Slide 1: Q2 2024 Earnings Presentation
Q2 2024 EARNINGS PRESENTATION August 8, 2024
Slide 2: Forward-Looking Statements; Non-GAAP Financial Information
FORWARD-LOOKING STATEMENTS This presentation 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. For
Slide 3: Q2 2024 Highlights & Sterling Acquisition Update
Q2 2024 HIGHLIGHTS & STERLING ACQUISITION UPDATE Scott Staples Chief Executive Officer
Slide 4: Q2 2024 Key Messages
Q2 2024 KEY MESSAGES Q2 2024 results in line with communicated expectations; 1 Reaffirming full-year 2024 guidance Sterling acquisition process progressing, with close expected 2 in the fourth quarter of 2024 Leveraging AI capabilities to deliver continued value for our 3 customers and optimize our
Slide 5: Strong Q2 2024 Results in Line with Communicated Expectations
1 STRONG Q2 2024 RESULTS IN LINE WITH COMMUNICATED EXPECTATIONS FOR KEY METRICS Revenues $184.5M Adjusted $55.8M (0.4%) EBITDA1 30.2% YoY Change Adj. EBITDA Margin1 Adjusted $30.8M Cash Flow from Operations, $40.7M Net Income1 $0.21 +23% Adj. Diluted EPS1 Adjusted2 YoY Change Q2 2024 results give ad
Slide 6: Sterling Acquisition Process Progressing
2 STERLING ACQUISITION PROCESS PROGRESSING DEVELOPMENTS BALANCE SHEET POST-CLOSE PRIORITIES • Second request received from DOJ in late • Secured fully committed financing • Maintaining continuity with customers May; in process • Anticipate requiring ~$1.6B of new • Focusing on integration • Continue
Slide 7: Leveraging AI to Deliver Value for Customers and Optimize Operations
3 LEVERAGING AI TO DELIVER VALUE FOR OUR CUSTOMERS AND OPTIMIZE OUR OPERATIONS Expanding Utilizing Increasing use next gen Profile AI in our call of SmartHub Advantage® applicant centers with our and Verified! experience platform Click. Chat. Call. technology in the U.S. initiative • Diverting up to
Slide 8: Financial Results & Outlook
FINANCIAL RESULTS & OUTLOOK David Gamsey EVP, Chief Financial Officer
Slide 9: Q2 2024 Financial Results
Q2 2024 FINANCIAL RESULTS ($ in millions, except per share data and percentages) REVENUES ADJUSTED EBITDA AND MARGIN1 ADJUSTED DILUTED EARNINGS PER SHARE1 $185.3 Includes ~($0.02) impact from capital $184.5 $56.0 $55.8 (0.4%) (0.4%) allocation actions, described on slide 20 $0.24 (2.2%) (12.5%) $0.2
Slide 10: Revenue Growth Breakdown
REVENUE GROWTH BREAKDOWN 2021 2022 2023 Q2 ’23 Q3 ’23 Q4 ’23 Q1 ’24 Q2 ’24 Upsell / Cross Sell 4% 4% 5% 4% 4% 6% 4% 5% New Logos 8% 5% 4% 5% 5% 4% 5% 4% Attrition (3%) (3%) (3%) (3%) (3%) (3%) (3%) (4%) Gross Retention 97% 97% 97% 97% 97% 97% 97% 96% Base Growth 26% 2% (12%) (13%) (9%) (13%) (11%) (
Slide 11: Balance Sheet Strength Provides Flexibility
BALANCE SHEET STRENGTH PROVIDES FLEXIBILITY PRO FORMA FA + STER CASH FLOW BALANCE SHEET AT 6/30/24 CAPITALIZATION & NET LEVERAGE • Variable and flexible cost structure • Net leverage2 of 1.3x • Secured fully committed financing, enables strong cash flow conversion 7-year term loan: ~$1.6B • Total av
Slide 12: Reaffirming First Advantage Full-Year 2024 Guidance
REAFFIRMING FIRST ADVANTAGE FULL-YEAR 2024 GUIDANCE ($ in millions, except per share data) FY 2024 Guidance Total Revenues $750 to $800 YoY % Growth -2% to +5% Adjusted EBITDA $228 to $248 Adjusted EBITDA Margin ~31% Adjusted Net Income $127 to $142 Adjusted Diluted Earnings Per Share $0.88 to $0.98
Slide 13: Closing Remarks
CLOSING REMARKS Scott Staples Chief Executive Officer
Slide 14: Company Snapshot & Highlights
COMPANY OUR CUSTOMERS SNAPSHOT & HIGHLIGHTS 30K+ 100M 97% 12 Years Customers Screens Gross Retention Average Tenure A LEADING PROVIDER OF of Top 100 Customers EMPLOYMENT BACKGROUND SCREENING, IDENTITY AND VERIFICATION SOLUTIONS OUR TECHNOLOGY OUR MARKET 1 3,900+ 765M+ 75+ $13B Total Core Global API’
Slide 15: Appendix: Supplemental Materials
APPENDIX Supplemental Materials
Slide 16: First Advantage Investment Highlights
FIRST ADVANTAGE INVESTMENT HIGHLIGHTS 1 A leader in a large, fragmented, and growing market 2 Diversified customer base across attractive industry verticals Digital technology, artificial intelligence, automation, and machine 3 learning enabling customers to hire smarter and onboard faster Strong ca
Slide 17: Full-Year 2023 Revenue Breakdown by Vertical
FIRST ADVANTAGE FULL-YEAR 2023 REVENUE BREAKDOWN BY VERTICAL Technology Transportation Manufacturing and Other Industrials 2% 24% 7% Financial Services 9% Key Verticals 71% Retail and Business and 10% E-Commerce Professional Services 22% 5% Hospitality 5% 15% General Staffing Healthcare Note: Repres
Slide 18: Long-Term Revenue Growth Target Supported by Historical Growth Rates
FIRST ADVANTAGE LONG-TERM REVENUE GROWTH TARGET SUPPORTED BY HISTORICAL GROWTH RATES Existing Customers New Customers Strategy and Key Organic • Fragmented industry Growth Drivers: • $13B Total Addressable Market • Significant whitespace • Leading value proposition • New product launches • Track rec
Slide 19: Full-Year 2024 Guidance Details: Modeling Assumptions
FIRST ADVANTAGE FULL-YEAR 2024 GUIDANCE DETAILS: MODELING ASSUMPTIONS Assumption ($ in millions; all values are approximate) Capital expenditures, including capitalized software development $30 – $33 Net interest expense, excluding amortization of financing fees and fair value $28 – $32 gains/(losse
Slide 20: 2024 Guidance Details: Adjusted Diluted EPS Bridge
FIRST ADVANTAGE FULL-YEAR 2024 GUIDANCE DETAILS: ADJUSTED DILUTED EARNINGS PER SHARE BRIDGE • 2024 Adjusted Diluted EPS guidance of $0.88 to $0.98 represents a decline of ($0.02) to ($0.12) compared to 2023 results • Excluding the ($0.08) combined impact of the share repurchases in 2023, the 2023 on
Slide 21: Appendix: Sterling Check Corp. Acquisition Details
APPENDIX Sterling Check Corp. Acquisition Details
Slide 22: Strategic Rationale
STRATEGIC RATIONALE Enhances Customer Value Proposition. Highly complementary and cost-effective background screening, identity, and verifications solutions unlock cross-sell opportunities and improve customer experience for combined customer base. Drives Innovation. Enables increased investment in
Slide 23: Combined Company at a Glance
COMBINED COMPANY AT A GLANCE ~$1.5B 200M+ ~80K 200+ OUR MARKET Combined Revenue Screens Annually Customers Countries and Territories as of LTM 6/30/241 $13B Total Addressable COMBINED COMPANY Greater Market diversification of 7% 5% 13% 3% 7% 6% 14% revenue across 8% customer segments, $7B Whitespace
Slide 24: Complementary Offerings and Accelerated Innovation
COMPLEMENTARY OFFERINGS AND ACCELERATED INNOVATION Comprehensive Solutions Combined Capabilities Accelerated Innovation Robust Tech Platforms Artificial Intelligence & Machine Learning Background Drug / Digital Work Product Solutions Checks Health Identity Verification Robotic Process Automa
Slide 25: Transaction Summary
TRANSACTION SUMMARY • Cash and stock transaction values Sterling at approximately $2.2 billion as of the date of the Merger Agreement including outstanding debt, Transaction representing synergized buy-in multiple at discount to First Advantage’s trading multiple Structure • Purchase price of $16.73
Slide 26: Strong Financial Profile Combines Growth and Profitability
STRONG FINANCIAL PROFILE COMBINES GROWTH AND PROFITABILITY FY 2023A Revenue1 ($M) FY 2023A Adjusted EBITDA1,2 ($M) Pro Forma % Adjusted EBITDA Margin2 Pro Forma 31% 26% 32%-33% $1,483 $50-$70 $473-$493 $720 $185 $50-$70 $720 $185 $764 $238 $764 $238 First Advantage Sterling Total First Advantage Ste
Slide 27: Pro Forma Capitalization & Leverage
PRO FORMA CAPITALIZATION & LEVERAGE Key Transaction Impacts Net Leverage Ratio • New debt of ~$1.6B1, combined with existing FA debt of $565M, brings gross debt to Pro Forma ~$2.15B 4.2x to 4.4x Capitalization • Expected cash at close of ~$125M • Implied net debt of ~$2.0B at close Target: • Revolve
Slide 28: Appendix: Reconciliations to GAAP Measures
APPENDIX Reconciliations to GAAP Measures
Slide 29: Adjusted EBITDA
ADJUSTED EBITDA (a) Share-based compensation for the quarters ended June 30, 2023, September 30, 2023, December 31, 2023, March 31, 2024, and June 30, 2024 includes approximately $1.5 million, $2.6 million, $2.6 million, $2.6 million, and $2.5 million of incrementally recognized expense, respectivel
Slide 30: Constant Currency Revenues and Adjusted EBITDA
CONSTANT CURRENCY REVENUES CONSTANT CURRENCY ADJUSTED EBITDA (a) Constant currency revenue is calculated by translating current period amounts using prior-year period exchange rates. (a) Constant currency Adjusted EBITDA is calculated by translating current period amounts using prior-year period exc
Slide 31: Adjusted Net Income and Adjusted Diluted Earnings Per Share
ADJUSTED NET INCOME ADJUSTED DILUTED EARNINGS PER SHARE (a) Represents the non-cash interest expense related to the amortization of debt issuance costs for the 2021 February refinancing of the Company’s First Lien Credit Facility. This adjustment also includes the impact of the change in fair value
Slide 32: Sterling Check Corp. Adjusted EBITDA
STERLING CHECK CORP. ADJUSTED EBITDA (1) Consists of transaction expenses related to M&A, associated earn-outs, one-time public company transition expenses and ancillary non-recurring public company expenses and fees associated with financing transactions. For the year ended December 31, 2023, costs