Core Insights - The 2026 Global Background Screening Trends Report emphasizes the necessity for enhanced screening and identity verification throughout the employee lifecycle, focusing on risk management and process simplification [1][5]. Group 1: Industry Trends - Risk is identified as a primary concern in screening, with slow hiring processes leading to candidate drop-off [3]. - Employers are increasingly automating and integrating processes to achieve faster and more efficient screening [3]. - The rise of global and flexible workforces is reshaping screening strategies, necessitating operational simplicity [3]. - Over 60% of global employers report an increase in candidates with multi-country or multi-location work histories, complicating verification requirements [3]. Group 2: Technology and AI Impact - AI is transforming hiring practices, introducing both efficiencies and new risks, prompting organizations to adopt advanced identity verification and AI-driven tools [4]. - The report highlights that 89% of HR hiring managers plan to implement additional background screening and identity verification solutions within the next two years to address rising identity fraud risks [8]. Group 3: Company Commitment - First Advantage is dedicated to providing technology, automation, and insights necessary for organizations to manage risk and build trust throughout the employee lifecycle [5][6].

Core Insights - First Advantage is a leading global data and software company focused on addressing human capital risk challenges for its customers [2] - The company has evolved from being primarily a background screener to a comprehensive provider of solutions that include digital identity and right to work, leveraging proprietary data and platforms [2] Company Overview - First Advantage specializes in helping large enterprise customers manage human capital risk at scale and ensure compliance globally [2] - The company has transformed its offerings over the past 4 to 5 years to adapt to the evolving risks faced by its clients [2]

Summary of First Advantage Conference Call Company Overview - **Company**: First Advantage - **Industry**: Data and Software Services focusing on Human Capital Risk Management - **Key Figures**: In 2025, conducted 205 million screening checks for 80,000 customers, generating approximately $1.6 billion in revenue [5][4] Core Business Transformation - Transitioned from a background screening company to a comprehensive provider addressing various human capital risks, including Digital Identity and Right to Work [5][4] - Operates at scale with a focus on large enterprise customers, integrating into over 105 leading Human Capital Management (HCM) and Applicant Tracking Systems (ATS) [6][5] Proprietary Data and AI Strategy - Holds over 1 billion records, including 900+ million criminal records and 135 million employment verification records, which are utilized to enhance services [10][9] - AI is viewed as an enabler rather than a disruptor, with a focus on compliance and regulatory adherence in a highly regulated industry [11][12] - Emphasizes the importance of primary source data for accuracy and compliance, particularly under the Fair Credit Reporting Act (FCRA) [12][13] Digital Identity and Fraud Prevention - The rise of identity fraud has increased demand for higher-margin Digital Identity products, with significant market opportunities arising from AI advancements [24][26] - Notable statistics indicate that by 2028, 1 in 4 job applicants may be fraudulent, highlighting the urgency for effective identity verification solutions [32][31] Resilience in Hiring Environment - Despite negative macroeconomic headlines, the enterprise hiring environment remains resilient due to the nature of core hiring needs in sectors like healthcare [42][45] - Companies are focusing on risk management over mass hiring, which benefits First Advantage as they add services to manage employee risk [52][53] Integration of Sterling Acquisition - Successfully completed core integration of Sterling, maintaining a 97% customer retention rate post-acquisition [58][59] - Focus is now shifting towards innovation and external growth, with expectations of sustained higher levels of new logo and upsell momentum [62][61] Future Growth and Investment Strategy - Plans for 2026 include incremental investments in product development, sales, and marketing to capitalize on market opportunities [72][73] - Anticipates becoming a $2 billion company by 2028, with a focus on providing comprehensive risk management solutions across the employee lifecycle [78][79] Key Takeaways - First Advantage is positioned to leverage its proprietary data and AI capabilities to address evolving human capital risks and identity fraud challenges - The company is experiencing growth opportunities despite broader economic uncertainties, driven by a focus on risk management and customer needs - The successful integration of Sterling has set the stage for future innovations and market expansions, with a clear strategy for sustained growth and customer retention.

Summary of First Advantage Conference Call Company Overview - **Company**: First Advantage - **Industry**: Software and Data Services focusing on human capital risk management - **Core Business**: Transitioned from traditional background screening to a comprehensive risk management platform, including identity verification and ongoing employee monitoring [2][3] Key Financial Highlights - **Q4 Performance**: Achieved 12% consolidated growth, driven by a 17% increase in new logo and upsell/cross-sell activities [7][8] - **Customer Base**: Serves 80,000 customers across 200 territories, with 205 million screening events conducted last year [3] - **2026 Guidance**: Expected growth in new logo and upsell/cross-sell to reach 9%-10%, with a conservative base growth forecast of 0% to -2% [9][30] Market Dynamics - **Screening Market Evolution**: Shift from point-in-time screening to holistic risk management, emphasizing ongoing identity verification due to rising risks associated with AI and bad actors [11][12] - **Customer Priorities**: Risk management has become a top priority for enterprises, with 89% of surveyed customers planning to enhance their risk assessment capabilities [20] Strategic Initiatives - **Post-Acquisition Benefits**: The acquisition of Sterling has led to increased scale, diversification across verticals, and improved cash flow and EBITDA margins [15][18] - **Verticalized Go-to-Market Strategy**: Dedicated sales teams for different verticals (healthcare, retail, financial services) have improved win rates and customer engagement [27][28] Technology and Innovation - **AI Integration**: First Advantage utilizes AI to enhance operational efficiency and compliance, leveraging over 1 billion proprietary records for decision-making [47][48] - **Digital Identity Solutions**: The company is addressing the growing demand for persistent identity verification, particularly in gig economy roles [41][45] Financial Management and Capital Allocation - **Debt Management**: Successfully paid down over $95 million of acquisition financing, with ongoing efforts to balance debt reduction and share repurchases [53][54] - **Margin Expansion**: Expected EBITDA margin improvement driven by operational efficiencies and synergy realization, with a target of $65-$80 million in synergies [33][38] Future Outlook - **Growth Opportunities**: Anticipated growth from emerging markets and maturing industries, with a focus on addressing complex risk environments [63][64] - **Key Success Metrics for 2026**: Continued go-to-market success, effective synergy execution, and strong cash flow generation are critical for a successful year [67][71] Additional Insights - **Customer Retention**: Retention rates remain high at 96%-97%, reflecting strong customer satisfaction and integration success post-acquisition [70] - **Risk Landscape**: The increasing complexity of risks in the corporate environment necessitates ongoing innovation and adaptation in service offerings [60][61] This summary encapsulates the key points discussed during the First Advantage conference call, highlighting the company's strategic direction, financial performance, and market positioning.

Debt and Financial Obligations - The company may incur significant additional indebtedness in the future, with restrictions on incurring such debt being subject to qualifications and exceptions [157]. - The ability to generate cash to service debt is dependent on factors beyond the company's control, and failure to meet debt obligations could adversely affect business operations [158]. - If the company does not generate sufficient cash flow, it may need to refinance debt, sell assets, or seek additional capital, which could materially impact operations [159]. - The credit agreement imposes significant operating and financial restrictions, limiting the company's ability to respond to changes or take certain actions [160]. - The carrying value of the company's long-term debt was $2,080.0 million as of December 31, 2025, with a hypothetical 100 basis point change in interest rates potentially impacting interest expense by approximately $21.1 million over the next 12 months [342]. Shareholder and Stock Information - Silver Lake beneficially owned 51.4% of the company's outstanding common stock as of December 31, 2025, allowing it to control corporate policies and decisions [163]. - The company does not intend to pay dividends for the foreseeable future, with any future dividends dependent on various factors including financial condition and cash needs [169]. - As of December 31, 2025, approximately 825,809,539 shares of common stock are authorized but unissued, which could dilute existing shareholders if issued [173]. - Future sales of common stock by existing stockholders could negatively impact the market price of the company's shares [174]. - Anti-takeover provisions in the company's organizational documents may delay or prevent a change of control that stockholders might consider beneficial [177]. - The company’s amended and restated certificate of incorporation allows the Board of Directors to issue up to 250,000,000 shares of preferred stock without stockholder approval, which may affect common stock value [181]. - The company has a classified board of directors with staggered three-year terms, which may complicate potential takeover attempts [179]. Cash and Liquidity - As of December 31, 2025, the company had cash and cash equivalents of $240.0 million, up from $168.7 million in 2024, indicating a significant increase of approximately 42.3% [340]. Interest Rate and Currency Exposure - The company entered into an interest rate collar agreement with a notional amount of $405.0 million in 2020, which was reduced to $300.0 million in March 2022, and transitioned from LIBOR to SOFR in June 2023 [343]. - In February 2023, the company entered into an interest rate swap agreement with a notional amount of $100.0 million, transitioning from LIBOR to SOFR and reducing the fixed rate to 4.32% [344]. - The company has exposure to foreign currency exchange rate fluctuations, primarily with the British Pound Sterling, Australian Dollar, and Canadian Dollar, which could impact financial results [348]. - Currency translation income (loss) for the years ended December 31 were approximately $17.0 million in 2025, $(16.2) million in 2024, and $1.2 million in 2023, indicating volatility in foreign currency impacts [350]. - The company has not hedged its investments in foreign subsidiaries, which may expose it to transaction gains or losses from currency fluctuations [350]. Inflation Impact - The company does not believe inflation has materially affected its business, but acknowledges potential risks if costs rise significantly [351]. Corporate Governance - The company qualifies as a "controlled company" under Nasdaq rules, which may exempt it from certain corporate governance requirements [172].

Financial Data and Key Metrics Changes - The company reported a 12% year-over-year revenue growth in Q4, reaching $420 million on a pro forma basis, with adjusted diluted EPS increasing by 67% to $0.30 [51][55] - Full year 2025 revenues grew to $1.57 billion, with adjusted EBITDA of $441 million, reflecting an 11% pro forma growth and a 170 basis points margin expansion [17][18] - Adjusted EBITDA for Q4 was $117 million, up 17% year-over-year, with an adjusted EBITDA margin of 27.8% [54] Business Line Data and Key Metrics Changes - The company achieved a 17% growth contribution from new logo and upsell cross-sell, resulting in a 12% overall pro forma revenue growth in Q4 [10][51] - Customer retention remained high at approximately 96% for the year, increasing to 97% in the second half [19][24] - The average tenure of the top 100 customers increased to over 13 years, indicating strong customer loyalty [18] Market Data and Key Metrics Changes - The company experienced strength in retail and e-commerce, driven by new upsell and cross-sell, while healthcare showed year-over-year growth despite some base weakness [27] - International business sustained strong year-over-year revenue growth across all regions, indicating confidence in further international expansion [29] - The company noted a shift in customer priorities towards risk mitigation, with 89% of employers planning to add additional screening products in the next one to two years [96] Company Strategy and Development Direction - The company completed core integration activities for the Sterling acquisition and is now focusing on innovation and growth acceleration through its FA 5.0 growth strategy [11][12] - Strategic capital allocation actions include a $25 million voluntary debt prepayment and a new $100 million share repurchase authorization [14][61] - The company plans to enhance product, sales, and marketing capabilities in 2026, with a focus on digital identity products and AI integration [50][64] Management's Comments on Operating Environment and Future Outlook - Management expressed a cautiously optimistic outlook for 2026, expecting modestly negative base performance but strong growth driven by go-to-market initiatives [15][71] - The company anticipates a two-year compound annual adjusted diluted EPS growth rate of approximately 20% from 2024 to the 2026 guidance midpoint [15][66] - Management noted that customer sentiment is neutral to positive, with no indications of a decline in hiring plans among enterprise customers [82] Other Important Information - The company has completed over 200 million screens across more than 200 countries and territories, showcasing its extensive operational reach [18] - The proprietary databases have grown by over 10% year-over-year, providing a robust data foundation for customer solutions [20] - AI is embedded across the company's products, enhancing efficiency and customer experience, with significant cost savings noted in customer service operations [90][91] Q&A Session Summary Question: What are your clients telling you about their own hiring plans? - Management indicated that customer conversations reflect a neutral to positive tone regarding hiring plans, with no reported declines in hiring [82][83] Question: Can you quantify the impact of delayed volumes from Q3 to Q4? - Management clarified that the shift was not a delay but a reflection of customer onboarding, estimating a couple of percentage points impact on revenue growth [84][85] Question: Can you provide examples of benefits from AI adoption? - Management noted that AI is embedded in various products, leading to significant wins and cost savings, although quantifying the impact is challenging [89][90] Question: What is driving the strong cross-sell and upsell momentum? - Management highlighted that the sales engine is performing exceptionally well, with a 24% year-over-year increase in enterprise new business, driven by larger and more complex deals [93][94] Question: How do you think about the ROI from capital allocation priorities? - Management emphasized that both debt repayment and share repurchases are part of a balanced strategy, with strong cash flow supporting these initiatives [120][122]

Financial Data and Key Metrics Changes - The company reported a 12% year-over-year revenue growth in Q4, reaching $420 million on a pro forma basis, with adjusted diluted EPS increasing by 67% to $0.30 [51][55] - Full year 2025 revenues grew to $1.57 billion, with adjusted EBITDA of $441 million, reflecting an 11% pro forma adjusted EBITDA growth and a margin expansion of 170 basis points [17][18] - Adjusted operating cash flows for the year were $232 million, a 41% increase year-over-year, with a cash balance of $240 million at year-end [59][60] Business Line Data and Key Metrics Changes - The company achieved a 17% growth contribution from new logo and upsell cross-sell, resulting in a 12% overall pro forma revenue growth in Q4 [10][51] - Customer retention remained high at approximately 96% for the year, increasing to 97% in the second half [19][24] - The average tenure of the top 100 customers increased to over 13 years, indicating strong customer loyalty [18] Market Data and Key Metrics Changes - The company experienced strength in retail and e-commerce, driven by new upsell and cross-sell, while healthcare showed year-over-year growth despite some base weakness [27] - International business sustained strong year-over-year revenue growth across all regions, indicating confidence in further international expansion [29] - The company noted a shift in customer priorities towards risk mitigation, with 89% of employers planning to add additional screening products in the next 1 to 2 years [96] Company Strategy and Development Direction - The company completed core integration activities for the Sterling acquisition and is shifting focus from integration to innovation, aiming to accelerate growth through its FA 5.0 growth strategy [11][12] - Strategic capital allocation actions include a $25 million voluntary debt prepayment and a new $100 million share repurchase authorization, reflecting confidence in continued growth [14][60] - The company is enhancing product, sales, and marketing capabilities to drive organic growth and expand international business opportunities [69][70] Management's Comments on Operating Environment and Future Outlook - Management expressed a cautiously optimistic outlook for 2026, expecting modestly negative base performance but strong growth driven by go-to-market initiatives [15][71] - The company anticipates a two-year compound annual adjusted diluted EPS growth rate of approximately 20% from 2024 to the 2026 guidance midpoint [15] - Despite macroeconomic uncertainties, management noted a positive tone from customers regarding hiring plans, with expectations for stable demand [30][82] Other Important Information - The company has accumulated over 1 billion records in its proprietary databases, a 10% increase year-over-year, enhancing its data foundation [20] - AI is embedded across the company's products, contributing to operational efficiency and customer acquisition, with significant cost savings noted in customer service [90][91] - The company is focused on responsible AI deployment, ensuring compliance and accuracy in its services [41][42] Q&A Session Summary Question: What are your clients telling you about their own hiring plans? - Management indicated that clients are expressing a neutral to positive tone regarding hiring plans, with no significant declines noted [82][83] Question: Can you quantify the impact of delayed volumes from Q3 to Q4? - Management clarified that the shift was not a delay but a reflection of customer onboarding, estimating a couple of percentage points impact on revenue growth [84][85] Question: Can you provide examples of benefits from AI adoption? - Management noted that AI is embedded in various products, leading to significant wins and operational efficiencies, although quantifying the impact is challenging [89][90] Question: What is driving the strong cross-sell and upsell momentum? - Management highlighted that the sales engine is performing exceptionally well, with an increase in average deal size and a focus on risk protection driving demand [93][96] Question: How do you view the margin guide for 2026? - Management discussed headwinds and tailwinds affecting margins, emphasizing the importance of strategic investments to create competitive differentiation [104][108]

Financial Data and Key Metrics Changes - The company reported a 12% year-over-year revenue growth in Q4, reaching $420 million on a pro forma basis, with adjusted diluted EPS increasing by 67% to $0.30 [29][31] - Full year 2025 revenues grew to $1.57 billion, with adjusted EBITDA of $441 million, reflecting an 11% pro forma adjusted EBITDA growth and a 27% adjusted diluted EPS growth [10][32] - Adjusted operating cash flows for the year were $232 million, a 41% increase year-over-year, with a cash balance of $240 million at year-end [33] Business Line Data and Key Metrics Changes - The company achieved a 17% growth contribution from new logo and upsell cross-sell in Q4, leading to a 12% overall pro forma revenue growth [6][13] - Customer retention remained high at approximately 96% for the year, increasing to 97% in the second half [11][30] - The average tenure of the top 100 customers increased to over 13 years, indicating strong customer loyalty [10] Market Data and Key Metrics Changes - The company experienced strength in retail and e-commerce, driven by new upsell and cross-sell, while healthcare showed year-over-year growth despite some base weakness [16][17] - International business sustained strong year-over-year revenue growth across all regions, contributing to confidence in further international expansion [17] - The company noted a neutral to positive tone from customers regarding hiring plans, contrasting with broader media narratives [48] Company Strategy and Development Direction - The company completed core integration activities for the Sterling acquisition and is shifting focus from integration to innovation, aiming to accelerate growth through its FA 5.0 strategy [7][19] - Strategic capital allocation actions include a $25 million voluntary debt prepayment and a new $100 million share repurchase authorization, reflecting confidence in continued growth [8][34] - The company is enhancing product, sales, and marketing capabilities, particularly in digital identity solutions, to address rising identity fraud concerns [26][28] Management's Comments on Operating Environment and Future Outlook - Management expressed a cautiously optimistic outlook for 2026, expecting a modestly negative base performance but strong growth driven by go-to-market initiatives [9][40] - The company anticipates a two-year compound annual adjusted diluted EPS growth rate of approximately 20% from 2024 to 2026 [9] - Management highlighted the importance of AI as an enabler of strategy, with ongoing investments in AI solutions to enhance operational efficiency and customer offerings [20][21] Other Important Information - The company completed over 200 million screens across more than 200 countries and territories, showcasing its extensive operational reach [10] - The proprietary databases have grown by over 10% year-over-year, providing a robust data foundation for customer solutions [11][12] - The company is focused on maintaining compliance and trust in its services, which are critical in the highly regulated environments it operates in [24] Q&A Session Summary Question: What are your clients telling you about their own hiring plans? - Management noted that customer conversations indicate a neutral to positive tone regarding hiring, with no reported declines in hiring plans [48] Question: Can you quantify the impact of delayed volumes from Q3 to Q4? - Management clarified that the shift was due to customers holding back screening volume until they were onboarded, estimating a couple of percentage points impact on revenue growth [49] Question: Can you provide examples of benefits from AI adoption? - Management highlighted that AI is embedded across products, leading to significant wins and cost savings, particularly in customer service through chatbots [55] Question: What is driving the strong cross-sell and upsell momentum? - Management indicated that the increase in average deal size and package density, along with a shift in customer priorities towards risk management, are key drivers [59][60] Question: How do you view the margin guide for 2026? - Management discussed headwinds from newer deals with higher pass-through costs but emphasized the positive impact of synergies and strategic investments on margins [66][68]

Core Insights - First Advantage (FA) reported quarterly earnings of $0.3 per share, exceeding the Zacks Consensus Estimate of $0.26 per share, and showing an increase from $0.18 per share a year ago, resulting in an earnings surprise of +15.39% [1] - The company achieved revenues of $420.02 million for the quarter ended December 2025, surpassing the Zacks Consensus Estimate by 7.39%, and up from $307.12 million year-over-year [2] Financial Performance - Over the last four quarters, First Advantage has consistently surpassed consensus EPS estimates [2] - The company has also topped consensus revenue estimates four times in the last four quarters [2] - The current consensus EPS estimate for the upcoming quarter is $0.23 on revenues of $371.42 million, and for the current fiscal year, it is $1.28 on revenues of $1.64 billion [7] Stock Performance - First Advantage shares have declined approximately 34.5% since the beginning of the year, while the S&P 500 has gained 1.5% [3] - The stock currently holds a Zacks Rank of 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Outlook - The Internet - Software industry, to which First Advantage belongs, is currently ranked in the top 36% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Q4 and Full Year 2025 Earnings Presentation February 26, 2026 © 2026 First Advantage 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. Forward-looking statements include all statements that are not historical facts. These forward-looking statements relate to matter ...