a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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☐ |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 6, 2023, the registrant had
Table of Contents
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Page |
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PART I. |
2 |
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Item 1. |
2 |
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2 |
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Condensed Consolidated Statements of Operations and Comprehensive Income |
3 |
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4 |
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Condensed Consolidated Statements of Changes in Stockholders’ Equity |
5 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
7 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
Item 3. |
37 |
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Item 4. |
37 |
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PART II. |
38 |
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Item 1. |
38 |
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Item 1A. |
38 |
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Item 2. |
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities |
38 |
Item 3. |
39 |
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Item 4. |
39 |
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Item 5. |
39 |
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Item 6. |
40 |
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41 |
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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) |
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September 30, 2023 |
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December 31, 2022 |
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ASSETS |
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CURRENT ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Short-term investments |
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Accounts receivable (net of allowance for doubtful accounts of $ |
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Prepaid expenses and other current assets |
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Income tax receivable |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Trade name, net |
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Customer lists, net |
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Deferred tax asset, net |
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Other assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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CURRENT LIABILITIES |
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Accounts payable |
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$ |
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$ |
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Accrued compensation |
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Accrued liabilities |
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Current portion of operating lease liability |
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Income tax payable |
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Deferred revenues |
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Total current liabilities |
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Long-term debt (net of deferred financing costs of $ |
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Deferred tax liability, net |
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Operating lease liability, less current portion |
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Other liabilities |
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Total liabilities |
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EQUITY |
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Common stock - $ |
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Additional paid-in-capital |
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Accumulated deficit |
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( |
) |
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( |
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Accumulated other comprehensive loss |
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( |
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( |
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Total equity |
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TOTAL LIABILITIES AND EQUITY |
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$ |
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$ |
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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
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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(in thousands, except share and per share amounts) |
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2023 |
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2022 |
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2023 |
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2022 |
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REVENUES |
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$ |
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$ |
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$ |
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$ |
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OPERATING EXPENSES: |
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Cost of services (exclusive of depreciation and amortization below) |
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Product and technology expense |
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Selling, general, and administrative expense |
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Depreciation and amortization |
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Total operating expenses |
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INCOME FROM OPERATIONS |
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OTHER EXPENSE, NET: |
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Interest expense, net |
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Total other expense, net |
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INCOME BEFORE PROVISION FOR INCOME TAXES |
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Provision for income taxes |
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NET INCOME |
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$ |
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$ |
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$ |
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$ |
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Foreign currency translation loss |
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( |
) |
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( |
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( |
) |
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( |
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COMPREHENSIVE INCOME |
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$ |
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$ |
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$ |
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$ |
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NET INCOME |
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$ |
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$ |
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$ |
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$ |
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Basic net income per share |
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$ |
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$ |
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$ |
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$ |
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Diluted net income per share |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of shares outstanding - basic |
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Weighted average number of shares outstanding - diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
First Advantage Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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Nine Months Ended September 30, |
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(in thousands) |
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2023 |
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2022 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Amortization of deferred financing costs |
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Bad debt expense (recovery) |
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( |
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Deferred taxes |
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( |
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Share-based compensation |
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Loss on foreign currency exchange rates |
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Loss on disposal of fixed assets and impairment of ROU assets |
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Change in fair value of interest rate swaps |
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( |
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( |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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Prepaid expenses and other assets |
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Accounts payable |
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Accrued compensation and accrued liabilities |
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( |
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( |
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Deferred revenues |
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( |
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Operating lease liabilities |
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( |
) |
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( |
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Other liabilities |
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( |
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Income taxes receivable and payable, net |
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( |
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( |
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Acquisitions of businesses, net of cash acquired |
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( |
) |
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( |
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Purchases of property and equipment |
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( |
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( |
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Capitalized software development costs |
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( |
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( |
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Other investing activities |
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( |
) |
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Net cash used in investing activities |
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( |
) |
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( |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Cash dividends paid |
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( |
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Share repurchases |
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( |
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( |
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Payments on finance lease obligations |
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( |
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( |
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Payments on deferred purchase agreements |
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( |
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( |
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Proceeds from issuance of common stock under share-based compensation plans |
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Net settlement of share-based compensation plan awards |
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( |
) |
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( |
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Net cash used in financing activities |
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( |
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( |
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Effect of exchange rate on cash, cash equivalents, and restricted cash |
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( |
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( |
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(Decrease) increase in cash, cash equivalents, and restricted cash |
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( |
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Cash, cash equivalents, and restricted cash at beginning of period |
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Cash, cash equivalents, and restricted cash at end of period |
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$ |
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$ |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
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Cash paid for income taxes, net of refunds received |
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$ |
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$ |
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Cash paid for interest |
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$ |
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$ |
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NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Property and equipment acquired on account |
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$ |
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$ |
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Excise taxes on share repurchases incurred but not paid |
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$ |
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$ |
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Dividends declared but not paid |
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$ |
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$ |
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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) |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated Other |
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Total Stockholders’ |
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BALANCE – December 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Share-based compensation |
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— |
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— |
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— |
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Repurchases of common stock |
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( |
) |
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— |
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( |
) |
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— |
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( |
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Proceeds from issuance of common stock under share-based compensation plans |
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— |
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— |
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Common stock withheld for tax obligations on restricted stock unit and option settlement |
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( |
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— |
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— |
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( |
) |
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Foreign currency translation |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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BALANCE – March 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Share-based compensation |
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— |
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— |
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— |
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Repurchases of common stock |
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( |
) |
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— |
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( |
) |
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— |
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( |
) |
Proceeds from issuance of common stock under share-based compensation plans |
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— |
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— |
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Common stock withheld for tax obligations on restricted stock unit and option settlement |
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( |
) |
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— |
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— |
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( |
) |
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Foreign currency translation |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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BALANCE – June 30, 2023 |
|
$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Share-based compensation |
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— |
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— |
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— |
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Repurchases of common stock |
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— |
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( |
) |
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— |
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( |
) |
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Cash dividends declared, $ |
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— |
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( |
) |
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— |
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— |
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( |
) |
Proceeds from issuance of common stock under share-based compensation plans |
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— |
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— |
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Common stock withheld for tax obligations on restricted stock unit and option settlement |
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( |
) |
|
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— |
|
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— |
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|
|
( |
) |
|
Foreign currency translation |
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— |
|
|
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— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Net income |
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|
— |
|
|
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— |
|
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|
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|
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— |
|
|
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|
||
BALANCE – September 30, 2023 |
|
$ |
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|
$ |
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|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
First Advantage Corporation
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Continued)
(Unaudited)
(in thousands) |
|
Common Stock |
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Additional |
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Accumulated |
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Accumulated Other |
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Total Stockholders’ |
|
|||||
BALANCE – December 31, 2021 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||
Share-based compensation |
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— |
|
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|
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— |
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— |
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||
Proceeds from issuance of common stock under share-based compensation plans |
|
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|
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|
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— |
|
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|
— |
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|
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|
|||
Foreign currency translation |
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— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Net income |
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— |
|
|
|
— |
|
|
|
|
|
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— |
|
|
|
|
||
BALANCE – March 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||
Share-based compensation |
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— |
|
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|
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— |
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— |
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||
Proceeds from issuance of common stock under share-based compensation plans |
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|
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|
|
|
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— |
|
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|
— |
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|||
Common stock withheld for tax obligations on restricted stock unit and option settlement |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Net income |
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— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
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|
||
BALANCE – June 30, 2022 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||
Share-based compensation |
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Repurchases of common stock |
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