FIRST ADVANTAGE CORP
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
FA$23.53+1.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0000950170-24-056995
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0000950170-24-093999
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 162 previous paragraphs and 186 current paragraphs.
98 unchanged; 57 reworded; 16 added; 7 removed; 0 previous and 15 current paragraphs rearranged.
Tables are not compared: 15 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
On May 28, 2024, First Advantage and Sterling each received a request for additional information and documentary materials (a “Second Request”) from the U.S. Department of Justice (the “DOJ”) in connection with the DOJ’s review of the proposed transaction contemplated by the Merger Agreement. The Second Request was issued under the notification requirements of the HSR Act. The effect of the Second Request is to extend the waiting period imposed under the HSR Act until 30 days after First Advantage and Sterling have substantially complied with the Second Request, unless that period is extended voluntarily by the parties or terminated sooner by the DOJ. The parties have been working cooperatively with the DOJ to bring its review of the proposed transaction to a close as expeditiously as possible and will continue to do so. The proposed transaction remains subject to the expiration or termination of the waiting period applicable to the proposed transaction under the HSR Act and the satisfaction or waiver of the other closing conditions contained in the Merger Agreement.
Current report
Revenues were $354.0 million for the six months ended June 30, 2024, compared to $360.8 million for the six months ended June 30, 2023. Revenues for the six months ended June 30, 2024 decreased by $6.9 million, or 1.9%, compared to the six months ended June 30, 2023.
Current report
Cost of services was $179.5 million for the six months ended June 30, 2024, compared to $184.1 million for the six months ended June 30, 2023. Cost of services for the six months ended June 30, 2024 decreased by $4.5 million, or 2.5%, compared to the six months ended June 30, 2023.
Current report
Product and technology expense was $26.1 million for the six months ended June 30, 2024, compared to $25.3 million for the six months ended June 30, 2023. Product and technology expense for the six months ended June 30, 2024 increased by $0.9 million, or 3.5%, compared to the six months ended June 30, 2023.
Current report
Product and technology expense increased primarily due to a $2.1 million increase in personnel expenses as a result of increased share-based compensation expense and additional investments. Product and technology expense was incrementally impacted by increases in professional service fees that were partially offset by savings in software license fees.
Current report
Selling, general, and administrative expense was $79.3 million for the six months ended June 30, 2024, compared to $58.7 million for the six months ended June 30, 2023. Selling, general, and administrative expense for the six months ended June 30, 2024 increased by $20.6 million, or 35.2%, compared to the six months ended June 30, 2023.
Current report
Interest expense, net was $10.9 million for the six months ended June 30, 2024, compared to $12.6 million for the six months ended June 30, 2023. Interest expense for the six months ended June 30, 2024 decreased by $1.6 million or 13.1% compared to the six months ended June 30, 2023.
Current report
Provision (Benefit) for Income Taxes
Current report
Our (benefit) provision for income taxes was $(0.7) million for the six months ended June 30, 2024, compared to $4.6 million for the six months ended June 30, 2023. Our provision for income taxes for the six months ended June 30, 2024 decreased by $5.3 million, compared to the six months ended June 30, 2023.
Current report
Net Income (Loss) and Net Income (Loss) Margin
Current report
Net (loss) income was $(1.0) million for the six months ended June 30, 2024, compared to $11.7 million for the six months ended June 30, 2023. Net income for the six months ended June 30, 2024 decreased by $12.8 million compared to the six months ended June 30, 2023.
Current report
Net (loss) income margin was (0.3)% for the six months ended June 30, 2024 compared to 3.2% for the six months ended June 30, 2023, as increases in selling, general, and administrative expenses, as a result of the Company’s pending acquisition of Sterling and reduced demand from customers more impacted by macroeconomic events, contributed to lower profitability, particularly as the Company cycled over the growth experienced in 2023 due to the post-pandemic recovery.
Current report
Adjusted EBITDA was $102.3 million for the six months ended June 30, 2024 and represented an Adjusted EBITDA Margin of 28.9%. Adjusted EBITDA was $104.5 million for the six months ended June 30, 2023 and represented an Adjusted EBITDA Margin of 29.0%. Adjusted EBITDA for the six months ended June 30, 2024 decreased by $2.2 million, or 2.1%, compared to the six months ended June 30, 2023.
Current report
Adjusted Net Income was $30.8 million for the three months ended June 30, 2024, compared to $34.8 million for the three months ended June 30, 2023. Adjusted Net Income for the three months ended June 30, 2024 decreased by $4.1 million, or 11.7% compared to the three months ended June 30, 2023.
Current report
Adjusted Net Income was $55.5 million for the six months ended June 30, 2024, compared to $63.2 million for the six months ended June 30, 2023. Adjusted Net Income for the six months ended June 30, 2024 decreased by $7.7 million, or 12.1%, compared to the six months ended June 30, 2023.
Current report
Adjusted Diluted Earnings Per Share was $0.38 for the six months ended June 30, 2024, compared to $0.43 for the six months ended June 30, 2023. Adjusted Diluted Earnings Per Share for the six months ended June 30, 2024 decreased by $0.05, or 11.6% compared to the six months ended June 30, 2023.
Removed paragraphs (7)
Previous report
“Enterprise customers” means our customers who contribute $500,000 or more to our revenues in a calendar year;
Previous report
Product and technology expense decreased primarily due to:
Previous report
a $0.7 million decrease in software licensing related expenses; and
Previous report
a number of other corporate expenses that decreased primarily as a result of cost savings actions taken by the Company.
Previous report
Provision for Income Taxes
Previous report
Net (Loss) Income and Net (Loss) Income Margin
Previous report
Adjusted Net Income was $24.8 million for the three months ended March 31, 2024, compared to $28.4 million for the three months ended March 31, 2023. Adjusted Net Income for the three months ended March 31, 2024 decreased by $3.6 million, or 12.6% compared to the three months ended March 31, 2023.
Reworded paragraphs (57)
Previous wording
The following discussion and analysis of First Advantage Corporation’s financial condition and results of operations is provided as a supplement to the condensed consolidated financial statements for the three months ended March 31, 2024, and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2023, our “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
The following discussion and analysis of First Advantage Corporation’s financial condition and results of operations is provided as a supplement to the condensed consolidated financial statements for the three and six months ended June 30, 2024, and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2023, our “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Previous wording
Our products are sold both individually and packaged. The First Advantage platform offers flexibility for customers to specify which products to include in their screening package, such as Social Security numbers, criminal records, education and work verifications, sex offender registry, and global sanctions. Generally, our customers order a background screening package or selected combination of screens related to a single individual before they onboard that individual. The type and mix of products and solutions we sell to a customer vary by customer size, their screening requirements, and industry vertical. Therefore, order volumes are not comparable across both customers and periods. Pricing can also vary considerably by customer depending on the product mix in their screening packages, order volumes, screening requirements and preferences, pass-through and third-party out of pocket costs, and bundling of products.
Current wording
Our products are sold both individually and packaged. The First Advantage platform offers flexibility for customers to specify which products to include in their screening package, such as Social Security numbers, criminal records, education and work verifications, sex offender registry, and global sanctions. Generally, our customers order a background screening package or selected combination of screens related to a single individual before they onboard that individual. The type and mix of products and solutions we sell to a customer vary by customer size, their screening requirements, and industry vertical. Therefore, order volumes are not comparable across both customers and periods. Pricing can also vary considerably by customer depending on the product mix in their screening packages, order volumes, screening requirements and preferences, and pass-through and third-party out of pocket costs.
Previous wording
We generated revenues of $169.4 million for the three months ended March 31, 2024, which represents a decline of 3.5% as compared to $175.5 million for the three months ended March 31, 2023. Approximately 87% of our revenues for the three months ended March 31, 2024 was generated in the Americas, predominantly in the United States, while the remaining 13% was generated internationally. Other than the United States, no single country accounted for 10% or more of our total revenues for the three months ended March 31, 2024. Please refer to “Results of Operations” for further details.
Current wording
We generated revenues of $184.5 million for the three months ended June 30, 2024, as compared to $185.3 million for the three months ended June 30, 2023 and generated revenues of $354.0 million for the six months ended June 30, 2024, as compared to $360.8 million for the six months ended June 30, 2023. Approximately 87% of our revenues for the six months ended June 30, 2024 was generated in the Americas, predominantly in the United States, while the remaining 13% was generated internationally. Other than the United States, no single country accounted for 10% or more of our total revenues for the three and six months ended June 30, 2024. Please refer to “Results of Operations” for further details.
Previous wording
Americas. This segment performs a variety of background check and compliance services across all phases of the workforce lifecycle from pre-onboarding services to post-onboarding and ongoing monitoring services, covering employees, contractors, contingent workers, tenants, and drivers. We generally classify our service offerings into three categories: pre-onboarding, post-onboarding, and adjacent products. We deliver our solutions across multiple industry verticals in the United States, Canada, and Latin America markets.
Current wording
Americas. This segment performs a variety of background check and compliance services across all phases of the workforce lifecycle from pre-onboarding services to post-onboarding and ongoing monitoring services, covering employees, contractors, contingent workers, tenants, and drivers. We generally classify our service offerings into three categories: pre-onboarding, post-onboarding, and adjacent products. We deliver our solutions across multiple industry verticals in the United States, Canada, and Latin America.
Previous wording
International. The International segment provides services similar to our Americas segment in regions outside of the Americas. We primarily deliver our solutions across multiple industry verticals in the Europe, India, and Asia Pacific markets.
Current wording
International. The International segment provides services similar to our Americas segment in regions outside of the Americas. We primarily deliver our solutions across multiple industry verticals in the Europe, India, and Asia Pacific.
Previous wording
The Acquisition is subject to satisfaction or waiver of customary closing conditions, including, among others, adoption of the Merger Agreement by Sterling stockholders, the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (the “HSR Act”) and clearance under the antitrust and foreign direct investment laws of certain other jurisdictions, and the effectiveness of a registration statement on Form S-4 filed by First Advantage in connection with the Acquisition.
Current wording
The Acquisition is subject to satisfaction or waiver of customary closing conditions, including, among others, adoption of the Merger Agreement by Sterling stockholders (which approval has been obtained), the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (the “HSR Act”) and the effectiveness of a registration statement on Form S-4 filed by First Advantage in connection with the Acquisition (which registration statement was declared effective on June 11, 2024).
Previous wording
Macroeconomic factors, including inflation, interest rates, recent declines in hiring activity and job openings, stability of the global banking system, global health crises, global supply chain constraints, and global economic and geopolitical developments, have negatively impacted significant portions of the global economy, and created volatility in the financial markets.
Current wording
Macroeconomic factors, including inflation, interest rates, variability in hiring activity and job openings, and global economic and geopolitical developments, have negatively impacted significant portions of the global economy, and created volatility in the financial markets.
Previous wording
If the economic uncertainty is sustained or increases, we may experience a negative impact on new business, customer renewals and demand levels, sales and marketing efforts, revenues growth rates, customer deployments, customer collections, product development, or other financial metrics. Any of these factors could harm our business, financial condition, and operating results.
Current wording
If the economic uncertainty is sustained or increases, we may experience a negative impact on new business, customer renewals and demand levels, sales and marketing efforts, revenue growth rates, customer deployments, customer collections, product development, or other financial metrics. Any of these factors could harm our business, financial condition, and operating results.
Previous wording
Despite the continuing uncertainty associated with these events, we are confident in the overall long-term health of our business, the strength of our product offerings, and our ability to continue to execute on our strategy and help our customers hire smarter and onboard faster. Our ability to deliver innovative products and solutions that enhance workplace safety and address compliance risks has contributed to the durability of our financial results. For additional information, see our “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
Despite the continuing uncertainty associated with these conditions, we are confident in the overall long-term health of our business, the strength of our product offerings, and our ability to continue to execute on our strategy and help our customers hire smarter and onboard faster. Our ability to deliver innovative products and solutions that enhance workplace safety and address compliance risks has contributed to the durability of our financial results. For additional information, see our “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Previous wording
Comparison of Results of Operations for the three months ended March 31, 2024 compared to the three months ended March 31, 2023
Current wording
Comparison of Results of Operations for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023
Previous wording
Revenues were $169.4 million for the three months ended March 31, 2024, compared to $175.5 million for the three months ended March 31, 2023. Revenues for the three months ended March 31, 2024 decreased by $6.1 million, or 3.5%, compared to the three months ended March 31, 2023.
Current wording
Revenues were $184.5 million for the three months ended June 30, 2024, compared to $185.3 million for the three months ended June 30, 2023. Revenues for the three months ended June 30, 2024 decreased by $0.8 million, or 0.4%, compared to the three months ended June 30, 2023.
Previous wording
The decrease in revenues was primarily due to a net decrease of $17.8 million, or 10.2%, in existing customer revenues, primarily driven by reduced demand from our customers more impacted by the macroeconomic events, primarily in the International segment, and the impact of lost accounts. These consolidated decreases were partially offset by ongoing strength in upselling and cross-selling to existing customers, contributing $7.7 million, or 4.4%, of additional revenues, and increased revenues from certain existing customers that were impacted by macroeconomic conditions, to a lesser extent, as compared to other existing customers.
Current wording
The decrease in revenues was primarily due to a net decrease of $11.9 million, or 6.4%, in existing customer revenues, primarily driven by the impact of macroeconomic factors affecting the hiring industry which have resulted in reduced demand from our customers and the impact of lost accounts. These consolidated decreases were partially offset by ongoing strength in upselling and cross-selling to existing customers, contributing $8.6 million, or 4.7%, of additional revenues, and increased revenues from certain existing customers that were impacted by macroeconomic conditions, to a lesser extent, as compared to other existing customers.
Previous wording
The decrease in existing customer revenues was offset by:
Current wording
The decrease in existing customer revenues was further offset by:
Previous wording
revenues of $8.9 million, or 5.1%, from new customers, primarily attributable to our Americas segment; and
Current wording
revenues of $7.8 million, or 4.2%, from new customers, primarily attributable to our Americas segment; and
Previous wording
revenues of $2.8 million, or 1.6%, attributable to the Infinite ID acquisition in the Americas segment.
Current wording
revenues of $3.3 million, or 1.8%, attributable to the Infinite ID acquisition in the Americas segment.
Previous wording
Cost of services was $87.2 million for the three months ended March 31, 2024, compared to $91.1 million for the three months ended March 31, 2023. Cost of services for the three months ended March 31, 2024 decreased by $3.9 million, or 4.2%, compared to the three months ended March 31, 2023.
Current wording
Cost of services was $92.3 million for the three months ended June 30, 2024, compared to $93.0 million for the three months ended June 30, 2023. Cost of services for the three months ended June 30, 2024 decreased by $0.6 million, or 0.7%, compared to the three months ended June 30, 2023.
Previous wording
Cost of services as a percentage of revenues was 51.5% for the three months ended March 31, 2024, compared to 51.9% for the three months ended March 31, 2023. The cost of services percentage of revenues for the first quarter of 2024 was impacted by cost savings from the Company’s continued implementation of automation and other process efficiencies, as well as certain cost savings actions taken by the Company. These decreases were partially offset by slight increases in certain third-party data costs, primarily due to variation in customer ordering mix.
Current wording
Cost of services as a percentage of revenues was 50.0% for the three months ended June 30, 2024, compared to 50.2% for the three months ended June 30, 2023. The cost of services percentage of revenues for the second quarter of 2024 was impacted by cost savings from the Company’s continued implementation of automation and other process efficiencies. These decreases were partially offset by slight increases in certain third-party data costs.
Previous wording
a $2.3 million decrease in variable third-party data expenses as a result of decreased revenue volumes, variation in customer ordering mix, and increased automation; and
Current wording
a $3.0 million decrease in variable third-party data expenses as a result of decreased revenue volumes, variation in customer ordering mix, and increased automation; and
Previous wording
a $1.2 million decrease in personnel expenses in our operations and customer care functions as a result of cost savings actions taken by the Company, as well as productivity efficiencies from the implementation of additional automation programs.
Current wording
a $1.3 million decrease in personnel expenses in our operations and customer care functions as a result of productivity efficiencies from the implementation of additional automation programs.
Previous wording
Product and technology expense was $12.5 million for the three months ended March 31, 2024, compared to $12.6 million for the three months ended March 31, 2023. Product and technology expense for the three months ended March 31, 2024 decreased by $0.2 million, or 1.3%, compared to the three months ended March 31, 2023.
Current wording
Product and technology expense was $13.7 million for the three months ended June 30, 2024, compared to $12.6 million for the three months ended June 30, 2023. Product and technology expense for the three months ended June 30, 2024 increased by $1.0 million, or 8.2%, compared to the three months ended June 30, 2023.
Previous wording
The decrease in product and technology expense was partially offset by $0.9 million increase in personnel expenses, primarily due to increased share-based compensation expense and additional investments made to enhance our product, solutions, and technology platforms.
Current wording
Product and technology expense increased primarily due to a $1.0 million increase in personnel expenses as a result of increased share-based compensation expense and additional investments. Product and technology expense was incrementally impacted by increases in professional service fees that were partially offset by savings in software license fees.
Previous wording
Selling, general, and administrative expense was $40.7 million for the three months ended March 31, 2024, compared to $28.7 million for the three months ended March 31, 2023. Selling, general, and administrative expense for the three months ended March 31, 2024 increased by $12.0 million, or 41.8%, compared to the three months ended March 31, 2023.
Current wording
Selling, general, and administrative expense was $38.6 million for the three months ended June 30, 2024, compared to $30.0 million for the three months ended June 30, 2023. Selling, general, and administrative expense for the three months ended June 30, 2024 increased by $8.7 million, or 28.9%, compared to the three months ended June 30, 2023.
Previous wording
a $1.3 million decrease in personnel expenses due to certain cost savings actions taken by the Company in the second half of 2023; and
Current wording
a $1.3 million decrease in personnel expenses due to certain cost savings actions taken by the Company primarily in the second half of 2023; and
Previous wording
a $1.1 million decrease in expenses related to the impairment of certain operating lease assets resulting from office space exited in 2023 that did not reoccur in 2024.
Current wording
a $0.8 million decrease in expenses related to the impairment of certain operating lease assets resulting from office space exited in 2023 that did not reoccur in 2024.
Previous wording
a $11.1 million increase in professional service and legal fees incurred related to the Company’s pending acquisition of Sterling;
Current wording
a $20.3 million increase in professional service and legal fees incurred related to the Company’s pending acquisition of Sterling;
Previous wording
a $2.4 million increase in share-based compensation expense primarily as a result of a modification to the vesting terms of outstanding unvested and unearned performance-based equity awards in May 2023 and incremental awards granted; and
Current wording
a $3.6 million increase in share-based compensation expense primarily as a result of a modification to the vesting terms of outstanding unvested and unearned performance-based equity awards in May 2023 and incremental awards granted; and
Previous wording
a $1.2 million increase in expenses related to litigation in the ordinary course of business.
Current wording
a $1.3 million increase in expenses related to litigation in the ordinary course of business.
Previous wording
Depreciation and amortization was $29.8 million for the three months ended March 31, 2024, compared to $31.9 million for the three months ended March 31, 2023. Depreciation and amortization for the three months ended March 31, 2024 decreased by $2.0 million, or 6.4%, compared to the three months ended March 31, 2023. This decrease was partially offset by increases in depreciation related to assets placed in service during the three months ended March 31, 2024.
Current wording
Depreciation and amortization was $30.0 million for the three months ended June 30, 2024, compared to $32.1 million for the three months ended June 30, 2023. Depreciation and amortization for the three months ended June 30, 2024 decreased by $2.1 million, or 6.5%, compared to the three months ended June 30, 2023. This decrease was partially offset by increases in depreciation related to assets placed in service during the three months ended June 30, 2024.
Previous wording
Interest expense, net was $3.6 million for the three months ended March 31, 2024, compared to $8.7 million for the three months ended March 31, 2023. Interest expense, net for the three months ended March 31, 2024 decreased by $5.1 million or 58.9%, compared to the three months ended March 31, 2023.
Current wording
Interest expense, net was $7.4 million for the three months ended June 30, 2024, compared to $3.9 million for the three months ended June 30, 2023. Interest expense, net for the three months ended June 30, 2024 increased by $3.5 million or 89.2%, compared to the three months ended June 30, 2023.
Previous wording
The decrease in interest expense, net was primarily attributable to $7.0 million of unrealized gains on the interest rate swaps as a result of the increased interest rate volatility observed in the first quarter of 2024. This decrease was offset by higher interest expense on the First Lien Credit Facility as a result of increasing interest rates and lower interest income earned on cash held within interest bearing accounts as a result of lower cash on hand.
Current wording
The increase in interest expense, net was primarily attributable to higher interest expense on the First Lien Credit Facility as a result of increasing interest rates and lower interest income earned on cash held within interest bearing accounts as a result of lower cash on hand. Interest expense, net for the three months ended June 30, 2024 was further impacted by $2.1 million of unrealized gains on the Company’s interest rate swaps.
Previous wording
Our (benefit) provision for income taxes was $(1.4) million for the three months ended March 31, 2024, compared to $0.7 million for the three months ended March 31, 2023. Our provision for income taxes for the three months ended March 31, 2024 decreased by $2.1 million, compared to the three months ended March 31, 2023.
Current wording
Our provision for income taxes was $0.7 million for the three months ended June 30, 2024, compared to $4.0 million for the three months ended June 30, 2023. Our provision for income taxes for the three months ended June 30, 2024 decreased by $3.3 million, compared to the three months ended June 30, 2023.
Previous wording
Net (loss) income was $(2.9) million for the three months ended March 31, 2024, compared to $1.9 million for the three months ended March 31, 2023. Net income for the three months ended March 31, 2024 decreased by $4.8 million compared to the three months ended March 31, 2023.
Current wording
Net income was $1.9 million for the three months ended June 30, 2024, compared to $9.8 million for the three months ended June 30, 2023. Net income for the three months ended June 30, 2024 decreased by $7.9 million compared to the three months ended June 30, 2023.
Previous wording
Net (loss) income margin was (1.7)% for the three months ended March 31, 2024 compared to 1.1% for the three months ended March 31, 2023, as increases in selling, general, and administrative expenses, as a result of the Company’s pending acquisition of Sterling and reduced demand from customers more impacted by macroeconomic events, contributed to lower profitability.
Current wording
Net income margin was 1.0% for the three months ended June 30, 2024, compared to 5.3% for the three months ended June 30, 2024, as increases in selling, general, and administrative expenses, as a result of the Company’s pending acquisition of Sterling and reduced demand from customers more impacted by macroeconomic events, contributed to lower profitability.
Previous wording
In addition to our results determined in accordance with GAAP, we believe certain measures are useful in evaluating our operating performance. Management believes these non-GAAP measures are useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate, and capital investments. Management uses Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Diluted Earnings Per Share to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation, and to compare our performance against that of other peer companies using similar measures. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.
Current wording
In addition to our results determined in accordance with GAAP, we believe certain measures are useful in evaluating our operating performance. Management believes these non-GAAP measures are useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate, and capital investments. Management uses Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Diluted Earnings Per Share to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation, and to compare our performance against that of peer companies using similar measures. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.
Previous wording
Management believes that Adjusted EBITDA is a strong indicator of our overall operating performance and is useful to management and investors as a measure of comparative operating performance from period to period. We define Adjusted EBITDA as net (loss) income before interest, taxes, depreciation, and amortization, and as further adjusted for loss on extinguishment of debt, share-based compensation, transaction and acquisition-related charges, integration and restructuring charges, and other non-cash charges. We exclude the impact of share-based compensation because it is a non-cash expense and we believe that excluding this item provides meaningful supplemental information regarding performance and ongoing cash generation potential. We exclude loss on extinguishment of debt, transaction and acquisition related charges, integration and restructuring charges, and other charges because such expenses are episodic in nature and have no direct correlation to the cost of operating our business on an ongoing basis.
Current wording
Management believes that Adjusted EBITDA is a strong indicator of our overall operating performance and is useful to management and investors as a measure of comparative operating performance from period to period. We define Adjusted EBITDA as net income (loss) before interest, taxes, depreciation, and amortization, and as further adjusted for loss on extinguishment of debt, share-based compensation, transaction and acquisition-related charges, integration and restructuring charges, and other non-cash charges. We exclude the impact of share-based compensation because it is a non-cash expense and we believe that excluding this item provides meaningful supplemental information regarding performance and ongoing cash generation potential. We exclude loss on extinguishment of debt, transaction and acquisition related charges, integration and restructuring charges, and other charges because such expenses are episodic in nature and have no direct correlation to the cost of operating our business on an ongoing basis.
Previous wording
Adjusted EBITDA was $46.6 million for the three months ended March 31, 2024 and represented an Adjusted EBITDA Margin of 27.5%. Adjusted EBITDA was $48.6 million for the three months ended March 31, 2023 and represented an Adjusted EBITDA Margin of 27.7%. Adjusted EBITDA for the three months ended March 31, 2024 decreased by $2.0 million, or 4.1%, compared to the three months ended March 31, 2023.
Current wording
Adjusted EBITDA was $55.8 million for the three months ended June 30, 2024 and represented an Adjusted EBITDA Margin of 30.2%. Adjusted EBITDA was $56.0 million for the three months ended June 30, 2023 and represented an Adjusted EBITDA Margin of 30.2%. Adjusted EBITDA for the three months ended June 30, 2024 decreased by $0.2 million, or 0.4%, compared to the three months ended June 30, 2023.
Previous wording
Adjusted EBITDA declined during the three months ended March 31, 2024, as macroeconomic events impacted our revenues attributed to existing customers. These decreases were partially offset by increased revenues from certain existing and new customers, including ongoing strength in upselling and cross-selling, cost structure benefits due to increased automation, operational efficiencies, and certain other cost savings actions taken by the Company.
Current wording
Adjusted EBITDA declined during the six months ended June 30, 2024, as macroeconomic events impacted our revenues attributed to existing customers. These decreases were partially offset by increased revenues from certain existing and new customers, including ongoing strength in upselling and cross-selling, cost structure benefits due to increased automation, operational efficiencies, and certain other cost savings actions taken by the Company.
Previous wording
Share-based compensation for the three months ended March 31, 2024, includes approximately $2.6 million of incrementally recognized expense associated with the May 2023 vesting modification. See Note 10 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further information.
Current wording
Share-based compensation for the three and six months ended June 30, 2024, includes approximately $2.5 million and $5.1 million, respectively, of incrementally recognized expense associated with the May 2023 vesting modification. Share-based compensation for the three and six months ended June 30, 2023, includes approximately $1.5 million of incrementally recognized expense. See Note 10 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further information.
Previous wording
Represents charges incurred related to acquisitions and similar transactions, primarily consisting of change in control-related costs, professional service fees, and other third-party costs. Transaction and acquisition related charges for the three months ended March 31, 2024 includes approximately $11.1 million of expense associated with the pending acquisition of Sterling, primarily consisting of legal, regulatory, and diligence professional service fees. The three months ended March 31, 2024 and 2023 also include insurance costs incurred related to the initial public offering.
Current wording
Represents charges incurred related to acquisitions and similar transactions, primarily consisting of change in control-related costs, professional service fees, and other third-party costs. Transaction and acquisition related charges for the three and six months ended June 30, 2024 include approximately $9.2 million and $20.3 million of expense, respectively, associated with the pending acquisition of Sterling, primarily consisting of legal, regulatory, and diligence professional service fees. The three and six months ended June 30, 2024 and 2023 also include insurance costs incurred related to the initial public offering.
Previous wording
Represents charges from organizational restructuring and integration activities, non-cash, and other charges primarily related to nonrecurring legal exposures, foreign currency (gains) losses, and (gains) losses on the sale of assets.
Current wording
Represents charges from organizational restructuring and integration activities, non-cash, and other charges primarily related to nonrecurring legal exposures, foreign currency (gains) losses, (gains) losses on the sale of assets, and other non-recurring items.
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Current report — wording carried from elsewhere
The decrease in revenues was primarily due to a net decrease of $29.7 million, or 8.2%, in existing customer revenues, primarily driven by the impact of macroeconomic factors affecting the hiring industry which have resulted in reduced demand from our customers and the impact of lost accounts. These consolidated decreases were partially offset by ongoing strength in upselling and cross-selling to existing customers, contributing $16.3 million, or 4.5%, of additional revenues, and increased revenues from certain existing customers that were impacted by macroeconomic conditions, to a lesser extent, as compared to other existing customers.
Current report — wording carried from elsewhere
The decrease in existing customer revenues was further offset by:
Current report — wording carried from elsewhere
revenues of $16.7 million, or 4.6%, from new customers, primarily attributable to our Americas segment; and
Current report — wording carried from elsewhere
revenues of $6.1 million, or 1.7%, attributable to the Infinite ID acquisition in the Americas segment.
Current report — wording carried from elsewhere
The decrease in cost of services was primarily due to a $0.6 million decrease in variable third-party data expenses as a result of decreased revenue volumes, variation in customer ordering mix, and increased automation.
Current report — wording carried from elsewhere
Cost of services as a percentage of revenues was 50.7% for the six months ended June 30, 2024, compared to 51.0% for the six months ended June 30, 2023. The cost of services percentage of revenues for the six months ended June 30, 2024 was impacted by cost savings from the Company’s continued implementation of automation and other process efficiencies. These decreases were partially offset by slight increases in certain third-party data costs.
Current report — wording carried from elsewhere
a $9.2 million increase in professional service and legal fees incurred related to the Company’s pending acquisition of Sterling; and
Current report — wording carried from elsewhere
a $1.2 million increase in share-based compensation expense primarily as a result of a modification to the vesting terms of outstanding unvested and unearned performance-based equity awards in May 2023 and incremental awards granted.
Current report — wording carried from elsewhere
Selling, general, and administrative expense increased primarily due to:
Current report — wording carried from elsewhere
The increase in selling, general, and administrative expense was partially offset by:
Current report — wording carried from elsewhere
a $2.6 million decrease in personnel expenses due to certain cost savings actions taken by the Company primarily in the second half of 2023; and
Current report — wording carried from elsewhere
a $1.9 million decrease in expenses related to the impairment of certain operating lease assets resulting from office space exited in 2023 that did not reoccur in 2024.
Current report — wording carried from elsewhere
Depreciation and amortization was $59.8 million for the six months ended June 30, 2024, compared to $63.9 million for the six months ended June 30, 2023. Depreciation and amortization for the six months ended June 30, 2024 decreased by $4.1 million, or 6.4%, compared to the six months ended June 30, 2023. This decrease was partially offset by increases in depreciation related to assets placed in service during the six months ended June 30, 2024.
Current report — wording carried from elsewhere
Interest expense, net for the six months ended June 30, 2024 was impacted by $9.2 million of unrealized gains on the Company’s interest rate swaps. This decrease was offset by higher interest expense on the First Lien Credit Facility as a result of increasing interest rates and lower interest income earned on cash held within interest bearing accounts as a result of lower cash on hand.
Current report — wording carried from elsewhere
The decrease in our provision for income taxes was primarily due to the decrease of income before income taxes during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023.