First Advantage (FA) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenues were $184.5 million, nearly flat year-over-year, with net income of $1.9 million, impacted by $9.2 million in Sterling acquisition expenses.

• Adjusted EBITDA was $55.8 million with a 30.2% margin, flat year-over-year; adjusted net income was $30.8 million, and adjusted diluted EPS was $0.21, down from $0.24.

• The Sterling Check Corp. acquisition, valued at $2.2 billion, is progressing with closing expected in Q4 2024, subject to regulatory approval and integration planning.

• AI initiatives and automation are driving operational efficiencies, cost savings, and improved customer satisfaction.

• CFO David Gamsey will retire in December, succeeded by Steven Marks, who has led finance workstreams for the Sterling integration.

Financial highlights

• Q2 2024 revenues were $184.5 million, down 0.4% year-over-year; organic constant currency revenue declined 2.2%.

• Net income was $1.9 million, down 81% year-over-year, mainly due to $9.2 million in acquisition-related expenses.

• Adjusted EBITDA was $55.8 million, with a margin of 30.2%, flat year-over-year and up 270 bps sequentially.

• Adjusted net income was $30.8 million; adjusted diluted EPS was $0.21, down from $0.24 in Q2 2023.

• Cash flows from operations were $32.0 million, or $40.7 million excluding Sterling acquisition costs.

Outlook and guidance

• Reaffirmed full-year 2024 guidance: revenues of $750–$800 million, adjusted EBITDA of $228–$248 million, adjusted net income of $127–$142 million, and adjusted diluted EPS of $0.88–$0.98.

• Guidance excludes Sterling acquisition contributions and reflects current macroeconomic and labor market trends.

• Sequential quarter-over-quarter growth expected for revenues, adjusted EBITDA, and margins through 2024.

• Guidance includes $10 million in increased employee costs and $7 million in new investments.

• Capital expenditures expected at $30–$33 million; net interest expense at $28–$32 million; adjusted effective tax rate 24%–25%.