive Plan, as it may be amended and restated from time to time (the “Plan”), hereby grants to the Participant set forth below the number of Restricted Stock Units set forth below. The Restricted Stock Units are subject to all of the terms and conditions as set forth herein, in the Restricted Stock Unit Agreement (attached hereto or previously provided to the Participant in connection with a prior grant), and in the Plan, all of which are incorporated herein in their entirety. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Plan.

 

 

Participant:

 

Date of Grant:

 

Number of Restricted Stock Units:

 

Vesting Schedule:

Subject to the Participant’s continued service with the Company on each applicable vesting date, 1/3rd of the Restricted Stock Units shall vest on each of the first three anniversaries of the Date of Grant; provided, that 100% of any unvested Restricted Stock Units shall vest in full upon a Change in Control, subject to the Participant’s continued service with the Company upon such Change in Control.

* * *

FIRST ADVANTAGE CORPORATION

 


¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
By:
Title:

THE UNDERSIGNED PARTICIPANT ACKNOWLEDGES RECEIPT OF THIS RESTRICTED STOCK UNIT GRANT NOTICE, THE RESTRICTED STOCK UNIT AGREEMENT AND THE PLAN, AND, AS AN EXPRESS CONDITION TO THE GRANT OF RESTRICTED STOCK UNITS HEREUNDER, AGREES TO BE BOUND BY THE TERMS OF THIS RESTRICTED STOCK UNIT GRANT NOTICE, THE RESTRICTED STOCK UNIT AGREEMENT AND THE PLAN.

PARTICIPANT1


¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
By:
Date:

1

To the extent that the Company has established, either itself or through a third-party plan administrator, the ability to accept this award electronically, such acceptance shall constitute the Participant’s signature hereto.

 

 

 


 

RESTRICTED STOCK UNIT AGREEMENT
UNDER
FIRST ADVANTAGE CORPORATION
2021 OMNIBUS INCENTIVE PLAN

Pursuant to the Restricted Stock Unit Grant Notice (the “Grant Notice”) delivered to the Participant (as defined in the Grant Notice), and subject to the terms of this Restricted Stock Unit Agreement (this “Restricted Stock Unit Agreement”) and First Advantage Corporation 2021 Omnibus Incentive Plan, as it may be amended and restated from time to time (the “Plan”), First Advantage Corporation (the “Company”) and the Participant agree as follows. Capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Plan

1.
Grant of Restricted Stock Units. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Participant the number of Restricted Stock Units provided in the Grant Notice (with each Restricted Stock Unit representing an unfunded, unsecured right to receive one share of Common Stock). The Company may make one or more additional grants of Restricted Stock Units to the Participant under this Restricted Stock Unit Agreement by providing the Participant with a new Grant Notice, which may also include any terms and conditions differing from this Restricted Stock Unit Agreement to the extent provided therein. The Company reserves all rights with respect to the granting of additional Restricted Stock Units hereunder and makes no implied promise to grant additional Restricted Stock Units.
2.
Vesting. Subject to the conditions contained herein and in the Plan, the Restricted Stock Units shall vest as provided in the Grant Notice.
3.
Settlement of Restricted Stock Units. Subject to any election by the Committee pursuant to Section 9(d)(ii) of the Plan, the Company will deliver to the Participant, without charge, as soon as reasonably practicable (and, in any event, within two and one-half months) following the applicable vesting date, one share of Common Stock for each Restricted Stock Unit (as adjusted under the Plan, as applicable) which becomes vested hereunder and such vested Restricted Stock Unit shall be cancelled upon such delivery. The Company shall either (a) deliver, or cause to be delivered, to the Participant a certificate or certificates therefor, registered in the Participant’s name or (b) cause such shares of Common Stock to be credited to the Participant’s account at the third party plan administrator. Notwithstanding anything in this Restricted Stock Unit Agreement to the contrary, the Company shall have no obligation to issue or transfer any shares of Common Stock as contemplated by this Restricted Stock Unit Agreement unless and until such issuance or transfer complies with all relevant provisions of law and the requirements of any stock exchange on which the Company’s shares of Common Stock are listed for trading.
4.
Treatment of Restricted Stock Units Upon Termination. Except as otherwise provided in the Grant Notice or as otherwise may be provided by the Committee, in the event of a Participant’s Termination for any reason prior to the time that such Participant’s Restricted Stock Units have vested, (A) all vesting with respect to such Participant’s Restricted Stock Units shall cease and (B) unvested Restricted Stock Units shall be forfeited to the Company by the Participant for no consideration as of the date of such Termination.
5.
Conditions to Issuance of Common Stock. The Company shall not be required to record the ownership by the Participant of shares of Common Stock issued upon the settlement of vested Restricted Stock Units prior to fulfillment of all of the following conditions: (i) the obtaining of approval or other clearance from any federal, state, local or non-U.S. governmental agency which the Committee shall, in its reasonable and good faith discretion, determine to be necessary; (ii) the lapse of such reasonable period of time following the settlement of the vested Restricted Stock Units as may otherwise be required by applicable law; and (iii) the execution and delivery to the Company, to the extent not so previously executed and delivered, of such other documents and instruments as may be reasonably required by the Committee.
6.
Participant. Whenever the word “Participant” is used in any provision of this Restricted Stock Unit Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the Restricted Stock Units may be transferred in accordance with Section 14(b) of the Plan, the word “Participant” shall be deemed to include such person or persons.
7.
Non-Transferability. The Restricted Stock Units are not transferable by the Participant except to Permitted Transferees in accordance with Section 14(b) of the Plan. Except as otherwise provided herein, no assignment or transfer of the Restricted Stock Units, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Restricted Stock Units shall terminate and become of no further effect.
8.
Rights as Shareholder. The Participant or a Permitted Transferee of the Restricted Stock Units shall have no rights as a shareholder with respect to any share of Common Stock underlying a Restricted Stock Unit unless and until the Participant shall have become the holder of record or the beneficial owner of such share of Common Stock, and no adjustment shall be made for dividends or distributions or other rights in respect of such share of Common Stock for which the record date is prior to the date upon which the Participant shall become the holder of record or the beneficial owner thereof.

 


 

9.
Tax Withholding. The Participant may be required to pay to the Company and the Company shall have the right and is hereby authorized to withhold, any applicable withholding taxes in respect of the Restricted Stock Units, their vesting or settlement or any payment or transfer with respect to the Restricted Stock Units at the minimum applicable statutory rates, and to take such action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes. The Committee may, in its sole discretion, permit the Participant to satisfy such withholding tax obligations, in whole or in part, by delivering shares of Common Stock, including shares of Common Stock received upon settlement of Restricted Stock Units pursuant to this Restricted Stock Unit Agreement.
10.
Notice. Every notice or other communication relating to this Restricted Stock Unit Agreement between the Company and the Participant shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by such party in a notice mailed or delivered to the other party as herein provided; provided, that, unless and until some other address be so designated, all notices or communications by the Participant to the Company shall be mailed or delivered to the Company at its principal executive office, to the attention of the Company’s Compensation Department, and all notices or communications by the Company to the Participant may be given to the Participant personally or may be mailed to the Participant at the Participant’s last known address, as reflected in the Company’s records. Notwithstanding the above, all notices and communications between the Participant and any third-party plan administrator shall be mailed, delivered, transmitted or sent in accordance with the procedures established by such third-party plan administrator and communicated to the Participant from time to time.
11.
No Right to Continued Service. This Restricted Stock Unit Agreement does not confer upon the Participant any right to continue as an employee or other service provider to the Company or any of its Subsidiaries.
12.
Binding Effect. This Restricted Stock Unit Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.
13.
Waiver and Amendments. Except as otherwise set forth in Section 13 of the Plan, any waiver, alteration, amendment or modification of any of the terms of this Restricted Stock Unit Agreement shall be valid only if made in writing and signed by the parties hereto; provided, that any such waiver, alteration, amendment or modification is consented to on the Company’s behalf by the Committee. No waiver by either of the parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.
14.
Clawback; Forfeiture. Notwithstanding anything to the contrary contained herein or in the Plan, if the Participant has engaged in or engages in any Detrimental Activity, then the Committee may, in its sole discretion, take actions permitted under the Plan, including: (a) canceling the Restricted Stock Units, or (b) requiring that the Participant forfeit any gain realized on the disposition of any shares of Common Stock received in settlement of any Restricted Stock Units, and repay such gain to the Company. In addition, if the Participant receives any amount in excess of what the Participant should have received under the terms of this Restricted Stock Unit Agreement for any reason (including without limitation by reason of a financial restatement, mistake in calculations or other administrative error), then the Participant shall be required to repay any such excess amount to the Company. Without limiting the foregoing, all Restricted Stock Units shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with applicable law. “Detrimental Activity” means any, offset of the following: (i) unauthorized disclosure of any confidential or proprietary information of any member of the Company Group; (ii) any activity that would be grounds to terminate the Participant’s employment or service with the Company for Cause; (iii) a breach by the Participant of any restrictive covenant by which such Participant is bound, including, without limitation, any covenant not to compete or not to hire or solicit, in any agreement with any member of the Company Group; or (iv) fraud, gross negligence or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion.
15.
Governing Law; Venue. This Restricted Stock Unit Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof. Notwithstanding anything contained in this Restricted Stock Unit Agreement, the Grant Notice or the Plan to the contrary, if any suit or claim is instituted by the Participant or the Company relating to this Restricted Stock Unit Agreement, the Grant Notice or the Plan, the Participant hereby submits to the exclusive jurisdiction of and venue in the courts of Atlanta, Georgia.
16.
Award Subject to Plan. The Restricted Stock Units granted hereunder, and the shares of Common Stock issued to the Participant upon settlement of vested Restricted Stock Units, are subject to the Plan and the terms of the Plan are hereby incorporated into this Restricted Stock Unit Agreement. By accepting the Restricted Stock Units, the Participant acknowledges that the Participant has received and read the Plan and agrees to be bound by the terms, conditions, and restrictions set forth in the Plan, this Restricted Stock Unit Agreement, and the Company’s policies, as in effect from time to time, relating to the Plan. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail. The provisions of this Restricted Stock Unit Agreement shall survive the termination of this Award to the extent consistent with, or necessary to carry out, the purposes thereof.

 


 

17.
Section 409A. It is intended that the Restricted Stock Units granted hereunder shall be exempt from Section 409A of the Code pursuant to the “short-term deferral” rule applicable to such section, as set forth in the regulations or other guidance published by the Internal Revenue Service thereunder.
18.
Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Restricted Stock Units and on any shares of Common Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
19.
Transmission Acknowledgement. To the extent necessary, the Participant authorizes, agrees and unambiguously consents to the transmission by the Company or any other member of the Company Group of any of the Participant’s personal data related to the Award for legitimate business purposes (including, without limitation, the administration of the Plan). The Participant confirms and acknowledges that the Participant gives this authorization and consent freely.
20.
Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. In the event that any information regarding the Restricted Stock Units provided to the Participant through the third-party stock plan administrator’s web portal or otherwise conflicts with any of the terms and conditions of this Restricted Stock Unit Agreement or the Plan (collectively, the “Restricted Stock Unit Governing Documents”), the Restricted Stock Unit Governing Documents shall control.
21.
Entire Agreement. The Restricted Stock Unit Governing Documents constitute the entire agreement of the parties hereto in respect of the subject matter contained herein and supersede all prior agreements and understandings of the parties, oral and written, with respect to such subject matter.

 


EX-10.2

 

Exhibit 10.2

 

Grant ID:

RESTRICTED STOCK UNIT GRANT NOTICE

UNDER

FIRST ADVANTAGE CORPORATION

2021 OMNIBUS INCENTIVE PLAN

First Advantage Corporation (the “Company”), pursuant to its 2021 Omnibus Incentive Plan, as it may be amended and restated from time to time (the “Plan”), hereby grants to the Participant set forth below the number of Restricted Stock Units set forth below. The Restricted Stock Units are subject to all of the terms and conditions as set forth herein, in the Restricted Stock Unit Agreement (attached hereto or previously provided to the Participant in connection with a prior grant), and in the Plan, all of which are incorporated herein in their entirety. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Plan.

 

 

 

 

Participant:

 

 

 

 

Date of Grant:

 

 

 

 

Number of

 

 

Restricted Stock Units:

 

 

 

 

Vesting Schedule:

 

Subject to the Participant’s continued service with the Company on each applicable vesting date, 100% of the Restricted Stock Units shall vest on the earlier of (i) the first anniversary of the Date of Grant, or, if earlier, the date which is the business day immediately preceding the date of the annual meeting of the Company’s stockholders in #GrantCustom1#, or (ii) a Change in Control.

* * *

 

 

FIRST ADVANTAGE CORPORATION

 


¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
By:
Title:

THE UNDERSIGNED PARTICIPANT ACKNOWLEDGES RECEIPT OF THIS RESTRICTED STOCK UNIT GRANT NOTICE, THE RESTRICTED STOCK UNIT AGREEMENT AND THE PLAN, AND, AS AN EXPRESS CONDITION TO THE GRANT OF RESTRICTED STOCK UNITS HEREUNDER, AGREES TO BE BOUND BY THE TERMS OF THIS RESTRICTED STOCK UNIT GRANT NOTICE, THE RESTRICTED STOCK UNIT AGREEMENT AND THE PLAN.

PARTICIPANT1
 


¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
By:
Date:

1

To the extent that the Company has established, either itself or through a third-party plan administrator, the ability to accept this award electronically, such acceptance shall constitute the Participant’s signature hereto.

 

 

 


 

RESTRICTED STOCK UNIT AGREEMENT

UNDER

FIRST ADVANTAGE CORPORATION

2021 OMNIBUS INCENTIVE PLAN

Pursuant to the Restricted Stock Unit Grant Notice (the “Grant Notice”) delivered to the Participant (as defined in the Grant Notice), and subject to the terms of this Restricted Stock Unit Agreement (this “Restricted Stock Unit Agreement”) and First Advantage Corporation 2021 Omnibus Incentive Plan, as it may be amended and restated from time to time (the “Plan”), First Advantage Corporation (the “Company”) and the Participant agree as follows. Capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Plan.

1.
Grant of Restricted Stock Units. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Participant the number of Restricted Stock Units provided in the Grant Notice (with each Restricted Stock Unit representing an unfunded, unsecured right to receive one share of Common Stock). The Company may make one or more additional grants of Restricted Stock Units to the Participant under this Restricted Stock Unit Agreement by providing the Participant with a new Grant Notice, which may also include any terms and conditions differing from this Restricted Stock Unit Agreement to the extent provided therein. The Company reserves all rights with respect to the granting of additional Restricted Stock Units hereunder and makes no implied promise to grant additional Restricted Stock Units.
2.
Vesting. Subject to the conditions contained herein and in the Plan, the Restricted Stock Units shall vest as provided in the Grant Notice.
3.
Settlement of Restricted Stock Units. Subject to any election by the Committee pursuant to Section 9(d)(ii) of the Plan, the Company will deliver to the Participant, without charge, as soon as reasonably practicable (and, in any event, within two and one-half months) following the applicable vesting date, one share of Common Stock for each Restricted Stock Unit (as adjusted under the Plan, as applicable) which becomes vested hereunder and such vested Restricted Stock Unit shall be cancelled upon such delivery. The Company shall either (a) deliver, or cause to be delivered, to the Participant a certificate or certificates therefor, registered in the Participant’s name or (b) cause such shares of Common Stock to be credited to the Participant’s account at the third party plan administrator. Notwithstanding anything in this Restricted Stock Unit Agreement to the contrary, the Company shall have no obligation to issue or transfer any shares of Common Stock as contemplated by this Restricted Stock Unit Agreement unless and until such issuance or transfer complies with all relevant provisions of law and the requirements of any stock exchange on which the Company’s shares of Common Stock are listed for trading.
4.
Treatment of Restricted Stock Units Upon Termination. Except as otherwise provided in the Grant Notice or as otherwise may be provided by the Committee, in the event of a Participant’s Termination for any reason prior to the time that such Participant’s Restricted Stock Units have vested, (A) all vesting with respect to such Participant’s Restricted Stock Units shall cease and (B) unvested Restricted Stock Units shall be forfeited to the Company by the Participant for no consideration as of the date of such Termination.
5.
Conditions to Issuance of Common Stock. The Company shall not be required to record the ownership by the Participant of shares of Common Stock issued upon the settlement of vested Restricted Stock Units prior to fulfillment of all of the following conditions: (i) the obtaining of approval or other clearance from any federal, state, local or non-U.S. governmental agency which the Committee shall, in its reasonable and good faith discretion, determine to be necessary; (ii) the lapse of such reasonable period of time following the settlement of the vested Restricted Stock Units as may otherwise be required by applicable law; and (iii) the execution and delivery to the Company, to the extent not so previously executed and delivered, of such other documents and instruments as may be reasonably required by the Committee.
6.
Participant. Whenever the word “Participant” is used in any provision of this Restricted Stock Unit Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the Restricted Stock Units may be transferred in accordance with Section 14(b) of the Plan, the word “Participant” shall be deemed to include such person or persons.
7.
Non-Transferability. The Restricted Stock Units are not transferable by the Participant except to Permitted Transferees in accordance with Section 14(b) of the Plan. Except as otherwise provided herein, no assignment or transfer of the Restricted Stock Units, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Restricted Stock Units shall terminate and become of no further effect.
8.
Rights as Shareholder. The Participant or a Permitted Transferee of the Restricted Stock Units shall have no rights as a shareholder with respect to any share of Common Stock underlying a Restricted Stock Unit unless and until the Participant shall have become the holder of record or the beneficial owner of such share of Common Stock, and no adjustment shall be made for dividends or distributions or other rights in respect of such share of Common Stock for which the record date is prior to the date upon which the Participant shall become the holder of record or the beneficial owner thereof.

 


 

9.
Tax Withholding. The Participant may be required to pay to the Company and the Company shall have the right and is hereby authorized to withhold, any applicable withholding taxes in respect of the Restricted Stock Units, their vesting or settlement or any payment or transfer with respect to the Restricted Stock Units at the minimum applicable statutory rates, and to take such action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes. The Committee may, in its sole discretion, permit the Participant to satisfy such withholding tax obligations, in whole or in part, by delivering shares of Common Stock, including shares of Common Stock received upon settlement of Restricted Stock Units pursuant to this Restricted Stock Unit Agreement.
10.
Notice. Every notice or other communication relating to this Restricted Stock Unit Agreement between the Company and the Participant shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by such party in a notice mailed or delivered to the other party as herein provided; provided, that, unless and until some other address be so designated, all notices or communications by the Participant to the Company shall be mailed or delivered to the Company at its principal executive office, to the attention of the Company’s Compensation Department, and all notices or communications by the Company to the Participant may be given to the Participant personally or may be mailed to the Participant at the Participant’s last known address, as reflected in the Company’s records. Notwithstanding the above, all notices and communications between the Participant and any third-party plan administrator shall be mailed, delivered, transmitted or sent in accordance with the procedures established by such third-party plan administrator and communicated to the Participant from time to time.
11.
No Right to Continued Service. This Restricted Stock Unit Agreement does not confer upon the Participant any right to continue as an employee or other service provider to the Company or any of its Subsidiaries.
12.
Binding Effect. This Restricted Stock Unit Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.
13.
Waiver and Amendments. Except as otherwise set forth in Section 13 of the Plan, any waiver, alteration, amendment or modification of any of the terms of this Restricted Stock Unit Agreement shall be valid only if made in writing and signed by the parties hereto; provided, that any such waiver, alteration, amendment or modification is consented to on the Company’s behalf by the Committee. No waiver by either of the parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.
14.
Clawback; Forfeiture. Notwithstanding anything to the contrary contained herein or in the Plan, if the Participant has engaged in or engages in any Detrimental Activity, then the Committee may, in its sole discretion, take actions permitted under the Plan, including: (a) canceling the Restricted Stock Units, or (b) requiring that the Participant forfeit any gain realized on the disposition of any shares of Common Stock received in settlement of any Restricted Stock Units, and repay such gain to the Company. In addition, if the Participant receives any amount in excess of what the Participant should have received under the terms of this Restricted Stock Unit Agreement for any reason (including without limitation by reason of a financial restatement, mistake in calculations or other administrative error), then the Participant shall be required to repay any such excess amount to the Company. Without limiting the foregoing, all Restricted Stock Units shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with applicable law. “Detrimental Activity” means any, offset of the following: (i) unauthorized disclosure of any confidential or proprietary information of any member of the Company Group; (ii) any activity that would be grounds to terminate the Participant’s employment or service with the Company for Cause; (iii) a breach by the Participant of any restrictive covenant by which such Participant is bound, including, without limitation, any covenant not to compete or not to hire or solicit, in any agreement with any member of the Company Group; or (iv) fraud, gross negligence or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion.
15.
Governing Law; Venue. This Restricted Stock Unit Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof. Notwithstanding anything contained in this Restricted Stock Unit Agreement, the Grant Notice or the Plan to the contrary, if any suit or claim is instituted by the Participant or the Company relating to this Restricted Stock Unit Agreement, the Grant Notice or the Plan, the Participant hereby submits to the exclusive jurisdiction of and venue in the courts of Atlanta, Georgia.
16.
Award Subject to Plan. The Restricted Stock Units granted hereunder, and the shares of Common Stock issued to the Participant upon settlement of vested Restricted Stock Units, are subject to the Plan and the terms of the Plan are hereby incorporated into this Restricted Stock Unit Agreement. By accepting the Restricted Stock Units, the Participant acknowledges that the Participant has received and read the Plan and agrees to be bound by the terms, conditions, and restrictions set forth in the Plan, this Restricted Stock Unit Agreement, and the Company’s policies, as in effect from time to time, relating to the Plan. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail. The provisions of this Restricted Stock Unit Agreement shall survive the termination of this Award to the extent consistent with, or necessary to carry out, the purposes thereof.

 


 

17.
Section 409A. It is intended that the Restricted Stock Units granted hereunder shall be exempt from Section 409A of the Code pursuant to the “short-term deferral” rule applicable to such section, as set forth in the regulations or other guidance published by the Internal Revenue Service thereunder.
18.
Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Restricted Stock Units and on any shares of Common Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
19.
Transmission Acknowledgement. To the extent necessary, the Participant authorizes, agrees and unambiguously consents to the transmission by the Company or any other member of the Company Group of any of the Participant’s personal data related to the Award for legitimate business purposes (including, without limitation, the administration of the Plan). The Participant confirms and acknowledges that the Participant gives this authorization and consent freely.
20.
Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. In the event that any information regarding the Restricted Stock Units provided to the Participant through the third-party stock plan administrator’s web portal or otherwise conflicts with any of the terms and conditions of this Restricted Stock Unit Agreement or the Plan (collectively, the “Restricted Stock Unit Governing Documents”), the Restricted Stock Unit Governing Documents shall control.
21.
Entire Agreement. The Restricted Stock Unit Governing Documents constitute the entire agreement of the parties hereto in respect of the subject matter contained herein and supersede all prior agreements and understandings of the parties, oral and written, with respect to such subject matter.

 


EX-10.3

 

Exhibit 10.3

 

Grant ID:

OPTION GRANT NOTICE
UNDER
FIRST ADVANTAGE CORPORATION
2021 OMNIBUS INCENTIVE PLAN

First Advantage Corporation (the “Company”), pursuant to its 2021 Omnibus Incentive Plan, as it may be amended and restated from time to time (the “Plan”), hereby grants to the Participant set forth below the number of Options (each Option representing the right to purchase one share of Common Stock) set forth below, at an Exercise Price per share as set forth below. The Options are subject to all of the terms and conditions as set forth herein, in the Option Agreement (attached hereto or previously provided to the Participant in connection with a prior grant) and in the Plan, all of which are incorporated herein in their entirety. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Plan.

Participant:

 

Date of Grant:

 

Number of Options:

 

Exercise Price per Share:

 

Option Period Expiration Date:

10th anniversary of Date of Grant

Type of Option:

Nonqualified Stock Option

Vesting Schedule:

Subject to the Participant’s continued service with the Company and its Subsidiaries on each applicable vesting date, the Options shall vest as follows:

 

Vesting Date

Quantity

 

 

 

 

 

 

 

 

 

 

 

 


 

 

Notwithstanding any of the foregoing, upon a Termination at any time by reason of death or Disability, any unvested Options that would have become vested and exercisable on the vesting date immediately following the date of such Termination, had the Participant remained in service with the Company and its Subsidiaries through such vesting date, will become vested and exercisable as of the Participant’s Termination.

If a Change in Control occurs and during the 24 month period following such Change in Control, the Participant’s service is terminated by the Service Recipient without Cause or due to the Participant’s resignation for Good Reason (as defined below), all unvested Options shall become fully vested and exercisable upon the date of the Participant’s Termination.

 

 

Definitions:

Good Reason” shall have the meaning given to such term in any employment or consulting agreement between the Participant and the Service Recipient in effect at the time of the Participant’s Termination. In the absence of any such employment or consulting agreement or the absence of any definition of “Good Reason” contained therein, “Good Reason” means the occurrence of one or more of the following events arising without the express written consent of the Participant, but only if the Participant notifies the Service Recipient in writing of the event within 60 days following the occurrence of the event, the event remains uncured after the expiration of 30 days from receipt of such notice, and the Participant resigns effective no later than 30 days following the Service Recipient’s failure to cure the event: (i) a material diminution in the Participant’s base salary or target bonus opportunity, (ii) the relocation of the Participant’s principal place of employment or service to a location more than 35 miles from the Participant’s then current principal place of employment or service, if a move to such other location materially increases the Participant’s commute, or (iii) any material breach by the Company or the Service Recipient of this Option Agreement or the Participant’s offer letter or employment agreement with the Service Recipient.

 

 

 

* * *

 

 


 

FIRST ADVANTAGE CORPORATION

 


¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
By:
Title:

 

 

 

 


 

THE UNDERSIGNED PARTICIPANT ACKNOWLEDGES RECEIPT OF THIS OPTION GRANT NOTICE, THE OPTION AGREEMENT AND THE PLAN, AND, AS AN EXPRESS CONDITION TO THE GRANT OF OPTIONS HEREUNDER, AGREES TO BE BOUND BY THE TERMS OF THIS OPTION GRANT NOTICE, THE OPTION AGREEMENT AND THE PLAN.

Participant1

 

 


¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
By:
Date:

 

 

1

To the extent that the Company has established, either itself or through a third-party plan administrator, the ability to accept this award electronically, such acceptance shall constitute the Participant’s signature hereto.

 

 


 

OPTION AGREEMENT
UNDER
FIRST ADVANTAGE CORPORATION
2021 OMNIBUS INCENTIVE PLAN

Pursuant to the Option Grant Notice (the “Grant Notice”) delivered to the Participant (as defined in the Grant Notice), and subject to the terms of this Option Agreement (this “Option Agreement”) and First Advantage Corporation 2021 Omnibus Incentive Plan, as it may be amended and restated from time to time (the “Plan”), First Advantage Corporation (the “Company”) and the Participant agree as follows. Capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Plan.

1.
Grant of Option. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Participant the number of Options provided in the Grant Notice (with each Option representing the right to purchase one share of Common Stock), at an Exercise Price per share as provided in the Grant Notice. The Company may make one or more additional grants of Options to the Participant under this Option Agreement by providing the Participant with a new Grant Notice, which may also include any terms and conditions differing from this Option Agreement to the extent provided therein. The Company reserves all rights with respect to the granting of additional Options hereunder and makes no implied promise to grant additional Options.
2.
Vesting. Subject to the conditions contained herein and in the Plan, the Options shall vest as provided in the Grant Notice.
3.
Exercise of Options Following Termination. Except as otherwise provided in the Grant Notice or as otherwise may be provided by the Committee, in the event of: (A) a Participant’s Termination by the Service Recipient for Cause, all outstanding Options granted to such Participant shall immediately terminate and expire; (B) a Participant’s Termination due to death or Disability, each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for one (1) year thereafter (but in no event beyond the expiration of the Option Period); (C) a Participant’s Termination without Good Reason, each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for thirty (30) days thereafter (but in no event beyond the expiration of the Option Period); and (D) a Participant’s Termination for any other reason (including, for the avoidance of doubt, termination by the Company without Cause or by the Participant for Good Reason), each outstanding unvested Option granted to such Participant shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for one hundred eighty (180) days thereafter (but in no event beyond the expiration of the Option Period).
4.
Method of Exercising Options. The Options may be exercised by the delivery of notice of the number of Options that are being exercised accompanied by payment in full of the Exercise Price applicable to the Options so exercised. Such notice shall be delivered either (a) in writing to the Company at its principal office or at such other address as may be established by the Committee, to the attention of the Company’s Compensation Department or its designee; or (b) to a third-party plan administrator as may be arranged for by the Company or the Committee from time to time for purposes of the administration of outstanding Options under the Plan, in the case of either (a) or (b), as communicated to the Participant by the Company from time to time. Payment of the aggregate Exercise Price may be made using any of the methods described in Section 7(d)(i) or (ii) of the Plan; provided, that the Participant shall obtain written consent from the Committee prior to the use of the method described in Section 7(d)(ii)(A) of the Plan.
5.
Issuance of Shares of Common Stock. Following the exercise of an Option hereunder, as promptly as practical after receipt of such notification and full payment of such Exercise Price and any required income or other tax withholding amount (as provided in Section 10 hereof), the Company shall issue or transfer, or cause such issue or transfer, to the Participant the number of shares of Common Stock with respect to which the Options have been so exercised, and shall either (a) deliver, or cause to be delivered, to the Participant a certificate or certificates therefor, registered in the Participant’s name or (b) cause such shares of Common Stock to be credited to the Participant’s account at the third‑party plan administrator.

 


 

 

 

 

6.
Conditions to Issuance of Common Stock. The Company shall not be required to record the ownership by the Participant of shares of Common Stock purchased upon the exercise of the Options or portion therefore prior to fulfillment of all of the following conditions: (i) the obtaining of approval or other clearance from any federal, state, local or non-U.S. governmental agency which the Committee shall, in its reasonable and good faith discretion, determine to be necessary; (ii) the lapse of such reasonable period of time following the exercise of the Option as may otherwise be required by applicable law; and (iii) the execution and delivery to the Company, to the extent not so previously executed and delivered, of such other documents and instruments as may be reasonably required by the Committee.
7.
Participant. Whenever the word “Participant” is used in any provision of this Option Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the Options may be transferred in accordance with Section 14(b) of the Plan, the word “Participant” shall be deemed to include such person or persons.
8.
Non-Transferability. The Options are not transferable by the Participant; provided, to the extent permitted by the Committee in accordance with Section 14(b) of the Plan, vested Options may be transferred to Permitted Transferees. Except as otherwise provided herein, no assignment or transfer of the Options, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Options shall terminate and become of no further effect.
9.
Rights as Shareholder. The Participant shall have no rights as a shareholder with respect to any share of Common Stock covered by an Option unless and until the Participant shall have become the holder of record or the beneficial owner of such share of Common Stock, and no adjustment shall be made for dividends or distributions or other rights in respect of such share of Common Stock for which the record date is prior to the date upon which the Participant shall become the holder of record or the beneficial owner thereof.
10.
Tax Withholding. Concurrently with the exercise of an Option, the Participant must pay to the Company any amount that the Company determines it is required to withhold under applicable federal, state or local or foreign tax laws in respect of the exercise or the transfer of the shares of Common Stock in connection therewith (“Withholding Taxes”). The Participant may elect to make payment: (i) in cash or by check or wire transfer (or any combination thereof) or (ii) and to the extent permitted by applicable law, by delivery of a notice that the Participant has placed a market sell order with a broker with respect to shares of Common Stock then issuable upon exercise of the Options being so exercised, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Withholding Taxes; provided, that payment of such proceeds is then made to the Company upon settlement of such sale; and provided, further, that the Committee may, in its sole discretion, allow such withholding obligation to be satisfied by any other method described in Section 14 of the Plan and, if Participant is a Section 16 officer of the Company under the Exchange Act, then the Committee shall establish the method of withholding required to be utilized by the Participant from alternatives available under the Plan prior to the exercise of any Options.
11.
Notice. Every notice or other communication relating to this Option Agreement between the Company and the Participant shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by such party in a notice mailed or delivered to the other party as herein provided; provided, that, unless and until some other address be so designated, all notices or communications by the Participant to the Company shall be mailed or delivered to the Company at its principal executive office, to the attention of the Company’s Compensation Department, and all notices or communications by the Company to the Participant may be given to the Participant personally or may be mailed to the Participant at the Participant’s last known address, as reflected in the Company’s records. Notwithstanding the above, all notices and communications between the Participant and any third-party plan administrator shall be mailed, delivered, transmitted or sent in accordance with the procedures established by such third-party plan administrator and communicated to the Participant from time to time.
12.
No Right to Continued Service. This Option Agreement does not confer upon the Participant any right to continue as an employee or service provider to the Company or any of its Subsidiaries.
13.
Binding Effect. This Option Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

 

 


 

 

 

 

14.
Waiver and Amendments. Except as otherwise set forth in Section 13 of the Plan, any waiver, alteration, amendment or modification of any of the terms of this Option Agreement shall be valid only if made in writing and signed by the parties hereto; provided, that any such waiver, alteration, amendment or modification is consented to on the Company’s behalf by the Committee. No waiver by either of the parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.
15.
Clawback; Forfeiture. Notwithstanding anything to the contrary contained herein or in the Plan, if the Participant has engaged in or engages in any Detrimental Activity, then the Committee may, in its sole discretion, take actions permitted under the Plan, including: (a) canceling the Options, or (b) requiring that the Participant forfeit any gain realized on the exercise of the Options or the disposition of any shares of Common Stock received upon exercise of the Options, and repay such gain to the Company. In addition, if the Participant receives any amount in excess of what the Participant should have received under the terms of this Option Agreement for any reason (including without limitation by reason of a financial restatement, mistake in calculations or other administrative error), then the Participant shall be required to repay any such excess amount to the Company. Without limiting the foregoing, all Options shall be subject to reduction, cancellation, forfeiture, offset or recoupment to the extent necessary to comply with applicable law. “Detrimental Activity” means any of the following: (i) unauthorized disclosure of any confidential or proprietary information of any member of the Company Group; (ii) any activity that would be grounds to terminate the Participant’s employment or service with the Service Recipient for Cause; (iii) a breach by the Participant of any restrictive covenant by which such Participant is bound, including, without limitation, any covenant not to compete or not to hire or solicit, in any agreement with any member of the Company Group; or (iv) fraud, gross negligence or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion.
16.
Governing Law; Venue. This Option Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof. Notwithstanding anything contained in this Option Agreement, the Grant Notice or the Plan to the contrary, if any suit or claim is instituted by the Participant or the Company relating to this Option Agreement, the Grant Notice or the Plan, the Participant hereby submits to the exclusive jurisdiction of and venue in the courts of Atlanta, Georgia.
17.
Award Subject to Plan. The Options granted hereunder, and the shares of Common Stock issued to the Participant upon exercise of the Options, are subject to the Plan and the terms of the Plan are hereby incorporated into this Option Agreement. By accepting the Options, the Participant acknowledges that the Participant has received and read the Plan and agrees to be bound by the terms, conditions, and restrictions set forth in the Plan, this Option Agreement, and the Company’s policies, as in effect from time to time, relating to the Plan. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail. The provisions of this Option Agreement shall survive the termination of this Award to the extent consistent with, or necessary to carry out, the purposes thereof.
18.
Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Options and on any shares of Common Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
19.
Transmission Acknowledgement. To the extent necessary, the Participant authorizes, agrees and unambiguously consents to the transmission by the Company or any other member of the Company Group of any of the Participant’s personal data related to the Award for legitimate business purposes (including, without limitation, the administration of the Plan). The Participant confirms and acknowledges that the Participant gives this authorization and consent freely.

 

 


 

 

 

 

20.
Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. In the event that any information regarding the Options provided to the Participant through the third-party stock plan administrator’s web portal or otherwise conflicts with any of the terms and conditions of this Option Agreement or the Plan (collectively, the “Option Governing Documents”), the Option Governing Documents shall control.
21.
Entire Agreement. The Option Governing Documents constitute the entire agreement of the parties hereto in respect of the subject matter contained herein and supersede all prior agreements and understandings of the parties, oral and written, with respect to such subject matter.

 

 


EX-10.4

 

 

Exhibit 10.4

 

Grant ID:

 

RESTRICTED STOCK UNIT GRANT NOTICE
UNDER
FIRST ADVANTAGE CORPORATION
2021 OMNIBUS INCENTIVE PLAN

First Advantage Corporation (the “Company”), pursuant to its 2021 Omnibus Incentive Plan, as it may be amended and restated from time to time (the “Plan”), hereby grants to the Participant set forth below the number of Restricted Stock Units set forth below. The Restricted Stock Units are subject to all of the terms and conditions as set forth herein, in the Restricted Stock Unit Agreement (attached hereto or previously provided to the Participant in connection with a prior grant), and in the Plan, all of which are incorporated herein in their entirety. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Plan.

Participant:

 

Date of Grant:

 

Number of

Restricted Stock Units:

 

Vesting Schedule:

Subject to the Participant’s continued employment or service with the Company Group on each applicable vesting date, the Restricted Stock Units shall vest as follows:

 

Vesting Date

Quantity

 

 

 

 

 

 

 

 

 

 

 

 


 

 

Notwithstanding any of the foregoing, upon a Termination at any time by reason of death or Disability, any unvested Restricted Stock Units that would have become vested on the vesting date immediately following the date of such Termination, had the Participant remained in service with the Company Group through such vesting date, will become vested as of the Participant’s Termination.

If a Change in Control occurs and during the 24 month period following such Change in Control, the Participant’s service is terminated by the Service Recipient without Cause or due to the Participant’s resignation for Good Reason (as defined below), all unvested Restricted Stock Units shall become fully vested upon the date of the Participant’s Termination.

 

 

Definitions:

Good Reason” shall have the meaning given to such term in any employment or consulting agreement between the Participant and the Service Recipient in effect at the time of the Participant’s Termination. In the absence of any such employment or consulting agreement or the absence of any definition of “Good Reason” contained therein, “Good Reason” means the occurrence of one or more of the following events arising without the express written consent of the Participant, but only if the Participant notifies the Service Recipient in writing of the event within 60 days following the occurrence of the event, the event remains uncured after the expiration of 30 days from receipt of such notice, and the Participant resigns effective no later than 30 days following the Service Recipient’s failure to cure the event: (i) a material diminution in the Participant’s base salary or target bonus opportunity, (ii) the relocation of the Participant’s principal place of employment or service to a location more than 35 miles from the Participant’s then current principal place of employment or service, if a move to such other location materially increases the Participant’s commute, or (iii) any material breach by the Company or the Service Recipient of this Restricted Stock Unit Agreement or the Participant’s offer letter or employment agreement with the Service Recipient.

 

 

 

 

 

 

 

 

* * *

 

 


 

 

FIRST ADVANTAGE CORPORATION

 


¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
By:
Title:

 

 

 


 

THE UNDERSIGNED PARTICIPANT ACKNOWLEDGES RECEIPT OF THIS RESTRICTED STOCK UNIT GRANT NOTICE, THE RESTRICTED STOCK UNIT AGREEMENT AND THE PLAN, AND, AS AN EXPRESS CONDITION TO THE GRANT OF RESTRICTED STOCK UNITS HEREUNDER, AGREES TO BE BOUND BY THE TERMS OF THIS RESTRICTED STOCK UNIT GRANT NOTICE, THE RESTRICTED STOCK UNIT AGREEMENT AND THE PLAN.

 

Participant1

 


¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
By:
Date:

1

To the extent that the Company has established, either itself or through a third-party plan administrator, the ability to accept this award electronically, such acceptance shall constitute the Participant’s signature hereto.

 

 


 

 

 

RESTRICTED STOCK UNIT AGREEMENT
UNDER
FIRST ADVANTAGE CORPORATION
2021 OMNIBUS INCENTIVE PLAN

Pursuant to the Restricted Stock Unit Grant Notice (the “Grant Notice”) delivered to the Participant (as defined in the Grant Notice), and subject to the terms of this Restricted Stock Unit Agreement (this “Restricted Stock Unit Agreement”) and First Advantage Corporation 2021 Omnibus Incentive Plan, as it may be amended and restated from time to time (the “Plan”), First Advantage Corporation (the “Company”) and the Participant agree as follows. Capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Plan.

1.
Grant of Restricted Stock Units. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Participant the number of Restricted Stock Units provided in the Grant Notice (with each Restricted Stock Unit representing an unfunded, unsecured right to receive one share of Common Stock). The Company may make one or more additional grants of Restricted Stock Units to the Participant under this Restricted Stock Unit Agreement by providing the Participant with a new Grant Notice, which may also include any terms and conditions differing from this Restricted Stock Unit Agreement to the extent provided therein. The Company reserves all rights with respect to the granting of additional Restricted Stock Units hereunder and makes no implied promise to grant additional Restricted Stock Units.
2.
Vesting. Subject to the conditions contained herein and in the Plan, the Restricted Stock Units shall vest as provided in the Grant Notice.
3.
Settlement of Restricted Stock Units. Subject to any election by the Committee pursuant to Section 9(d)(ii) of the Plan, the Company will deliver to the Participant, without charge, as soon as reasonably practicable (and, in any event, within two and one-half months) following the applicable vesting date, one share of Common Stock for each Restricted Stock Unit (as adjusted under the Plan, as applicable) which becomes vested hereunder and such vested Restricted Stock Unit shall be cancelled upon such delivery. The Company shall either (a) deliver, or cause to be delivered, to the Participant a certificate or certificates therefor, registered in the Participant’s name or (b) cause such shares of Common Stock to be credited to the Participant’s account at the third party plan administrator. Notwithstanding anything in this Restricted Stock Unit Agreement to the contrary, the Company shall have no obligation to issue or transfer any shares of Common Stock as contemplated by this Restricted Stock Unit Agreement unless and until such issuance or transfer complies with all relevant provisions of law and the requirements of any stock exchange on which the Company’s shares of Common Stock are listed for trading.
4.
Treatment of Restricted Stock Units Upon Termination. Except as otherwise provided in the Grant Notice or as otherwise may be provided by the Committee, in the event of a Participant’s Termination for any reason prior to the time that such Participant’s Restricted Stock Units have vested, (A) all vesting with respect to such Participant’s Restricted Stock Units shall cease and (B) unvested Restricted Stock Units shall be forfeited to the Company by the Participant for no consideration as of the date of such Termination.
5.
Conditions to Issuance of Common Stock. The Company shall not be required to record the ownership by the Participant of shares of Common Stock issued upon the settlement of vested Restricted Stock Units prior to fulfillment of all of the following conditions: (i) the obtaining of approval or other clearance from any federal, state, local or non-U.S. governmental agency which the Committee shall, in its reasonable and good faith discretion, determine to be necessary; (ii) the lapse of such reasonable period of time following the settlement of the vested Restricted Stock Units as may otherwise be required by applicable law; and (iii) the execution and delivery to the Company, to the extent not so previously executed and delivered, of such other documents and instruments as may be reasonably required by the Committee.
6.
Participant. Whenever the word “Participant” is used in any provision of this Restricted Stock Unit Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the Restricted Stock Units may be transferred in accordance with Section 14(b) of the Plan, the word “Participant” shall be deemed to include such person or persons.

 

 


 

 

 

7.
Non-Transferability. The Restricted Stock Units are not transferable by the Participant except to Permitted Transferees in accordance with Section 14(b) of the Plan. Except as otherwise provided herein, no assignment or transfer of the Restricted Stock Units, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Restricted Stock Units shall terminate and become of no further effect.
8.
Rights as Shareholder. The Participant or a Permitted Transferee of the Restricted Stock Units shall have no rights as a shareholder with respect to any share of Common Stock underlying a Restricted Stock Unit unless and until the Participant shall have become the holder of record or the beneficial owner of such share of Common Stock, and no adjustment shall be made for dividends or distributions or other rights in respect of such share of Common Stock for which the record date is prior to the date upon which the Participant shall become the holder of record or the beneficial owner thereof.
9.
Tax Withholding. The Participant may be required to pay to the Company and the Company shall have the right and is hereby authorized to withhold, any applicable withholding taxes in respect of the Restricted Stock Units, their vesting or settlement or any payment or transfer with respect to the Restricted Stock Units at the minimum applicable statutory rates, and to take such action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes. The Committee may, in its sole discretion, permit the Participant to satisfy such withholding tax obligations, in whole or in part, by delivering shares of Common Stock, including shares of Common Stock received upon settlement of Restricted Stock Units pursuant to this Restricted Stock Unit Agreement.
10.
Notice. Every notice or other communication relating to this Restricted Stock Unit Agreement between the Company and the Participant shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by such party in a notice mailed or delivered to the other party as herein provided; provided, that, unless and until some other address be so designated, all notices or communications by the Participant to the Company shall be mailed or delivered to the Company at its principal executive office, to the attention of the Company’s Compensation Department, and all notices or communications by the Company to the Participant may be given to the Participant personally or may be mailed to the Participant at the Participant’s last known address, as reflected in the Company’s records. Notwithstanding the above, all notices and communications between the Participant and any third-party plan administrator shall be mailed, delivered, transmitted or sent in accordance with the procedures established by such third-party plan administrator and communicated to the Participant from time to time.
11.
No Right to Continued Service. This Restricted Stock Unit Agreement does not confer upon the Participant any right to continue as an employee or other service provider to the Company Group.
12.
Binding Effect. This Restricted Stock Unit Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.
13.
Waiver and Amendments. Except as otherwise set forth in Section 13 of the Plan, any waiver, alteration, amendment or modification of any of the terms of this Restricted Stock Unit Agreement shall be valid only if made in writing and signed by the parties hereto; provided, that any such waiver, alteration, amendment or modification is consented to on the Company’s behalf by the Committee. No waiver by either of the parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.

 

 


 

 

 

14.
Clawback; Forfeiture. Notwithstanding anything to the contrary contained herein or in the Plan, if the Participant has engaged in or engages in any Detrimental Activity, then the Committee may, in its sole discretion, take actions permitted under the Plan, including: (a) canceling the Restricted Stock Units, or (b) requiring that the Participant forfeit any gain realized on the disposition of any shares of Common Stock received in settlement of any Restricted Stock Units, and repay such gain to the Company. In addition, if the Participant receives any amount in excess of what the Participant should have received under the terms of this Restricted Stock Unit Agreement for any reason (including without limitation by reason of a financial restatement, mistake in calculations or other administrative error), then the Participant shall be required to repay any such excess amount to the Company. Without limiting the foregoing, all Restricted Stock Units shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with applicable law. “Detrimental Activity” means any, offset of the following: (i) unauthorized disclosure of any confidential or proprietary information of any member of the Company Group; (ii) any activity that would be grounds to terminate the Participant’s employment or service with the Company Group for Cause; (iii) a breach by the Participant of any restrictive covenant by which such Participant is bound, including, without limitation, any covenant not to compete or not to hire or solicit, in any agreement with any member of the Company Group; or (iv) fraud, gross negligence or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion.
15.
Governing Law; Venue. This Restricted Stock Unit Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof. Notwithstanding anything contained in this Restricted Stock Unit Agreement, the Grant Notice or the Plan to the contrary, if any suit or claim is instituted by the Participant or the Company relating to this Restricted Stock Unit Agreement, the Grant Notice or the Plan, the Participant hereby submits to the exclusive jurisdiction of and venue in the courts of Atlanta, Georgia.
16.
Award Subject to Plan. The Restricted Stock Units granted hereunder, and the shares of Common Stock issued to the Participant upon settlement of vested Restricted Stock Units, are subject to the Plan and the terms of the Plan are hereby incorporated into this Restricted Stock Unit Agreement. By accepting the Restricted Stock Units, the Participant acknowledges that the Participant has received and read the Plan and agrees to be bound by the terms, conditions, and restrictions set forth in the Plan, this Restricted Stock Unit Agreement, and the Company’s policies, as in effect from time to time, relating to the Plan. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail. The provisions of this Restricted Stock Unit Agreement shall survive the termination of this Award to the extent consistent with, or necessary to carry out, the purposes thereof.
17.
Section 409A. It is intended that the Restricted Stock Units granted hereunder shall be exempt from Section 409A of the Code pursuant to the “short-term deferral” rule applicable to such section, as set forth in the regulations or other guidance published by the Internal Revenue Service thereunder.
18.
Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Restricted Stock Units and on any shares of Common Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
19.
Transmission Acknowledgement. To the extent necessary, the Participant authorizes, agrees and unambiguously consents to the transmission by the Company or any other member of the Company Group of any of the Participant’s personal data related to the Award for legitimate business purposes (including, without limitation, the administration of the Plan). The Participant confirms and acknowledges that the Participant gives this authorization and consent freely.
20.
Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. In the event that any information regarding the Restricted Stock Units provided to the Participant through the third-party stock plan administrator’s web portal or otherwise conflicts with any of the terms and conditions of this Restricted Stock Unit Agreement or the Plan (collectively, the “Restricted Stock Unit Governing Documents”), the Restricted Stock Unit Governing Documents shall control.

 

 


 

 

 

21.
Entire Agreement. The Restricted Stock Unit Governing Documents constitute the entire agreement of the parties hereto in respect of the subject matter contained herein and supersede all prior agreements and understandings of the parties, oral and written, with respect to such subject matter.

 

 


EX-31.1

Exhibit 31.1

CERTIFICATION

PURSUANT TO 17 CFR 240.13a-14

PROMULGATED UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Scott Staples, certify that:

 

1.
I have reviewed this Quarterly Report on Form 10-Q of First Advantage Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
[Reserved];
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 4, 2022

 

By:

/s/ Scott Staples

 

 

 

Scott Staples

 

 

 

Chief Executive Officer

(principal executive officer)

 

 

 

 

 

 

 


EX-31.2

Exhibit 31.2

CERTIFICATION

PURSUANT TO 17 CFR 240.13a-14

PROMULGATED UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, David L. Gamsey, certify that:

 

1.
I have reviewed this Quarterly Report on Form 10-Q of First Advantage Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
[Reserved];
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: August 4, 2022

 

By:

/s/ David L. Gamsey

 

 

 

David L. Gamsey

 

 

 

Executive Vice President & Chief Financial Officer

(principal financial officer)

 

 


EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO


18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO


SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of First Advantage Corporation (the “Company”) for the period ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

 

1.
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date: August 4, 2022

 

By:

/s/ Scott Staples

 

 

 

Scott Staples

 

 

 

Chief Executive Officer

(principal executive officer)

 

 

 

 

 

 

 

 


EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO


18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO


SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of First Advantage Corporation (the “Company”) for the period ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

 

1.
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date: August 4, 2022

 

By:

/s/ David L. Gamsey

 

 

 

David L. Gamsey

 

 

 

Executive Vice President & Chief Financial Officer

(principal financial officer)