Slide 1: First Advantage Acquisition of Sterling Check and Q4 and Full Year 2023 Earnings Presentation
FIRST ADVANTAGE ACQUISITION OF STERLING CHECK AND Q4 AND FULL YEAR 2023 EARNINGS PRESENTATION February 29, 2024
Slide 2: Forward-Looking Statements
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: Sterling Check Corp. Acquisition Overview
STERLING CHECK CORP. ACQUISITION OVERVIEW Scott Staples, Chief Executive Officer David Gamsey, EVP, Chief Financial Officer
Slide 4: 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 5: Combined Company at a Glance
COMBINED COMPANY AT A GLANCE ~$1.5B 200M+ ~80K 200+ OUR MARKET Combined Revenue1 Screens Annually Customers Countries and Territories $13B Total Addressable COMBINED COMPANY Greater Market diversification of 7% 5% 13% 3% 7% 6% 14% revenue across 8% customer segments, $7B Whitespace 7% 24% 10% 8% ind
Slide 6: 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 7: Transaction Summary
TRANSACTION SUMMARY • Cash and stock transaction values Sterling at approximately $2.2 billion including outstanding debt, representing synergized buy-in multiple Transaction at discount to First Advantage’s current trading multiple Structure • Purchase price of $16.73 per Sterling share, representi
Slide 8: Strong Financial Profile Combines Growth and Profitability
STRONG FINANCIAL PROFILE COMBINES GROWTH AND PROFITABILITY FY 2023A Revenue1 ($M) FY 2023A Adjusted EBITDA1,2 ($M) Pro Forma % Adjusted EBITDA Margin Pro Forma 31% 26% 32% $720 $1,483 $50 $473 $185 $50 $720 $185 $764 $238 At least $50M with upside $764 $238 First Advantage Sterling Total First Advan
Slide 9: Pro Forma Capitalization & Leverage
PRO FORMA CAPITALIZATION & LEVERAGE Key Transaction Impacts Net Leverage Ratio • Committed financing: ~$1.8B Pro Forma • Minimum cash at close: $150M Capitalization ~4x • Revolver capacity at close: $250M1 • At least $50M run-rate synergies Synergies • Expected to be achieved within 18-24 months pos
Slide 10: Financial Results & Outlook
FINANCIAL RESULTS & OUTLOOK David Gamsey EVP, Chief Financial Officer
Slide 11: Company Snapshot & Full Year 2023 Highlights
COMPANY SNAPSHOT OUR CUSTOMERS & FULL YEAR 2023 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+ $13B Total C
Slide 12: Full Year 2023 Financial Results
FULL YEAR 2023 FINANCIAL RESULTS ($ in millions, except per share data and percentages) REVENUES ADJUSTED EBITDA AND MARGIN1 ADJUSTED DILUTED EARNINGS PER SHARE1 $810.0 $1.03 $763.8 $1.00 ($0.03) EPS (5.7%) (2.9%) impact from $248.9 $237.6 Aug 2023 (4.6%) special dividend (5.8%) Organic Constant Cur
Slide 13: Q4 2023 Financial Results
Q4 2023 FINANCIAL RESULTS ($ in millions, except per share data and percentages) REVENUES ADJUSTED EBITDA AND MARGIN1 ADJUSTED DILUTED EARNINGS PER SHARE1 ($0.02) EPS impact from $212.6 $202.6 Aug 2023 (4.7%) $70.3 special dividend (2.9%) (6.1%) $68.2 $0.30 Organic (3.3%) $0.29 Constant 33.1% 33.7%
Slide 14: Balance Sheet Strength Provides Flexibility
BALANCE SHEET STRENGTH PROVIDES FLEXIBILITY EXECUTED BALANCED CAPITAL SIGNIFICANT CASH FLOW ROBUST BALANCE SHEET ALLOCATION STRATEGY IN 2023 GENERATION Pursued Strategic M&A Opportunities • Variable and flexible cost structure enables • Net leverage2 of 1.5x at 12/31/23 5 acquisitions in past 3 year
Slide 15: Introducing Standalone First Advantage Full Year 2024 Guidance
INTRODUCING STANDALONE FIRST ADVANTAGE FULL YEAR 2024 GUIDANCE ($ in millions, except per share data) FY 2024 Guidance Total Revenues $750 to $800 Y/Y % 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.
Slide 16: Adjusted Diluted Earnings Per Share Bridge
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 2023 share buyback, 2023 one-time special dividend, expiring interest rate swaps (net), and increase in expected 2024
Slide 17: Appendix: Supplemental Materials
APPENDIX Supplemental Materials
Slide 18: Investment Highlights
INVESTMENT HIGHLIGHTS 1 A leader in a large, fragmented, and growing market 2 Diversified customer base across attractive industry verticals Digital technology, automation, and machine learning enabling 3 customers to hire smarter and onboard faster Strong cash flow generation and superior margins f
Slide 19: Key Strategic Focus Areas Driving Growth
KEY STRATEGIC FOCUS AREAS DRIVING GROWTH Verticalized Go-To-Market 19 Investment in Strategy Product & Flexible Cost Technology Structure Accelerate Customer- Organic Focused Growth Culture 19
Slide 20: Full Year 2023 Revenue Breakdown by Vertical
FULL YEAR 2023 REVENUE BREAKDOWN BY VERTICAL Technology Transportation Manufacturing and Other Industrials 2% 24% 7% Financial Services 9% Key Strategic Verticals 71% Retail and Business and 10% E-Commerce Professional Services 22% 5% Hospitality 5% 15% General Staffing Healthcare Note: Represents e
Slide 21: Standalone Long-Term Revenue Growth Target Supported by Historical Growth Rates
STANDALONE FIRST ADVANTAGE LONG-TERM REVENUE GROWTH TARGET SUPPORTED BY HISTORICAL GROWTH RATES Existing Customers New Customers Strategy and Key Organic • Fragmented industry Growth Drivers: • $13B Total Addressable Market • Significant whitespace • Leading value proposition • New product launches
Slide 22: Revenue Growth Breakdown
REVENUE GROWTH BREAKDOWN ($ in millions) 2021 2022 Q1 ’23 Q2 ‘23 Q3 ‘23 Q4 ‘23 2023 Upsell / Cross Sell 4% 4% 5% 4% 4% 6% 5% New Logos 8% 5% 4% 5% 5% 4% 4% Attrition (3%) (3%) (3%) (3%) (3%) (3%) (3%) Base Growth 26% 2% (13%) (13%) (9%) (13%) (12%) Gross Retention 97% 97% 97% 97% 97% 97% 97% 22
Slide 23: Consistent Track Record of Leading Adjusted EBITDA Margins
CONSISTENT TRACK RECORD OF LEADING ADJUSTED EBITDA MARGINS ($ in millions) Adjusted EBITDA and Margin 1,2 3-Year LTM ADJ. EBITDA CAGR 17.4% $69.4 $70.3 $68.2 $63.9 $64.2 $64.8 $60.8 $56.3 $56.0 $53.6 $48.6 $43.3 $44.6 $36.6 $31.7 $27.2 33.2% 33.1% 33.7% 32.2% 32.7% 32.3% 31.6% 31.2% 30.1% 30.2% 30.2
Slide 24: Standalone Full Year 2024 Guidance Modeling Assumptions
STANDALONE FIRST ADVANTAGE FULL YEAR 2024 GUIDANCE MODELING ASSUMPTIONS Assumption ($ in millions; all values are approximate) Capital expenditures, including capitalized software development 2024 includes $3M of U.S. criminal data AI project and $4M of large-scale $30 – $33 computer refresh project
Slide 25: Appendix: Reconciliations to GAAP Measures
APPENDIX Reconciliations to GAAP Measures
Slide 26: Adjusted EBITDA
ADJUSTED EBITDA (a) Share-based compensation for the quarters ended June 30, 2023, September 30, 2023, and December 31, 2023 include approximately $1.4 million, $2.6 million, and $2.6 million of incrementally recognized expense, respectively, associated with the May 2023 vesting modification. (b) Re
Slide 27: Adjusted EBITDA (Q1 2020 Pro Forma for Silver Lake Transaction)
ADJUSTED EBITDA (Q1 2020 Pro Forma for Silver Lake Transaction) Pro Forma Predecessor Successor Adjustments for the Period Ended Period Ended Three Pro Forma Three Jan 31, 2020 Mar 31, 2020 Months Ended Months Ended (in thousands) Q1 Q1 Mar 31, 2020 Mar 31, 2020 Net (loss) income $ (36,530) $ (21,81
Slide 28: Constant Currency Revenues and Adjusted EBITDA
CONSTANT CURRENCY REVENUES CONSTANT CURRENCY ADJUSTED EBITDA (a) Constant currency Adjusted EBITDA is calculated by translating current period amounts (a) Constant currency revenue is calculated by translating current period amounts using prior-year period exchange rates. using prior-year period exc
Slide 29: Adjusted Net Income
ADJUSTED NET INCOME (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 First Lien Credit Facility and Second Lien Credit Facility, respectively. Beginning
Slide 30: Adjusted Diluted Earnings Per Share
ADJUSTED DILUTED EARNINGS PER SHARE (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 First Lien Credit Facility and Second Lien Credit Facility, respecti
Slide 31: Sterling Check Corp. Adjusted EBITDA
STERLING CHECK CORP. ADJUSTED EBITDA (1) Consists of transaction expenses related to M&A, associated earn-outs, costs related to the preparation of the IPO, one-time public company transition expenses and fees associated with financing transactions. For the year ended December 31, 2023, costs consis