FIRST ADVANTAGE CORP

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 and six months ended June 30, 2026, and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2025, 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, 2025 (the “2025 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”).

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 nine months ended September 30, 2026, and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2025, 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, 2025 (the “2025 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”).

Previous wording

These forward-looking statements are subject to various risks, uncertainties, assumptions, or changes in circumstances that are difficult to predict or quantify. Such risks and uncertainties include, but are not limited to, the following: the failure to realize the expected benefits of the Sterling Acquisition; adverse changes in external events beyond our control, including our customers’ onboarding volumes, economic drivers which are sensitive to macroeconomic cycles, such as interest rate volatility and inflation, geopolitical unrest, global trade disputes, uncertainty in financial markets, and changes in tax laws; our operations in a highly regulated industry and the fact that we are subject to numerous and evolving laws and regulations, including with respect to personal data, data security, and artificial intelligence (“AI”); our inability to identify and successfully implement our growth strategies on a timely basis or at all; potential harm to our business, brand, and reputation as a result of security breaches, cyber-attacks, social, ethical, and legal issues relating to the use of new and evolving technologies, employee or other internal misconduct, computer viruses, or the mishandling of personal data; operating in a penetrated and competitive market; our reliance on third-party data providers; our sales to government entities and higher-tier contractors to governmental customers which involve unique competitive, procurement, budget, administrative and contractual risks; due to the sensitive and privacy-driven nature of our products and solutions, we could face liability and legal or regulatory proceedings, which could be costly and time-consuming to defend and may not be fully covered by insurance; our international business exposes us to a number of risks; real or perceived errors, failures, or bugs in our products could adversely affect our business, results of operations, financial condition, and growth prospects; our ability to identify attractive targets or successfully complete such transactions; failure to comply with anti-corruption, economic and trade sanctions, and anti-money laundering laws and regulations; disruptions at our Operation Centers of Excellence and other operational sites; our contracts with our customers, which do not guarantee exclusivity or contracted volumes; the timing, manner and volume of repurchases of common stock pursuant to our share repurchase program; disruptions, outages, or other errors with our technology and network infrastructure, including our data centers, servers, and third-party cloud and internet providers and our migration to the cloud; the continued integration of our platforms and solutions with human resource providers such as applicant tracking systems and human capital management systems as well as our relationships with such human resource providers; risks relating to public opinion, which may be magnified by incidents or adverse publicity concerning our industry or operations; our…

Excerpt shortened here; the source contains the full paragraph.

Current wording

These forward-looking statements are subject to various risks, uncertainties, assumptions, or changes in circumstances that are difficult to predict or quantify. Such risks and uncertainties include, but are not limited to, the following: adverse changes in external events beyond our control, including our customers’ onboarding volumes, economic drivers which are sensitive to macroeconomic cycles, such as interest rate volatility and inflation, geopolitical unrest, global trade disputes, uncertainty in financial markets, and changes in tax laws; our operations in a highly regulated industry and the fact that we are subject to numerous and evolving laws and regulations, including with respect to personal data, data security, and artificial intelligence (“AI”); failure to identify attractive acquisition targets and strategic partnerships, successfully complete proposed business combination transactions or realize the expected benefits of such transactions; our inability to identify and successfully implement our growth strategies on a timely basis or at all; potential harm to our business, brand, and reputation as a result of security breaches, cyber-attacks, social, ethical, and legal issues relating to the use of new and evolving technologies, employee or other internal misconduct, computer viruses, or the mishandling of personal data; operating in a penetrated and competitive market; our reliance on third-party data providers; our sales to government entities and higher-tier contractors to governmental customers which involve unique competitive, procurement, budget, administrative and contractual risks; due to the sensitive and privacy-driven nature of our products and solutions, we could face liability and legal or regulatory proceedings, which could be costly and time-consuming to defend and may not be fully covered by insurance; our international business exposes us to a number of risks; real or perceived errors, failures, or bugs in our products could adversely affect our business, results of operations, financial condition, and growth prospects; failure to comply with anti-corruption, economic and trade sanctions, and anti-money laundering laws and regulations; disruptions at our Operation Centers of Excellence and other operational sites; our contracts with our customers, which do not guarantee exclusivity or contracted volumes; the timing, manner and volume of repurchases of common stock pursuant to our share repurchase program; disruptions, outages, or other errors with our technology and network infrastructure, including our data centers, servers, and third-party cloud and internet providers and our migration to the cloud; the continued integration of our platforms and solutions with human resource providers such as applicant tracking systems and human capital management systems as well as our relationships with such human resource providers; risks relating to public opinion, which may be magnified by incidents or adverse publicity conc…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We enter into contracts with our customers that are typically three years in length. These contracts set forth the general terms and pricing of our products and solutions but generally do not include minimum order volumes or committed order volumes. Additionally, a majority of Sterling’s enterprise customer contracts are exclusive to Sterling or require Sterling to be used as the primary provider. Due to our contract terms and the nature of the background screening industry, we determined our contract terms for ASC 606 purposes to be three years or less. We typically bill our customers at the end of each month and recognize revenues as completed orders are reported or otherwise made available to our customers.

Current wording

We enter into contracts with our customers that are typically three years in length. These contracts set forth the general terms and pricing of our products and solutions but generally do not include minimum order volumes or committed order volumes. Certain of our customer contracts include exclusivity or primary provider provisions; however, such provisions are not included in all customer contracts and do not necessarily guarantee order volumes. Due to our contract terms and the nature of the background screening industry, we determined our contract terms for ASC 606 purposes to be three years or less. We typically bill our customers at the end of each month and recognize revenues as completed orders are reported or otherwise made available to our customers.

Previous wording

We generated revenues of $448.8 million for the three months ended June 30, 2026, as compared to $390.6 million for the three months ended June 30, 2025 and generated revenues of $834.0 million for the six months ended June 30, 2026, as compared to $745.2 million for the six months ended June 30, 2025. Approximately 88% of our revenues for the three months ended June 30, 2026 was generated in the United States, while the remaining 12% was generated abroad. Approximately 87% of our revenues for the six months ended June 30, 2026 was generated in the United States, while the remaining 13% was generated abroad. 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, 2026. Please refer to “Results of Operations” for further details.

Current wording

We generated revenues of $465.8 million for the three months ended September 30, 2026, as compared to $409.2 million for the three months ended September 30, 2025 and generated revenues of $1,299.7 million for the nine months ended September 30, 2026, as compared to $1,154.4 million for the nine months ended September 30, 2025. Approximately 88% of our revenues for the three months ended September 30, 2026 was generated in the United States, while the remaining 12% was generated abroad. Approximately 87% of our revenues for the nine months ended September 30, 2026 was generated in the United States, while the remaining 13% was generated abroad. Other than the United States, no single country accounted for 10% or more of our total revenues for the three and nine months ended September 30, 2026. Please refer to “Results of Operations” for further details.

Previous wording

Heightened geopolitical tensions, regional conflicts, and policy uncertainty have increased variability in customer hiring plans and workforce strategies. These conditions have resulted in slower decision‑making, increased cost scrutiny, and greater focus on operational efficiency, including the pace and scale of new hiring initiatives. If the economic uncertainty is sustained or increases, we may experience a negative impact on new business generation, customer renewals, overall 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. Our ability to grow our business will also depend on the long-term strength, diversity, and durability of the verticals that we focus on and rely upon to drive our revenues.

Current wording

These macroeconomic, geopolitical, and policy conditions may contribute to variability in customer hiring plans and workforce strategies and can result in slower decision-making, increased cost scrutiny, and a greater focus on operational efficiency, including the pace and scale of new hiring initiatives. If economic uncertainty is sustained or increases, we may experience a negative impact on new business generation, customer renewals, overall 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. Our ability to grow our business will also depend on the long-term strength, diversity, and durability of the verticals that we focus on and rely upon to drive our revenues.

Previous wording

Comparison of Results of Operations for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025

Current wording

Comparison of Results of Operations for the three and nine months ended September 30, 2026 compared to the three and nine months ended September 30, 2025

Previous wording

Revenues were $448.8 million for the three months ended June 30, 2026, compared to $390.6 million for the three months ended June 30, 2025. Revenues for the three months ended June 30, 2026 increased by $58.1 million, or 14.9%, compared to the three months ended June 30, 2025.

Current wording

Revenues were $465.8 million for the three months ended September 30, 2026, compared to $409.2 million for the three months ended September 30, 2025. Revenues for the three months ended September 30, 2026 increased by $56.6 million, or 13.8%, compared to the three months ended September 30, 2025.

Previous wording

a net increase of $41.6 million, or 10.6% from existing customer revenues, primarily driven by continued strength from upselling and cross-selling initiatives as well as increased volumes from existing customers, which were offset by the impact of lost accounts; and

Current wording

a net increase of $40.4 million, or 9.8% from existing customer revenues, primarily driven by increased volumes from existing customers and continued strength from upselling and cross-selling initiatives, which were partially offset by the impact of lost accounts; and

Previous wording

revenues of $31.8 million, or 4.3%, from new customers, primarily attributable to our First Advantage Americas and Sterling segments.

Current wording

revenues of $16.2 million, or 4.0%, from new customers, primarily attributable to our First Advantage Americas and Sterling segments.

Previous wording

Revenues were $834.0 million for the six months ended June 30, 2026, compared to $745.2 million for the six months ended June 30, 2025. Revenues for the six months ended June 30, 2026 increased by $88.7 million, or 11.9%, compared to the six months ended June 30, 2025.

Current wording

Revenues were $1,299.7 million for the nine months ended September 30, 2026, compared to $1,154.4 million for the nine months ended September 30, 2025. Revenues for the nine months ended September 30, 2026 increased by $145.4 million, or 12.6%, compared to the nine months ended September 30, 2025.

Previous wording

a net increase of $56.9 million, or 7.6% from existing customer revenues, primarily driven by continued strength from upselling and cross-selling initiatives as well as increased volumes from existing customers, which were offset by the impact of lost accounts; and

Current wording

a net increase of $97.3 million, or 8.4% from existing customer revenues, primarily driven by increased volumes from existing customers and continued strength from upselling and cross-selling initiatives, which were partially offset by the impact of lost accounts; and

Previous wording

revenues of $16.6 million, or 4.2%, from new customers, primarily attributable to our First Advantage Americas and Sterling segments.

Current wording

revenues of $48.1 million, or 4.2%, from new customers, primarily attributable to our First Advantage Americas and Sterling segments.

Previous wording

Cost of services was $244.8 million for the three months ended June 30, 2026, compared to $207.8 million for the three months ended June 30, 2025. Cost of services for the three months ended June 30, 2026 increased by $36.9 million, or 17.8%, compared to the three months ended June 30, 2025.

Current wording

Cost of services was $253.9 million for the three months ended September 30, 2026, compared to $222.0 million for the three months ended September 30, 2025. Cost of services for the three months ended September 30, 2026 increased by $31.9 million, or 14.4%, compared to the three months ended September 30, 2025.

Previous wording

a $46.4 million increase in third-party data expenses as a result of increased revenue volumes; and

Current wording

The increase in cost of services was primarily due to a $27.1 million increase in third-party data expenses as a result of increased revenue volumes and changes in product mix.

Previous wording

Cost of services was $456.2 million for the six months ended June 30, 2026, compared to $400.4 million for the six months ended June 30, 2025. Cost of services for the six months ended June 30, 2026 increased by $55.8 million, or 13.9%, compared to the six months ended June 30, 2025.

Current wording

Cost of services was $710.1 million for the nine months ended September 30, 2026, compared to $622.4 million for the nine months ended September 30, 2025. Cost of services for the nine months ended September 30, 2026 increased by $87.7 million, or 14.1%, compared to the nine months ended September 30, 2025.

Previous wording

a $29.8 million increase in third-party data expenses as a result of increased revenue volumes; and

Current wording

a $73.5 million increase in third-party data expenses as a result of increased revenue volumes and changes in product mix; and

Previous wording

Cost of services as a percentage of revenues was 54.5% for the three months ended June 30, 2026, compared to 53.2% for the three months ended June 30, 2025. The cost of services percentage of revenues for the second quarter of 2026 was impacted by product and customer mix and increases in third party costs.

Current wording

Cost of services as a percentage of revenues was 54.6% for the nine months ended September 30, 2026, compared to 53.9% for the nine months ended September 30, 2025. The cost of services percentage of revenues for the nine months ended September 30, 2026 was impacted by changes in product and customer mix and increases in third-party data costs driven by higher volume increases in certain industry verticals that require more third-party data to fulfill the underlying services.

Previous wording

Product and technology expense was $27.3 million for the three months ended June 30, 2026, compared to $25.7 million for the three months ended June 30, 2025. Product and technology expense for the three months ended June 30, 2026 increased by $1.6 million, or 6.2%, compared to the three months ended June 30, 2025.

Current wording

Product and technology expense was $27.3 million for the three months ended September 30, 2026, compared to $25.1 million for the three months ended September 30, 2025. Product and technology expense for the three months ended September 30, 2026 increased by $2.2 million, or 8.6%, compared to the three months ended September 30, 2025.

Previous wording

The increase in product and technology expense was primarily due to a $2.8 million increase in personnel expenses and software costs related to continued investments in our products, solutions and technology platforms. The increase was offset by a $1.3 million decrease in professional services costs from non-recurring integration activities incurred in the prior year.

Current wording

The increase in product and technology expense was primarily due to a $1.8 million increase in personnel expenses related to continued investments in our products, solutions and technology platforms.

Previous wording

Product and technology expense was $51.9 million for the six months ended June 30, 2026, compared to $52.8 million for the six months ended June 30, 2025. Product and technology expense for the six months ended June 30, 2026 decreased by $1.0 million, or 1.8%, compared to the six months ended June 30, 2025.

Current wording

Product and technology expense was $79.2 million for the nine months ended September 30, 2026, compared to $78.0 million for the nine months ended September 30, 2025. Product and technology expense for the nine months ended September 30, 2026 increased by $1.2 million, or 1.5%, compared to the nine months ended September 30, 2025.

Previous wording

The decrease in product and technology expense was primarily due to a $3.5 million decrease in software costs and professional services costs from non-recurring integration activities incurred in the prior year. The decrease was offset by a $2.0 million increase in personnel expenses related to continued investments in our products, solutions, and technology platforms.

Current wording

The increase in product and technology expense was primarily driven by $3.9 million of higher personnel expenses related to continued investments in our products, solutions and technology platforms, partially offset by a $1.5 million decrease in software costs resulting from Sterling integration efforts.

Previous wording

Selling, general, and administrative expense was $57.8 million for the three months ended June 30, 2026, compared to $57.5 million for the three months ended June 30, 2025. Selling, general, and administrative expense for the three months ended June 30, 2026 increased by $0.3 million, or 0.6%, compared to the three months ended June 30, 2025.

Current wording

Selling, general, and administrative expense was $57.6 million for the three months ended September 30, 2026, compared to $57.5 million for the three months ended September 30, 2025. Selling, general, and administrative expense for the three months ended September 30, 2026 increased by $0.1 million, or 0.2%, compared to the three months ended September 30, 2025.

Previous wording

a $3.0 million increase in incentive expenses related to commission and bonus programs; and

Current wording

a $1.8 million increase in incentive compensation expense related to commission and bonus programs driven by the Company’s 2026 financial performance.

Previous wording

The increases were partially offset by:

Current wording

These increases were partially offset by:

Previous wording

a $4.9 million decrease in share-based compensation expense, primarily due to Sterling equity awards converted to First Advantage equity awards in connection with the October 2024 acquisition becoming fully vested; and

Current wording

a $1.2 million decrease in share-based compensation expense, primarily due to the full vesting of Sterling equity awards that were converted to First Advantage equity awards in connection with the October 2024 acquisition;

Previous wording

a $2.1 million decrease in other personnel and facilities expenses resulting from cost-savings actions implemented by the Company in 2025; and

Current wording

a $0.9 million decrease in facilities and office expenses resulting from cost-savings initiatives implemented by the Company in 2025; and

Previous wording

Selling, general, and administrative expense was $111.3 million for the six months ended June 30, 2026, compared to $123.1 million for the six months ended June 30, 2025. Selling, general, and administrative expense for the six months ended June 30, 2026 decreased by $11.8 million, or 9.6%, compared to the six months ended June 30, 2025.

Current wording

Selling, general, and administrative expense was $168.9 million for the nine months ended September 30, 2026, compared to $180.5 million for the nine months ended September 30, 2025. Selling, general, and administrative expense for the nine months ended September 30, 2026 decreased by $11.6 million, or 6.5%, compared to the nine months ended September 30, 2025.

Previous wording

a $1.8 million favorable impact from foreign exchange gains.

Current wording

a $5.7 million favorable impact from foreign exchange gains;

Previous wording

a $5.0 million decrease in personnel expenses resulting from cost-savings actions implemented by the Company in 2025;

Current wording

a $2.4 million decrease in personnel expenses resulting from cost-savings initiatives implemented by the Company in 2025; and

Previous wording

These decreases were partially offset by a $5.2 million loss on the sale of assets related to an adjacent product during the six months ended June 30, 2026, which did not constitute a sale of a business or discontinued operations.

Current wording

These decreases were partially offset by a $5.2 million loss on the sale of assets related to an adjacent product during the nine months ended September 30, 2026, which did not constitute a sale of a business or discontinued operations.

Previous wording

Depreciation and amortization was $124.1 million for the six months ended June 30, 2026, compared to $123.6 million for the six months ended June 30, 2025. Depreciation and amortization for the six months ended June 30, 2026 increased by $0.5 million, or 0.4%, compared to the six months ended June 30, 2025, remaining relatively flat year-over-year.

Current wording

Depreciation and amortization was $66.9 million for the three months ended September 30, 2026 compared to $62.3 million for the three months ended September 30, 2025. Depreciation and amortization for the three months ended September 30, 2026 increased by $4.6 million, or 7.4%, compared to the three months ended September 30, 2025. The increase was primarily attributed to $4.3 million of accelerated amortization resulting from a reassessment of the useful lives of certain intangible assets.

Previous wording

Interest expense, net was $31.6 million for the three months ended June 30, 2026, compared to $44.8 million for the three months ended June 30, 2025. Interest expense, net for the three months ended June 30, 2026 decreased by $13.2 million or 29.4%, compared to the three months ended June 30, 2025.

Current wording

Interest expense, net was $30.4 million for the three months ended September 30, 2026, compared to $40.0 million for the three months ended September 30, 2025. Interest expense, net for the three months ended September 30, 2026 decreased by $9.6 million or 24.0%, compared to the three months ended September 30, 2025.

Previous wording

The decrease in interest expense was primarily driven by lower interest on the Company’s term loan, reflecting voluntary principal repayments and reduced interest rates following the Company’s 2025 amendment to its 2024 First Lien Credit Agreement. The decrease was further impacted by an increase in unrealized gains of $5.7 million on the Company’s interest rate swaps, driven by interest rate volatility during the period.

Current wording

The decrease in interest expense was primarily driven by lower interest on the Company’s term loan, reflecting voluntary principal repayments and reduced interest rates following the Company’s 2025 amendment to its 2024 First Lien Credit Agreement. The decrease was further impacted by an increase in unrealized gains of $2.8 million on the Company’s interest rate swaps, driven by interest rate volatility during the period.

Previous wording

Interest expense, net was $61.4 million for the six months ended June 30, 2026, compared to $91.4 million for the six months ended June 30, 2025. Interest expense, net for the six months ended June 30, 2026 decreased by $29.9 million or 32.7%, compared to the six months ended June 30, 2025.

Current wording

Interest expense, net was $91.9 million for the nine months ended September 30, 2026, compared to $131.4 million for the nine months ended September 30, 2025. Interest expense, net for the nine months ended September 30, 2026 decreased by $39.5 million or 30.1%, compared to the nine months ended September 30, 2025.

Previous wording

The decrease in interest expense was primarily driven by lower interest on the Company’s term loan, reflecting voluntary principal repayments and reduced interest rates following the Company’s 2025 amendment to its 2024 First Lien Credit Agreement. The decrease was further impacted by an increase in unrealized gains of $14.6 million on the Company’s interest rate swaps, driven by interest rate volatility during the period.

Current wording

The decrease in interest expense was primarily driven by lower interest on the Company’s term loan, reflecting voluntary principal repayments and reduced interest rates following the Company’s 2025 amendment to its 2024 First Lien Credit Agreement. The decrease was further impacted by an increase in unrealized gains of $17.4 million on the Company’s interest rate swaps, driven by interest rate volatility during the period.

Previous wording

Loss on extinguishment of debt for the three and six months ended June 30, 2026 relates to the write-off of unamortized deferred financing costs as a result of voluntary principal repayments of $25.0 million and $50.0 million during the three and six months ended June 30, 2026, respectively, on the Company’s outstanding term loan facility.

Current wording

Loss on extinguishment of debt for the three and nine months ended September 30, 2026 relates to the write-off of unamortized deferred financing costs as a result of voluntary principal repayments of $45.0 million and $95.0 million during the three and nine months ended September 30, 2026, respectively, on the Company’s outstanding term loan facility.

Previous wording

Our provision (benefit) for income taxes was $8.1 million for the three months ended June 30, 2026, compared to $(7.6) million for the three months ended June 30, 2025. Our provision for income taxes for the three months ended June 30, 2026 increased by $15.8 million, compared to the three months ended June 30, 2025.

Current wording

Our provision (benefit) for income taxes was $8.6 million for the three months ended September 30, 2026, compared to $(0.8) million for the three months ended September 30, 2025. Our provision for income taxes for the three months ended September 30, 2026 increased by $9.4 million, compared to the three months ended September 30, 2025.

Previous wording

The increase in the provision for income taxes was primarily due to higher pre-tax earnings during the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, during which the Company reported a pre-tax loss.

Current wording

The increase in the provision for income taxes was primarily due to higher pre-tax earnings during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025.

Previous wording

Our provision (benefit) for income taxes was $9.3 million for the six months ended June 30, 2026, compared to $(5.4) million for the six months ended June 30, 2025. Our provision for income taxes for the six months ended June 30, 2026 increased by $14.7 million, compared to the six months ended June 30, 2025.

Current wording

Our provision (benefit) for income taxes was $17.8 million for the nine months ended September 30, 2026, compared to $(6.2) million for the nine months ended September 30, 2025. Our provision for income taxes for the nine months ended September 30, 2026 increased by $24.0 million, compared to the nine months ended September 30, 2025.

Previous wording

The increase in the provision for income taxes was primarily due to higher pre-tax earnings during the three months ended June 30, 2026, as compared to the three months ended June 30, 2025, during which the Company reported a pre-tax loss.

Current wording

The increase in the provision for income taxes was primarily due to higher pre-tax earnings during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, during which the Company reported a pre-tax loss.