First Advantage(US:FA)2023-02-27 16:00Debt and Financial Management - The company has a debt repurchase program totaling $150.0 million, which expires on December 31, 2023[151]. - The company may incur significant additional indebtedness in the future, which could increase financial risks and limit operational flexibility[145]. - The company's ability to generate cash flow is critical for servicing its debt and funding operations, which is subject to various external factors[146]. - Failure to comply with restrictive covenants in debt instruments could result in an event of default, adversely affecting financial condition[149]. - The carrying value of the company's long-term debt was $556.6 million as of December 31, 2022, with a potential fair value change of approximately $0.3 million for a hypothetical 100 basis point interest rate shift[352]. - The company had cash and cash equivalents of $391.7 million and short-term investments of $2.0 million as of December 31, 2022, indicating a strong liquidity position[350]. Corporate Governance and Control - Silver Lake beneficially owned 60.4% of the company's outstanding common stock as of December 31, 2022, allowing it to control significant corporate decisions[152]. - The company qualifies as a "controlled company" under Nasdaq rules, which may exempt it from certain corporate governance requirements[160]. - The company has anti-takeover provisions in its organizational documents that could delay or prevent a change of control, potentially limiting shareholders' ability to obtain a premium for their shares[165]. - The company has a classified board of directors, with staggered three-year terms, which may limit shareholders' influence over board composition[167]. Market and Economic Risks - The phase-out of LIBOR could affect interest rates under the company's credit facilities, potentially leading to higher interest expenses[150]. - The company may face increased interest rate risks due to variable rate borrowings, impacting overall financial stability[145]. - The company is exposed to market risks related to interest rates and foreign currency exchange rates, which are managed as part of its overall risk management program[349]. - Currency translation losses included in other comprehensive loss were approximately $(20.7) million for the year ended December 31, 2022[357]. - The principal foreign currency exposures relate primarily to the Indian Rupee, British Pound Sterling, and to a lesser extent the Hong Kong Dollar, Australian Dollar, and Chinese Renminbi[355]. - The company does not believe inflation has had a material effect on its business or financial condition, but acknowledges potential risks if costs become subject to significant inflationary pressures[358]. Shareholder Considerations - The company has no history of paying cash dividends on its common stock, and any future dividends will depend on various factors including financial condition and cash needs[158]. - As of December 31, 2022, the company had approximately 851,267,397 shares of authorized but unissued common stock, which may dilute existing shareholders' ownership if issued[161]. - The company has reserved shares for issuance under the 2021 Equity Plan and the ESPP, which could further dilute existing shareholders if exercised[161]. Compliance and Internal Controls - The company incurs significant costs associated with being a public company, including compliance with the Sarbanes-Oxley Act and Dodd-Frank Act, which may divert management's attention from revenue-generating activities[170]. - The company may face challenges in maintaining effective internal controls over financial reporting, which could lead to material misstatements in financial statements[172]. Environmental Considerations - The company recognizes the potential long-term impact of climate change on its operations, particularly in the U.S. and India, which could disrupt business and increase costs[176]. Financial Instruments - As of December 31, 2022, the company had an interest rate collar agreement with a notional amount of $405.0 million, reduced to $300.0 million from March 2022 through February 2024[353]. - In February 2023, the company entered into an interest rate swap agreement with a notional amount of $100.0 million, fixing the rate at 4.36% until February 28, 2026[354].