SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~June~~September 30, 2009

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________ to ________

Commission file number: 001-31666

FIRST ADVANTAGE CORPORATION

(Exact name of registrant as specified in its charter)

Incorporated in Delaware ~~(State~~	61-1437565
(State or other jurisdiction of incorporation or organization)	~~61-1437565~~ ~~(I.R.S.~~ (I.R.S. Employer Identification Number)

12395 First American Way

Poway, California 92064

(Address of principal executive offices, including zip code)

(727) 214-3411

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ~~(§232.405~~(232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ]

~~Large accelerated filer~~Smaller reporting company [ ] ~~Accelerated filer [X] Non-accelerated filer [ ]~~

~~Smaller reporting company [ ]~~

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12-b). Yes [ ] No [X]

There were ~~12,063,733~~12,098,680 shares of outstanding Class A Common Stock of the registrant as of ~~July 27,~~October 26, 2009.

There were 47,726,521 shares of outstanding Class B Common Stock of the registrant as of ~~July 27,~~October 26, 2009.

Table of Contents

INDEX

Part I: FINANCIAL INFORMATION

Item 1. Financial Statements		13

	Consolidated Balance Sheets as of ~~June~~September 30, 2009 and December 31, 2008 (unaudited)	24

	Consolidated Statements of Income for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2009 and ~~June~~September 30, 2008 ~~(unaudited)~~	3

	~~Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2009 and June 30, 2008 (unaudited)~~	4

	~~Consolidated Statement of Changes in Equity for the Six Months Ended June 30, 2009~~ (unaudited)	5

	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2009 and September 30, 2008 (unaudited)	6

	Consolidated Statement of Changes in Equity for the Nine Months Ended September 30, 2009 (unaudited)	7

	Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 2009 and ~~June~~September 30, 2008 (unaudited)	68

	Notes to Consolidated Financial Statements (unaudited)	810

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		1826

Item 3. Quantitative and Qualitative Disclosures About Market Risk		3042

Item 4. Controls and Procedures		3042

Part II: OTHER INFORMATION

Item 1. Legal Proceedings						3042

Item 1A. Risk Factors						3042

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						3043

Item 3. Defaults Upon Senior Securities						3043

Item 4. Submission of Matters to a Vote of Security Holders						3143

Item 5. Other Information						3143

Item 6. Exhibits						3143

Signatures						3244

Table of Contents

PART I. FINANCIAL INFORMATION

Item1. Financial Statements

First Advantage Corporation

Consolidated Financial Statements (Unaudited)

For the Three and ~~Six~~Nine Months Ended

~~June~~September 30, 2009 and 2008

Table of Contents

First Advantage Corporation

Consolidated Balance Sheets (Unaudited)

(in thousands)
June 30, December 31,
2009 2008
Assets
Current assets:
    Cash and cash equivalents
$           60,478 $           52,361
    Accounts receivable (less allowance for doubtful accounts

     of $11,977 and $8,345, respectively)
118,702 121,531
    Prepaid expenses and other current assets
9,634 9,032
    Due from affiliates
              2,908                    -
    Deferred income tax asset
            16,846             16,695
       Total current assets
208,568 199,619
Property and equipment, net 78,982 81,807
Goodwill 752,491 731,369
Customer lists, net 48,507 53,813
Other intangible assets, net 15,311 17,245
Database development costs, net 12,191 11,837
Marketable equity securities 43,389 30,365
Other assets 3,300 3,684
       Total assets
$      1,162,739 $      1,129,739

Liabilities and Equity
Current liabilities:
    Accounts payable
$           37,346 $           38,404
    Accrued compensation
22,367 32,423
    Accrued liabilities
13,511 11,379
    Deferred income
6,755 7,381
    Income tax payable
              1,037 2,609
    Due to affiliates
                   - 714
    Current portion of long-term debt and capital leases
8,807 9,891
       Total current liabilities
89,823 102,801
Long-term debt and capital leases, net of current portion 29,357 22,938
Deferred income tax liability 68,429 61,652
Other liabilities 4,971 5,300
       Total liabilities
192,580 192,691
Equity:
    First Advantage Corporations Stockholders' Equity:

    Preferred stock, $.001 par value; 1,000 shares authorized, no shares issued or outstanding
  - -
    Class A common stock, $.001 par value; 125,000 shares authorized;

        12,061 and 11,772 shares issued and outstanding as of
    June 30, 2009 and December 31, 2008, respectively
12 12
    Class B common stock, $.001 par value; 75,000 shares authorized; 47,727 shares issued

    and outstanding as of June 30, 2009 and December 31, 2008, respectively
48 48
    Additional paid-in capital
501,324 502,600
    Retained earnings
414,187 390,602
    Accumulated other comprehensive income (loss)
10,124 (412)
       Total First Advantage Corporation's stockholders' equity
925,695 892,850
    Noncontrolling interests
44,464 44,198
       Total equity
970,159 937,048
       Total liabilities and equity
$      1,162,739 $      1,129,739

~~The accompanying notes are an integral part of these consolidated financial statements.~~

~~Table of Contents~~

~~First Advantage Corporation~~

~~Consolidated Statements of Income (Unaudited)~~

(in thousands, except per share amounts)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2009 2008 2009 2008

Service revenue $ 164,668 $ 182,423 $ 354,708 $ 370,677
Reimbursed government fee revenue 13,341 13,122 26,319 27,147
    Total revenue
178,009 195,545 381,027 397,824
Cost of service revenue 58,261 53,487 139,601 107,203
Government fees paid 13,341 13,122 26,319 27,147
    Total cost of service
71,602 66,609 165,920 134,350
    Gross margin
106,407 128,936 215,107 263,474
Salaries and benefits 48,130 62,927 101,297 129,376
Facilities and telecommunications 6,865 8,084 13,524 16,284
Other operating expenses 18,597 22,909 37,944 45,743
Depreciation and amortization 10,895 10,726 21,581 20,622
Impairment loss - 297 - 297
    Total operating expenses
84,487 104,943 174,346 212,322
    Income from operations
21,920 23,993 40,761 51,152
Other (expense) income:
   Interest expense (294 ) (1,075 ) (669 ) (1,500 )
   Interest income 71 172 284 591
    Total other (expense), net
(223 ) (903 ) (385 ) (909 )
Income from continuing operations before income taxes 21,697 23,090 40,376 50,243
Provision for income taxes 9,112 9,676 16,958 20,650
Income from continuing operations 12,585 13,414 23,418 29,593
Loss from discontinued operations, net of tax - (1,264 ) - (4,241 )
Net income 12,585 12,150 23,418 25,352
    Less:  Net loss attributable to noncontrolling interest
(386 ) (238 ) (167 ) (325 )
Net income attributable to First Advantage Corporation ("FADV") $ 12,971 $ 12,388 $ 23,585 $ 25,677
Basic income per share:
    Income from continuing operations attributable to FADV shareholders
$ 0.22 $ 0.23 $ 0.40 $ 0.50
    Loss from discontinued operations attributable to FADV shareholders, net of tax
- (0.02 ) - (0.07 )
    Net income attributable to FADV shareholders
$ 0.22 $ 0.21 $ 0.40 $ 0.43
Diluted income per share:
    Income from continuing operations attributable to FADV shareholders
$ 0.22 $ 0.23 $ 0.39 $ 0.50
    Loss from discontinued operations attributable to FADV shareholders, net of tax
- (0.02 ) - (0.07 )
    Net income attributable to FADV shareholders
$ 0.22 $ 0.21 $ 0.39 $ 0.43
Weighted-average common shares outstanding:
    Basic
59,776 59,435 59,681 59,297
    Diluted
59,898 59,617 59,764 59,374
Amounts attributable to FADV shareholders:
    Income from continuing operations, net of tax
$ 12,971 $ 13,652 $ 23,585 $ 29,918
    Loss from discontinued operations, net of tax
- (1,264 ) - (4,241 )
    Net income
$ 12,971 $ 12,388 $ 23,585 $ 25,677

~~The accompanying notes are an integral part of these consolidated financial statements.~~

~~Table of Contents~~

~~First Advantage Corporation~~

~~Consolidated Statements of Comprehensive Income (Loss) (Unaudited)~~

Three Months Ended Six Months Ended
(in thousands)
June 30, June 30,
2009 2008 2009
2008

Net income $ 12,585 $ 12,150 $ 23,418 $ 25,352
Other comprehensive income (loss) , net of tax:
    Foreign currency translation adjustments
3,572 (670 ) 2,803 2,080
    Unrealized gain (loss) on investment, net of tax
5,915 (9,230 ) 7,733 (29,719 )
Total other comprehensive income (loss) , net of tax $ 9,487 $ (9,900 ) $ 10,536 $ (27,639 )
Comprehensive income (loss) $ 22,072 $ 2,250 $ 33,954 $ (2,287 )
    Comprehensive loss attributable to the noncontrolling interest
(386 ) (238 ) (167 ) (325 )
Comprehensive income (loss) attributable to FADV $ 21,686 $ 2,012 $ 33,787 $ (2,612 )

(in thousands)	September 30,		December 31,
Assets	2009		2008
Current assets:
Cash and cash equivalents	$	57,784	$	52,361
Accounts receivable (less allowance for doubtful accounts
of $11,520 and $8,345, respectively)		115,870		121,531
Prepaid expenses and other current assets		8,929		9,032
Income tax receivable		11,968		-
Due from affiliates		3,180		-
Deferred income tax asset		18,929		16,695
Total current assets		216,660		199,619
Property and equipment, net		76,638		81,807
Goodwill		753,547		731,369
Customer lists, net		45,820		53,813
Other intangible assets, net		14,375		17,245
Database development costs, net		12,406		11,837
Marketable equity securities		48,293		30,365
Other assets		5,994		3,684
Total assets	$	1,173,733	$	1,129,739
Liabilities and Equity
Current liabilities:
Accounts payable	$	35,382	$	38,404
Accrued compensation		27,605		32,423
Accrued liabilities		14,462		11,379
Deferred income		5,704		7,381
Income tax payable		-		2,609
Due to affiliates		-		714
Current portion of long-term debt and capital leases		20,446		9,891
Total current liabilities		103,599		102,801
Long-term debt and capital leases, net of current portion		1,028		22,938
Deferred income tax liability		76,826		61,652
Other liabilities		4,897		5,300
Total liabilities		186,350		192,691
Equity:
First Advantage Corporation's stockholders' equity:
Preferred stock, $.001 par value; 1,000 shares authorized,
no shares issued or outstanding		-		-
Class A common stock, $.001 par value; 125,000 shares
authorized; 12,095 and 11,772 shares issued and outstanding
as of September 30, 2009 and December 31, 2008, respectively		12		12
Class B common stock, $.001 par value; 75,000 shares
authorized; 47,727 shares issued and outstanding
as of September 30, 2009 and December 31, 2008, respectively		48		48
Additional paid-in capital		502,411		502,600
Retained earnings		425,637		390,602
Accumulated other comprehensive income (loss)		14,414		(412	)
Total First Advantage Corporation's stockholders' equity		942,522		892,850
Noncontrolling interests		44,861		44,198
Total equity		987,383		937,048
Total liabilities and equity	$	1,173,733	$	1,129,739

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

First Advantage Corporation

Consolidated Statements of Income (Unaudited)

(in thousands, except per share amounts)	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
Service revenue	$	155,980		$	174,664		$	510,688		$	545,341
Reimbursed government fee revenue		13,586			13,633			39,905			40,780
Total revenue		169,566			188,297			550,593			586,121
Cost of service revenue		51,429			53,520			191,030			160,723
Government fees paid		13,586			13,633			39,905			40,780
Total cost of service		65,015			67,153			230,935			201,503
Gross margin		104,551			121,144			319,658			384,618
Salaries and benefits		49,920			59,113			151,217			188,489
Facilities and telecommunications		6,741			7,789			20,265			24,073
Other operating expenses		18,453			19,899			56,397			65,642
Depreciation and amortization		10,993			10,898			32,574			31,520
Impairment loss		-			1,720			-			2,017
Total operating expenses		86,107			99,419			260,453			311,741
Income from operations		18,444			21,725			59,205			72,877
Other (expense) income:
Interest expense		(234	)		(640	)		(903	)		(2,140	)
Interest income		103			155			387			746
Total other (expense), net		(131	)		(485	)		(516	)		(1,394	)
Income from continuing operations before income taxes		18,313			21,240			58,689			71,483
Provision for income taxes		6,898			8,932			23,856			29,582
Income from continuing operations		11,415			12,308			34,833			41,901
Loss from discontinued operations, net of tax		-			-			-			(4,241	)
Net income		11,415			12,308			34,833			37,660
Less: Net loss attributable to noncontrolling interest		(35	)		(323	)		(202	)		(648	)
Net income attributable to First Advantage Corporation ("FADV")	$	11,450		$	12,631		$	35,035		$	38,308
Basic income per share:
Income from continuing operations attributable to FADV shareholders	$	0.19		$	0.21		$	0.59		$	0.72
Loss from discontinued operations attributable to FADV shareholders, net of tax		-			-			-			(0.07	)
Net income attributable to FADV shareholders	$	0.19		$	0.21		$	0.59		$	0.65
Diluted income per share:
Income from continuing operations attributable to FADV shareholders	$	0.19		$	0.21		$	0.59		$	0.72
Loss from discontinued operations attributable to FADV shareholders, net of tax		-			-			-			(0.08	)
Net income attributable to FADV shareholders	$	0.19		$	0.21		$	0.59		$	0.64
Weighted-average common shares outstanding:
Basic		59,803			59,478			59,722			59,358
Diluted		60,086			59,529			59,867			59,446
Amounts attributable to FADV shareholders:
Income from continuing operations	$	11,450		$	12,631		$	35,035		$	42,549
Loss from discontinued operations, net of tax		-			-			-			(4,241	)
Net income	$	11,450		$	12,631		$	35,035		$	38,308

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

First Advantage Corporation

Consolidated Statements of Comprehensive Income (Unaudited)

	Three Months Ended						Nine Months Ended
(in thousands)	September 30,						September 30,
	2009			2008			2009			2008
Net income	$	11,415		$	12,308		$	34,833		$	37,660
Other comprehensive income (loss) , net of tax:
Foreign currency translation adjustments		1,495			(4,515	)		4,298			(2,435	)
Unrealized gain (loss) on investment, net of tax		2,795			4,174			10,528			(25,483	)
Total other comprehensive income (loss) , net of tax		4,290			(341	)		14,826			(27,918	)
Comprehensive income		15,705			11,967			49,659			9,742
Less: Comprehensive loss attributable to the noncontrolling interest		(35	)		(323	)		(202	)		(648	)
Comprehensive income attributable to FADV	$	15,740		$	12,290		$	49,861		$	10,390

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

First Advantage Corporation

Consolidated Statement of Changes in Equity

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2009 (Unaudited)

Accumulated
(in thousands)
Common Common Additional Other
Stock Stock Paid-in Retained Comprehensive Noncontrolling
Shares Amount Capital Earnings (Loss) Income Interests Total
Balance at December 31, 2008 59,499 $ 60 $ 502,600 $ 390,602 $ (412 ) $ 44,198 $ 937,048
Net income - - - 23,585 - (167 ) 23,418
Purchase of subsidiary shares from
   noncontrolling interest - - (5,506 ) - - 433 (5,073 )
Class A Shares issued in
connection with share
based compensation 289 - 310 - - - 310
Share based compensation - - 3,920 - - - 3,920
  Foreign currency translation - - - - 2,803 - 2,803
Unrealized gain on investment,
     net of tax     - - - - 7,733 - 7,733
Balance at June 30, 2009 59,788 $ 60 $ 501,324 $ 414,187 $ 10,124 $ 44,464 $ 970,159

										Accumulated
(in thousands)	Common		Common		Additional					Other
	Stock		Stock		Paid-in			Retained		Comprehensive			Noncontrolling
	Shares		Amount		Capital			Earnings		(Loss) Income			Interests			Total
Balance at December 31, 2008		59,499	$	60	$	502,600		$	390,602	$	(412	)	$	44,198		$	937,048
Net income		-		-		-			35,035		-			(202	)		34,833
Purchase of subsidiary shares from
noncontrolling interest		-		-		(6,779	)		-		-			865			(5,914	)
Class A Shares issued in connection
with share based compensation		323		-		830			-		-			-			830
Share based compensation		-		-		5,760			-		-			-			5,760
Foreign currency translation		-		-		-			-		4,298			-			4,298
Unrealized gain on investment, net of tax		-		-		-			-		10,528			-			10,528
Balance at September 30, 2009		59,822	$	60	$	502,411		$	425,637	$	14,414		$	44,861		$	987,383

The accompanying notes are an integral part of these consolidated financial statements.

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First Advantage Corporation

Consolidated Statements of Cash Flows

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2009 and 2008 (Unaudited)

(in thousands)	For the Nine Months Ended
	September 30,
	2009			2008
Cash flows from operating activities:
Net income	$	34,833		$	37,660
Loss from discontinued operations		-			(4,241	)
Income from continuing operations	$	34,833		$	41,901
Adjustments to reconcile income from continuing operations to net
cash provided by (used in) operating activities:
Depreciation and amortization		32,574			31,520
Impairment loss		-			2,017
Bad debt expense		7,013			5,867
Share based compensation		5,760			7,344
Deferred income tax		3,132			4,288
Change in operating assets and liabilities, net of acquisitions:
Accounts receivable		(2,220	)		13,206
Prepaid expenses and other current assets		9			541
Other assets		(2,597	)		(790	)
Accounts payable		(2,908	)		(5,433	)
Accrued liabilities		4,069			(1,478	)
Deferred income		(1,630	)		(938	)
Due from affiliates		(3,894	)		(5,825	)
Income tax accounts		(12,072	)		(52,452	)
Accrued compensation and other liabilities		(5,050	)		(6,739	)
Net cash provided by operating activities - continuing operations		57,019			33,029
Net cash provided by operating activities - discontinued operations		-			754
Cash flows from investing activities:
Database development costs		(2,955	)		(3,203	)
Purchases of property and equipment		(14,517	)		(24,337	)
Cash paid for acquisitions		(19,465	)		(51,191	)
Proceeds from sale of assets		900			-
Cash balance of companies acquired		-			331
Net cash used in investing activities - continuing operations		(36,037	)		(78,400	)
Net cash provided by investing activities - discontinued operations		-			1,721
Cash flows from financing activities:
Proceeds from long-term debt		50,860			100,260
Repayment of long-term debt		(62,260	)		(85,455	)
Cash contributions from First American to LeadClick Holdings, LLC		-			2,402
Proceeds from class A shares issued in connection with stock option
plan and employee stock purchase plan		830			4,566
Cash paid for acquisition of noncontrolling interests		(5,914	)		(8,008	)
Distribution to noncontrolling interests		-			(1,127	)
Tax expense related to stock options		-			(204	)
Net cash (used in) provided by financing activities		(16,484	)		12,434
Effect of exchange rates on cash		925			(648	)
Increase (decrease) in cash and cash equivalents		5,423			(31,110	)
Cash and cash equivalents at beginning of period		52,361			76,060
Change in cash and cash equivalents of discontinued operations		-			540
Cash and cash equivalents at end of period	$	57,784		$	45,490

(in thousands)
For the Six Months Ended
June 30,
2009 2008
Cash flows from operating activities:
    Net income
$ 23,418 $ 25,352
    Loss from discontinued operations
- (4,241 )
    Income from continuing operations
$ 23,418 $ 29,593

    Adjustments to reconcile income from continuing operations to net

        cash provided by (used in) operating activities:

       Depreciation and amortization
21,581 20,919
       Bad debt expense
6,483 3,464
       Share based compensation
3,920 4,974
       Deferred income tax
1,324 7,676
       Change in operating assets and liabilities, net of acquisitions:

       Accounts receivable
(3,826 ) 13,603
       Prepaid expenses and other current assets
(547 ) (535 )
       Other assets
126 (116 )
       Accounts payable
(1,117 ) (2,322 )
       Accrued liabilities
1,905 (1,962 )
       Deferred income
(604 ) (477 )
       Due from affiliates
(3,622 ) (6,782 )
       Income tax accounts
(1,475 ) (59,400 )
       Accrued compensation and other liabilities
(10,390 ) (11,157 )
          Net cash provided by (used in) operating activities - continuing operations
37,176 (2,522 )
          Net cash provided by operating activities - discontinued operations
- 754
Cash flows from investing activities:
    Database development costs
(1,939 ) (2,092 )
    Purchases of property and equipment
(9,826 ) (17,479 )
    Cash paid for acquisitions
(19,465 ) (51,152 )
    Proceeds from sale of assets
850 -
    Cash balance of companies acquired
- 331
          Net cash used in investing activities - continuing operations
(30,380 ) (70,392 )
          Net cash provided by investing activities - discontinued operations
- 1,721
Cash flows from financing activities:
    Proceeds from long-term debt
50,396 90,000
    Repayment of long-term debt
(45,139 ) (52,033 )
    Cash contributions from First American to LeadClick Holdings, LLC
- 2,402
    Proceeds from class A shares issued in connection with stock option

       plan and employee stock purchase plan
310 4,365
    Cash paid for acquisition of noncontrolling interests
(5,073 ) (8,008 )
    Distribution to noncontrolling interests
- (949 )
    Tax expense related to stock options
- (204 )
          Net cash provided by financing activities
494 35,573

Effect of exchange rates on cash 827 (146 )
Increase (decrease) in cash and cash equivalents 8,117 (35,012 )
Cash and cash equivalents at beginning of period 52,361 76,060
Change in cash and cash equivalents of discontinued operations - 540
Cash and cash equivalents at end of period $ 60,478 $ 41,588

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

First Advantage Corporation

Consolidated Statements of Cash Flows, continued

For the ~~Six~~Nine Months Ended ~~June~~September 30, 2009 and 2008 (Unaudited)

	For the Six Months Ended					For the Nine Months Ended
(in thousands)	June 30,					September 30,
	2009		2008			2009		2008
Supplemental disclosures of cash flow information:
Cash paid for interest	$	432	$	1,467		$	684	$	2,106
Cash received for income tax refund	$	982	$	987
Cash received for income tax refunds						$	1,081	$	1,248
Cash paid for income taxes	$	17,580	$	69,125		$	33,996	$	75,661

Non-cash investing and financing activities:
Notes issued in connection with acquisitions	$	-	$	3,026		$	-	$	3,026
Class A shares issued for compensation	$	4,997	$	2,767		$	4,997	$	2,788
Unrealized gain (loss) on investment, net of tax	$	7,733	$	(29,719	)	$	10,528	$	(25,483	)

The accompanying notes are an integral part of these consolidated financial statements.

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First Advantage Corporation

Notes to Consolidated Financial Statements

1. Organization and Nature of Business

First Advantage Corporation (the “Company” or “First Advantage” or “FADV”) is a global risk mitigation and business solutions provider and operates in five primary business segments: Credit Services, Data Services, Employer Services, Multifamily Services, and Investigative and Litigation Support Services. In the first quarter of 2009, the Company consolidated the previous Lender Services and Dealer Services segments and moved the consumer credit business from the Data Services segment to create the Credit Services segment. The prior periods have been recast to reflect the changed segments.

The First American Corporation and its affiliates (“First American”) currently own or control, directly or indirectly, all of the Company's Class B shares of common stock, which represents approximately 80% of equity interests of the ~~shares~~Company and approximately 98% of ~~capital stock~~the voting power of the Company as of ~~June~~September 30, 2009. The Class B common stock owned by First American is entitled to ten votes per share on all matters presented to the stockholders for vote.

On ~~June 29,~~October 8, 2009, ~~the Company received an unsolicited proposal from~~ First American issued a press release announcing the commencement of an exchange offer (the “Offer”) to acquire all of the ~~issued and~~ outstanding shares of the ~~Company's~~Company’s Class A common stock (“Class A Shares”) not owned or controlled by First American at ~~a fixed~~an exchange ratio of ~~0.5375~~0.58 of a First American common share ofper Class A Share (See Note 11 – Subsequent Event). On October 9, 2009, First ~~American's common stock for each share of~~American filed a Registration Statement on Form S-4 with the ~~Company's common stock. First American's proposal is subject~~Securities and Exchange Commission (the “SEC”), which contains the Offer to ~~confirmatory due diligence,~~Exchange and related materials. On that same day, the ~~negotiation of an acceptable definitive acquisition agreement and~~Company filed with the ~~receipt of all necessary stockholder and regulatory approvals. First American's proposal is under consideration by~~SEC a Solicitation/Recommendation on Schedule 14D-9 pursuant to which the Special Committee of the Board of Directors of the Company recommended on behalf of the Board of Directors of the Company, that the stockholders of the Company accept the Offer and tender their shares pursuant to the Offer. The Offer is described in further detail in Note 11 – Subsequent Event.

In the event that the Offer is accepted and consummated in the fourth quarter, operating results for the fourth quarter will be negatively impacted due to related costs. As further described in Note 11 – Subsequent Event, upon meeting certain conditions, First American has announced that it intends to merge the Company with a wholly-owned subsidiary of First American. This merger will constitute a “Change in Control” under the FADV 2003 Incentive Compensation Plan (“the Plan”). Upon a Change in Control, the unvested awards of stock options, restricted stock units and restricted stock issued under the Plan will vest and the unamortized costs of those awards will be expensed. At September 30, 2009, the unamortized compensation expense was approximately $8.5 million and approximately $0.9 million related to the unvested restricted stock and unvested options, respectively. In addition, Morgan Stanley is acting as the Company’s financial advisor related to the Offer. Pursuant to the terms of Morgan Stanley’s engagement, in the event that the Offer is accepted, the Company has agreed to pay Morgan Stanley a transaction fee which is ~~comprised~~currently estimated to be approximately $3.0 million.

Table of ~~directors who are unaffiliated with~~ Contents

First ~~American.~~Advantage Corporation

Notes to Consolidated Financial Statements

For the three and nine months ended September 30, 2009, the Company incurred approximately $1.6 million in legal expenses related to the Offer and related litigation and expects additional professional fees in the fourth quarter related to the Offer and related litigation.

As part of the Company’s streamlining initiative, in the second quarter of 2008, First Advantage sold First Advantage Investigative Services (“FAIS”), which was included in our Investigative and Litigation Support Services segment, and Credit Management Solutions, Inc. (“CMSI”), which was included in our Credit Services segment. The results of these businesses’ operations in the prior period are presented in discontinued operations in the Company’s Consolidated Statements of Income.

2. Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial information included in this report has been prepared in accordance with the instructions to Form 10-Q and does not include all of the information and notes required by generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments are of a normal, recurring nature and are considered necessary for a fair statement of the results for the interim period. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 and as amended on the Current Form 8-K filed on October 8, 2009 with the Securities and Exchange Commission.

Certain amounts for the three and ~~six~~nine months ended ~~June~~September 30, 2008 and at December 31, 2008 have been reclassified to conform with the 2009 presentation.

Operating results for the three and ~~six~~nine months ended ~~June~~September 30, 2009 and 2008 are not necessarily indicative of the results that may be expected for the entire fiscal year.

Subsequent events have been evaluated through ~~July 30,~~October 29, 2009, the date these financial statements were issued.

As of ~~June~~September 30, 2009, the Company’s significant accounting policies and estimates, which are detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, have not changed from December 31, 2008, except for the adoption of ~~Statement of~~the Financial Accounting Standards Board's (“~~SFAS”~~FASB”) ~~No. 141 (revised 2007), “Business Combinations,” SFAS No. 160, “Noncontrolling Interest~~GAAP updates related to business combinations, noncontrolling interest in consolidated financial statements, subsequent events,

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First Advantage Corporation

Notes to Consolidated Financial Statements~~” SFAS No. 165, "Subsequent Events,"~~

interim disclosures about fair value of financial instruments, and FASB ~~Staff Position FAS 107-1, "Interim Disclosures about Fair Value of Financial Instruments."~~Accounting Standards Codification.

Purchase Accounting

In December 2007, the ~~Financial Accounting Standards Board ("FASB") issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R)~~FASB updated GAAP related to business combinations. This update retains the fundamental requirements in ~~SFAS No. 141~~previous statements that the acquisition method of accounting (which ~~SFAS No. 141~~is called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. In general, the ~~statement~~update 1) broadens the guidance, ~~of SFAS No. 141,~~ extending its applicability to all events where one entity obtains control over one or more other businesses, 2) broadens the use of fair value measurements used to recognize the assets acquired and liabilities assumed, 3) changes the accounting for acquisition related fees and restructuring costs incurred in connection with an acquisition, and 4) increases required disclosures. The Company will apply the provisions of this ~~statement~~update prospectively to business combinations for which the acquisition date is on or after January 1, 2009.

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~~First Advantage Corporation~~

~~Notes to Consolidated Financial Statements~~

Noncontrolling Interest

~~Noncontrolling Interest~~

In December 2007, the FASB ~~issued SFAS No. 160, “Noncontrolling Interests~~updated GAAP related to noncontrolling interests in ~~Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”). SFAS 160~~consolidated financial statements. This update requires that a noncontrolling interest in a subsidiary be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest be identified in the consolidated financial statements. It also requires consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. The Company has applied the provisions of this ~~statement~~update effective beginning on January 1, 2009 and the adoption did not have a material effect on its consolidated financial statements.

Fair Value of Financial Instruments

In April 2009, the FASB ~~issued FASB Staff Position (“FSP”) FSP SFAS 107-1 and APB 28-1, “Interim Disclosures~~updated GAAP related to interim disclosures about ~~Fair Value~~fair value of ~~Financial Instruments.”~~financial instruments. This ~~FSP~~ amends ~~Statement of Financial Accounting Standard (“SFAS”) No. 107, “Disclosures About Fair Value of Financial Instruments,”~~previous statements, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This ~~FSP~~ also ~~amends APB Opinion No. 28, “Interim Financial Reporting,” to require~~requires those disclosures in summarized financial information at interim reporting periods. This ~~FSP~~ is effective for interim reporting periods ending after June 15, 2009. The ~~FSP~~update does not require disclosures for earlier periods presented for comparative purposes at initial

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First Advantage Corporation

Notes to Consolidated Financial Statements

adoption. In periods after initial adoption, this ~~FSP~~update requires comparative disclosures only for periods ending after initial adoption. WeThe Company adopted this new standard effective April 1, 2009.

The carrying amount of the Company’s financial instruments at ~~June~~September 30, 2009 and December 31, 2008, which includes cash and cash equivalents, marketable equity securities and accounts receivable, approximates fair value because of the short maturity of those instruments. The Company’s marketable equity securities are classified as available for sale securities. Unrealized holding gains and losses for available for sale securities are excluded from earnings and reported, net of taxes, as accumulated other comprehensive (loss) income. The Company considers its variable rate debt to be representative of current market rates and, accordingly, estimates that the recorded amounts approximate fair market value. Fair value estimates of its fixed rate debt were determined using discounted cash flow methods with a discount rate of 3.25% ~~and 3.25%~~, which are the estimated rates that similar instruments could be negotiated at ~~June~~September 30, 2009 and December 31, ~~2008, respectively.~~2008.

The estimated fair values of the Company’s financial instruments, none of which are held for trading purposes, are summarized as follows:

	June 30, 2009						December 31, 2008						September 30, 2009						December 31, 2008
(in thousands)	Carrying			Estimated			Carrying			Estimated			Carrying			Estimated			Carrying			Estimated
	Amount			Fair Value			Amount			Fair Value			Amount			Fair Value			Amount			Fair Value
Cash and cash equivalents	$	60,478		$	60,478		$	52,361		$	52,361		$	57,784		$	57,784		$	52,361		$	52,361
Accounts receivable		118,702			118,702			121,531			121,531			115,870			115,870			121,531			121,531
Marketable equity securities		43,389			43,389			30,365			30,365			48,293			48,293			30,365			30,365
Long-term debt and capital leases		(38,164	)		(38,201	)		(32,829	)		(32,699	)		(21,474	)		(21,508	)		(32,829	)		(32,699	)

Subsequent Events

In May 2009, the FASB ~~issued SFAS No. 165, “Subsequent Events” (“SFAS 165”). SFAS 165~~updated GAAP related to subsequent events. The update establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. ~~SFAS 165~~It is effective for reporting periods ending after June 15, 2009.

~~Table of Contents~~The Company adopted this update effective April 1, 2009.

~~First Advantage Corporation~~Accounting Standards Codification

~~Notes~~The FASB has adopted the FASB Accounting Standards Codification (the “Codification”) as the single authoritative source for GAAP, replacing the mix of accounting standards that have evolved over the last 50 plus years. The Codification is effective for financial statements that cover interim and annual periods ending after September 15, 2009. While not intended to ~~Consolidated Financial Statements~~change GAAP, the Codification significantly changes the way in which accounting literature is organized. It's now organized by accounting topic, which should enable users to more quickly identify the guidance that applies to a specific accounting issue. The Company adopted this new standard effective September 15, 2009.

3. Acquisitions

During the ~~first six~~nine months ofended September 30, 2009, the Company paid consideration of approximately $19.5 million in cash related to earnout provisions from prior year acquisitions, ~~and~~ approximately $5.1 million for the final purchase of a portion of noncontrolling interests in LeadClick Media, ~~Inc.~~Inc, and $0.8 million for an additional portion of noncontrolling interest in PrideRock Holding Company. The additional

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First Advantage Corporation

Notes to Consolidated Financial Statements

consideration related to earnout provisions was recorded to goodwill and the purchase of noncontrolling interests was recorded to additional paid in capital when paid.

The changes in the carrying amount of goodwill, by operating segment, are as follows for the ~~six~~nine months ended ~~June~~September 30, 2009:

			Acquisitions,									Acquisitions,			Adjustments
	Balance at		(Disposals)			Adjustments to net		Balance at		Balance at		(Disposals)			to net assets		Balance at
(in thousands)	December 31, 2008		and Earnouts			assets acquired		June 30, 2009		December 31, 2008		and Earnouts			acquired			September 30, 2009
Credit Services	$	107,578	$	-		$	-	$	107,578	$	107,578	$	-		$	-	$	107,578
Data Services		218,505		(611	)		-		217,894		218,505		(611	)		-		217,894
Employer Services		272,461		2,266			2,245		276,972		272,461		2,266			3,308		278,035
Multifamily Services		49,174		-			-		49,174		49,174		-			-		49,174
Investigative and Litigation Support Services		83,651		17,199			23		100,873		83,651		17,199			16		100,866
Consolidated	$	731,369	$	18,854		$	2,268	$	752,491	$	731,369	$	18,854		$	3,324	$	753,547

The adjustments to net assets acquired represent post acquisition adjustments for those companies acquired in the past periods.

4. Discontinued Operations

As discussed in Note 1, as part of the Company’s streamlining initiative, in the second quarter of 2008, the Company sold FAIS, which was included in our Investigative and Litigation Support Services segment, and CMSI, which was included in our Credit Services segment. The results of these businesses’ operations in the prior period are presented in discontinued operations in the Company’s Consolidated Statements of Income.

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~~First Advantage Corporation~~

~~Notes to Consolidated Financial Statements~~

The following amounts have been segregated from continuing operations and are reflected as discontinued operations for the ~~three and six~~nine months ended ~~June~~September 30, 2008.

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First Advantage Corporation

Notes to Consolidated Financial Statements

Three months ended Six months ended
June 30, June 30,
(in thousands, except per share amounts) 2008 2008

Total revenue $ 2,826 $ 7,671
Loss from discontinued operations before income taxes $ (2,141 ) $ (3,245 )
Loss on sale of discontinued operations before income taxes - (3,910 )
Income tax benefit (877 ) (2,914 )
Loss from discontinued operations, net of tax $ (1,264 ) $ (4,241 )
Loss per share:
Basic $ (0.02 ) $ (0.07 )
Diluted $ (0.02 ) $ (0.07 )
Weighted-average common shares outstanding:
Basic 59,435 59,297
Diluted 59,617 59,374

	Nine months ended
	September 30,
(in thousands, except per share amounts)	2008
Total revenue	$	7,671
Loss from discontinued operations before income taxes	$	(7,155	)
Income tax benefit		(2,914	)
Loss from discontinued operations, net of tax	$	(4,241	)
Loss per share:
Basic	$	(0.07	)
Diluted	$	(0.08	)
Weighted-average common shares outstanding:
Basic		59,358
Diluted		59,446

5. Goodwill and Intangible Assets

In accordance with ~~SFAS No. 142, “Goodwill and Other Intangible Assets,”~~GAAP, the Company will perform the goodwill impairment test for all reporting units in the fourth quarter of 2009. There have been no impairments of goodwill during the ~~six~~nine months ended ~~June~~September 30, 2009.

Given the current economic environment and the uncertainties regarding the impact on the Company’s business, there can be no assurance that the Company’s estimates and assumptions regarding the duration of the ongoing economic downturn, or the period or strength of recovery, made for purposes of the Company’s goodwill impairment testing during the year ended December 31, 2008 will prove to be accurate predictions of the future. If the Company’s assumptions regarding forecasted revenue or margin growth rates of certain reporting units are not achieved, the Company may be required to record additional goodwill impairment losses in ~~future periods, whether in~~ connection with the Company’s next annual impairment testing in the fourth quarter of 2009 or ~~prior to that, if any such change constitutes a triggering event~~ in ~~other than the quarter in which the annual goodwill impairment test is performed.~~future periods. It is not possible at this time to determine if any such future impairment loss would result or, if it does, whether such charge would be material.

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First Advantage Corporation

Notes to Consolidated Financial Statements

Goodwill and other identifiable intangible assets as of ~~June~~September 30, 2009 and December 31, 2008 are as follows:

(in thousands)	September 30, 2009			December 31, 2008
Goodwill	$	753,547		$	731,369
Customer lists	$	93,757		$	95,446
Less accumulated amortization		(47,937	)		(41,633	)
Customer lists, net	$	45,820		$	53,813
Other identifiable intangible assets:
Noncompete agreements	$	9,097		$	11,783
Trade names		20,468			21,631
		29,565			33,414
Less accumulated amortization		(15,190	)		(16,169	)
Other identifiable intangible assets, net	$	14,375		$	17,245

(in thousands) June 30, 2009 December 31, 2008

Goodwill $ 752,491 $ 731,369
Customer lists $ 95,556 $ 95,446
Less accumulated amortization (47,049 ) (41,633 )
Customer lists, net $ 48,507 $ 53,813
Other identifiable intangible assets:
Noncompete agreements $ 10,186 $ 11,783
Trade names 21,664 21,631
31,850 33,414
Less accumulated amortization (16,539 ) (16,169 )
Other identifiable intangible assets, net $ 15,311 $ 17,245

Amortization of customer lists and other identifiable intangible assets totaled approximately ~~$3.7~~$3.6 million and ~~$4.4~~$5.3 million for the three months ended ~~June~~September 30, 2009 and 2008, respectively, and approximately ~~$7.3~~$11.0 million and ~~$8.5~~$13.8 million for the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008, respectively.

An impairment loss of $1.3 million was recorded for the three and nine months ended September 30, 2008 in the Credit Services segment. The charge is related to the write-off of the net book value of the automotive lead generation business’ identifiable intangible assets and customer list. The impairment loss was incurred due to the challenging credit market and the negative impact to the automotive lead generation business.

Estimated amortization expense relating to intangible asset balances as of ~~June~~September 30, 2009, is expected to be as follows over the next five years:


(in thousands)
Remainder of 2009	$	7,252	$	3,609
2010		13,926		13,956
2011		11,307		11,323
2012		10,213		10,231
2013		8,812		8,831
Thereafter		12,308		12,245
	$	63,818	$	60,195

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First Advantage Corporation

Notes to Consolidated Financial Statements

The changes in the carrying amount of identifiable intangible assets are as follows for the ~~six~~nine months ended ~~June~~September 30, 2009:

	Other
	Identifiable
	Intangible			Customer
(in thousands)	Assets			Lists
Balance, at December 31, 2008	$	17,245		$	53,813
Adjustments		37			57
Amortization		(2,907	)		(8,050	)
Balance, at September 30, 2009	$	14,375		$	45,820

Other
Identifiable
Intangible Customer
(in thousands) Assets Lists

Balance, at December 31, 2008 $ 17,245 $ 53,813
Adjustments 33 58
Amortization (1,967 ) (5,364 )
Balance, at June 30, 2009 $ 15,311 $ 48,507

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~~First Advantage Corporation~~

~~Notes to Consolidated Financial Statements~~

6. Debt

Long-term debt consists of the following at ~~June~~September 30, 2009:

(in thousands, except percentages)

Acquisition notes:
    Weighted average interest rate of 3.65% with maturities

    through 2011
$ 11,699
Bank notes:
    $225 million Secured Credit Facility, interest at 30-day LIBOR

    plus 1.13% (1.44% at June 30, 2009) matures September 2010
25,000
Capital leases and other debt:
    Various interest rates with maturities through 2011
1,465
Total long-term debt and capital leases $ 38,164
Less current portion of long-term debt and capital leases 8,807
Long-term debt and capital leases, net of current portion $ 29,357

(in thousands, except percentages)

Acquisition notes: Weighted average interest rate of 3.64% with maturities
through 2011	$	9,657
Bank notes: $225 million Secured Credit Facility, interest at 30-day LIBOR
plus 1.13% (1.37% at September 30, 2009) matures September 2010		10,000
Capital leases and other debt: Various interest rates with maturities through 2011		1,817
Total long-term debt and capital leases	$	21,474
Less current portion of long-term debt and capital leases		20,446
Long-term debt and capital leases, net of current portion	$	1,028

At ~~June~~September 30, 2009, the Company was in compliance with the financial covenants of its loan agreement. In the event that the First American Offer is accepted and consummated with a merger, this may be determined to be an “Event of Default,” under the terms of the Credit Agreement.

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~~First Advantage Corporation~~

~~Notes to Consolidated Financial Statements~~

7. Earnings Per Share

A reconciliation of earnings per share and weighted-average shares outstanding is as follows:

	Three Months Ended					Six Months Ended					Three Months Ended				Nine Months Ended
(in thousands, except per share amounts)	June 30,					June 30,					September 30,				September 30,
	2009		2008			2009		2008			2009		2008		2009		2008
Income from continuing operations attributable to FADV shareholders	$	12,971	$	13,652		$	23,585	$	29,918		$	11,450	$	12,631	$	35,035	$	42,549
Loss from discontinued operations attributable to FADV shareholders, net of tax		-		(1,264	)		-		(4,241	)		-		-		-		(4,241	)
Net income attributable to FADV shareholders	$	12,971	$	12,388		$	23,585	$	25,677		$	11,450	$	12,631	$	35,035	$	38,308
Denominator:
Weighted-average shares for basic earnings per share		59,776		59,435			59,681		59,297			59,803		59,478		59,722		59,358
Effect of restricted stock		117		75			79		47			255		42		135		72
Effect of dilutive securities - employee stock options and warrants		5		107			4		30			28		9		10		16
Denominator for diluted earnings per share		59,898		59,617			59,764		59,374			60,086		59,529		59,867		59,446
Earnings per share:
Basic
Income from continuing operations attributable to FADV shareholders	$	0.22	$	0.23		$	0.40	$	0.50		$	0.19	$	0.21	$	0.59	$	0.72
Loss from discontinued operations attributable to FADV shareholders, net of tax		-		(0.02	)		-		(0.07	)		-		-		-		(0.07	)
Net income attributable to FADV shareholders	$	0.22	$	0.21		$	0.40	$	0.43		$	0.19	$	0.21	$	0.59	$	0.65
Diluted
Income from continuing operations attributable to FADV shareholders	$	0.22	$	0.23		$	0.39	$	0.50		$	0.19	$	0.21	$	0.59	$	0.72
Loss from discontinued operations attributable to FADV shareholders, net of tax		-		(0.02	)		-		(0.07	)		-		-		-		(0.08	)
Net income attributable to FADV shareholders	$	0.22	$	0.21		$	0.39	$	0.43		$	0.19	$	0.21	$	0.59	$	0.64

For the three months ended ~~June~~September 30, 2009 and 2008, options and warrants totaling ~~3,376,872~~2,962,431 and ~~3,062,601,~~3,999,719, respectively, were excluded from the weighted average diluted shares outstanding, as they were antidilutive. For the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008, options and warrants totaling ~~3,376,872~~3,162,930 and ~~3,599,011,~~3,895,234, respectively, were excluded from the weighted average diluted shares outstanding, as they were antidilutive.

8. Share-Based Compensation

In the first quarter of 2008, the Company changed from granting stock options as the primary means of share-based compensation to granting restricted stock units (“RSU”). The fair value of any RSU grant is based on the market value of the Company’s shares on the date of the grant and is recognized as compensation expense over the vesting period. RSUs generally vest over three years at a rate of 33.3% for the first two years and 33.4% for last year.

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~~First Advantage Corporation~~

~~Notes to Consolidated Financial Statements~~

Restricted stock activity since December 31, 2008 is summarized as follows:

				Weighted
(in thousands, except weighted average fair value prices)				Average
	Number of			Grant-Date
	Shares			Fair Value
Nonvested restricted stock outstanding at December 31, 2008		632		$	21.93
Restricted stock granted		423		$	10.89
Restricted stock forfeited		(30	)	$	17.99
Restricted stock vested		(253	)	$	23.06
Nonvested restricted stock outstanding at September 30, 2009		772		$	15.66

Weighted
(in thousands, except exercise prices) Average
Number of Grant-Date
Shares Fair Value
Nonvested restricted stock outstanding at December 31, 2008 632 $ 21.93
Restricted stock granted 406 $ 10.61
Restricted stock forfeited (30 ) $ 17.99
Restricted stock vested (253 ) $ 23.06
Nonvested restricted stock outstanding at June 30, 2009 755 $ 15.61

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First Advantage Corporation

Notes to Consolidated Financial Statements

The following table illustrates the share-based compensation expense recognized for the three and ~~six~~nine months ended ~~June~~September 30, 2009 and 2008.

	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June 30,				June 30,				September 30,				September 30,
(in thousands)	2009		2008		2009		2008		2009		2008		2009		2008
Stock options	$	487	$	1,326	$	1,120	$	2,700	$	457	$	1,165	$	1,578	$	3,875
Restricted stock		1,459		1,349		2,746		2,188		1,363		1,169		4,109		3,357
Employee stock purchase plan		24		42		54		86		20		26		73		112
	$	1,970	$	2,717	$	3,920	$	4,974	$	1,840	$	2,360	$	5,760	$	7,344

Stock option activity under the Company’s stock plan since December 31, 2008 is summarized as follows:

				Weighted		Aggregate					Weighted		Aggregate
(in thousands, except exercise prices)	Number of			Average		Intrinsic		Number of			Average		Intrinsic
	Shares			Exercise Price		Value		Shares			Exercise Price		Value
Options outstanding at December 31, 2008		3,492		$	23.06	$	71		3,492		$	23.06	$	863
Options exercised									(26	)	$	15.51
Options forfeited		(106	)	$	28.31				(294	)	$	24.66
Options outstanding at June 30, 2009		3,386		$	22.93	$	68
Options outstanding at September 30, 2009									3,172		$	22.98	$	697
Options exercisable, end of the quarter		3,137		$	22.81	$	68		2,956		$	22.83	$	692

The following table summarizes information about stock options outstanding at ~~June~~September 30, 2009:


(in thousands, except for exercise prices, years and weighted average amounts)	(in thousands, except for exercise prices, years and weighted average amounts)											(in thousands, except for exercise prices, years and weighted average amounts)

		Options Outstanding						Options Exercisable					Options Outstanding						Options Exercisable
				Weighted Avg						Weighted					Weighted Avg		Weighted				Weighted
Range of				Remaining Contractual		Weighted Average				Average
Exercise Prices		Shares		Life in Years		Exercise Price		Shares		Exercise Price
															Remaining Contractual		Average				Average
Range of Exercise Prices												Range of Exercise Prices	Shares		Life in Years		Exercise Price		Shares		Exercise Price
$	7.00 - $ 12.50		9		2.2	$	11.13		9	$	11.13	7.00 - $ 12.50		9		1.9	$	11.13		9	$	11.13
$	12.51 - $ 25.00		2,254		4.6	$	20.85		2,167	$	20.89	12.51 - $ 25.00		2,075		4.6	$	20.90		2,018	$	20.91
$	25.01 - $ 50.00		1,118		6.2	$	27.04		956	$	27.09	25.01 - $ 50.00		1,084		6.1	$	26.97		925	$	27.01
$	50.01 - $242.25		5		1.7	$	60.50		5	$	60.50	50.01 - $242.25		4		1.8	$	50.25		4	$	50.25
			3,386						3,137					3,172						2,956

The Company had outstanding warrants to purchase up to 41,462 shares of its common stock at exercise prices of $12.05 per share as of ~~June~~September 30, 2009. The weighted average remaining contractual life in years for the warrants outstanding is ~~1.93.~~1.68.

~~Table of Contents~~

~~First Advantage Corporation~~

~~Notes to Consolidated Financial Statements~~

9. Income Taxes

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and foreign jurisdictions.

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First Advantage Corporation

Notes to Consolidated Financial Statements

With few exceptions, the Company is no longer subject to U.S. federal examinations by tax authorities for years before 2005, and state and local, and non-U.S. income tax examinations by tax authorities before 2003. In April 2009, the Internal Revenue Service (“IRS”) concluded an examination of First Advantage’s consolidated 2005 federal income tax return without any material adjustments. In March 2009, the IRS initiated an examination of First Advantage’s consolidated 2006 and 2007 federal income tax returns, which the Company does not anticipate will result in material adjustments.

As of ~~June~~September 30, 2009, the Company has a $4.9 million total liability recorded for unrecognized tax benefits as well as a ~~$0.4~~$0.5 million total liability for income tax related interest. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is ~~$2.6~~$3.3 million. The majority of the unrecognized tax benefits that would affect the effective tax rate and associated interest relates to foreign operations. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company does not currently anticipate that the total amount of unrecognized tax benefits will significantly increase or decrease by the end of 2009.

10. Segment Information

The Company operates in five primary business segments: Credit Services, Data Services, Employer Services, Multifamily Services, and Investigative and Litigation Support Services. In the first quarter of 2009, the Company consolidated the previous Lender Services and Dealer Services segments and moved the consumer credit business from the Data Services segment to create the Credit Services segment. The prior periods have been recast to reflect the changed segments.

The Credit Services segment include business lines that offer lenders credit reporting solutions for mortgage and home equity needs, that provide consumer credit reporting services and serve the automotive dealer marketplace by delivering consolidated consumer credit ~~reports and automotive lead generation services.~~reports.

The Data Services segment includes business lines that provide transportation credit reporting, motor vehicle record reporting, fleet management, criminal records reselling, specialty finance credit reporting, and lead generation services. Revenue for the Data Services segment includes ~~$1.0~~$0.9 million and ~~$1.4~~$1.2 million of inter-segment sales for the three months ended ~~June~~September 30, 2009 and 2008, respectively, and ~~$1.9~~$2.8 million and ~~$2.8~~$4.0 million of inter-segment sales for the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008, respectively.

The Employer Services segment includes employment background screening, occupational health services, tax incentive services and hiring solutions. Products and services relating to employment background screening include criminal records searches, employment and education verification, social security number verification

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First Advantage Corporation

Notes to Consolidated Financial Statements

and credit reporting. Occupational health services include drug-free workplace programs, physical examinations and employee assistance programs. Hiring solutions include applicant tracking software, recruiting services and outsourced management of payroll and human resource functions. Tax incentive services include services related to the administration of employment-based and location-based tax credit and incentive programs, sales and use tax programs and fleet asset management programs. Revenue for the Employer Services segment includes ~~$0.1~~$0.6 million of inter-segment sales for the ~~three~~nine months ended ~~June 30, 2008, and $0.2 million and $0.5 million of inter-segment sales for the six months ended June~~September 30, 2009 and ~~2008, respectively.~~2008.

The Multifamily Services segment includes resident screening and software services. Resident screening services include criminal background and eviction searches, credit reporting, employment verification and lease performance and payment histories. Revenue for the Multifamily Services segment includes $0.2 million of inter-segment sales for each of the three months ended ~~June~~September 30, 2009 and 2008, and ~~$0.3 million and $0.4~~$0.5 million of inter-segment sales for the ~~six~~nine months ended ~~June~~September 30, 2009 and ~~2008, respectively.~~2008.

The Investigative and Litigation Support Services segment includes all investigative services. Products and services offered by the Investigative and Litigation Support Services segment includes computer forensics, electronic discovery, due diligence reports and other high level investigations.

The elimination of intra-segment revenue and cost of service revenue is included in Corporate. These transactions are recorded at cost.

Service revenue for international operations included in the Employer Services segment was ~~$7.0~~$8.0 million and ~~$12.3~~$11.9 million for the three months ended ~~June~~September 30, 2009 and 2008, respectively, and ~~$13.5~~$21.4 million and ~~$23.4~~$35.3 million for the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008, respectively. Service revenue for international operations included in the Investigative and Litigation Support Services segment was ~~$1.4~~$0.4 million and ~~$11.7~~$7.6 million for the three months ended ~~June~~September 30, 2009 and 2008, respectively, and ~~$6.8~~$1.3 million and ~~$24.6~~$32.3 million for the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008, respectively.

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First Advantage Corporation

Notes to Consolidated Financial Statements

The following table sets forth segment information for the three and ~~six~~nine months ended ~~June~~September 30, 2009 and 2008.

(in thousands)	Service			Depreciation		Income (Loss)
Three Months Ended September 30, 2009	Revenue			and Amortization		From Operations			Assets
Credit Services	$	59,443		$	1,533	$	12,489		$	202,380
Data Services		25,514			2,435		3,590			298,524
Employer Services		41,731			3,771		3,929			388,095
Multifamily Services		19,879			1,542		7,268			84,458
Investigative and Litigation Support Services		9,804			724		1,337			120,971
Corporate and Eliminations		(391	)		988		(10,169	)		79,305
Consolidated	$	155,980		$	10,993	$	18,444		$	1,173,733
Three Months Ended September 30, 2008
Credit Services	$	60,837		$	1,728	$	7,063		$	196,406
Data Services		21,922			2,570		3,680			312,606
Employer Services		54,199			3,255		6,644			408,139
Multifamily Services		19,702			1,444		6,654			87,782
Investigative and Litigation Support Services		18,600			837		6,347			111,259
Corporate and Eliminations		(596	)		1,064		(8,663	)		64,606
Consolidated	$	174,664		$	10,898	$	21,725		$	1,180,798
Nine Months Ended September 30, 2009
Credit Services	$	191,567		$	4,470	$	44,820		$	202,380
Data Services		113,456			7,367		11,389			298,524
Employer Services		119,350			11,058		6,110			388,095
Multifamily Services		57,467			4,553		20,521			84,458
Investigative and Litigation Support Services		30,224			2,176		2,753			120,971
Corporate and Eliminations		(1,376	)		2,950		(26,388	)		79,305
Consolidated	$	510,688		$	32,574	$	59,205		$	1,173,733
Nine Months Ended September 30, 2008
Credit Services	$	202,723		$	4,480	$	35,371		$	196,406
Data Services		60,422			7,601		11,214			312,606
Employer Services		163,397			9,629		13,119			408,139
Multifamily Services		58,037			4,242		17,995			87,782
Investigative and Litigation Support Services		63,281			2,460		23,407			111,259
Corporate and Eliminations		(2,519	)		3,108		(28,229	)		64,606
Consolidated	$	545,341		$	31,520	$	72,877		$	1,180,798

(in thousands) Depreciation
Income (Loss)

Three Months Ended June 30, 2009 Service Revenue and Amortization From Operations Assets
Credit Services $ 67,705 $ 1,488 $ 17,584 $ 200,797
Data Services 28,842 2,427 2,153 300,290
Employer Services 40,168 3,772 2,681 391,370
Multifamily Services 19,685 1,509 7,579 85,018
Investigative and Litigation Support Services 8,694 727 270 120,482
Corporate and Eliminations (426 ) 972 (8,347 ) 64,782
Consolidated $ 164,668 $ 10,895 $ 21,920 $ 1,162,739

Three Months Ended June 30, 2008

Credit Services $ 66,984 $ 1,565 $ 11,961 $ 190,311
Data Services 19,533 2,534 3,764 313,651
Employer Services 55,511 3,295 3,004 410,989
Multifamily Services 19,986 1,429 6,569 89,342
Investigative and Litigation Support Services 21,178 858 7,535 115,539
Corporate and Eliminations (769 ) 1,045 (8,840 ) 64,152
Consolidated $ 182,423 $ 10,726 $ 23,993 $ 1,183,984
Six Months Ended June 30, 2009
Credit Services $ 132,124 $ 2,937 $ 32,331 $ 200,797
Data Services 87,942 4,932 7,799 300,290
Employer Services 77,619 7,287 2,181 391,370
Multifamily Services 37,588 3,011 13,253 85,018
Investigative and Litigation Support Services 20,420 1,452 1,416 120,482
Corporate and Eliminations (985 ) 1,962 (16,219 ) 64,782
Consolidated $ 354,708 $ 21,581 $ 40,761 $ 1,162,739
Six Months Ended June 30, 2008
Credit Services $ 141,886 $ 2,752 $ 28,308 $ 190,311
Data Services 38,500 5,031 7,534 313,651
Employer Services 109,198 6,374 6,475 410,989
Multifamily Services 38,335 2,798 11,341 89,342
Investigative and Litigation Support Services 44,681 1,623 17,060 115,539
Corporate and Eliminations (1,923 ) 2,044 (19,566 ) 64,152
Consolidated $ 370,677 $ 20,622 $ 51,152 $ 1,183,984

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First Advantage Corporation

Notes to Consolidated Financial Statements

11.Subsequent Event

Proposed Offer to Exchange by First American

On October 8, 2009, First American commenced an exchange offer (the “Offer”) to acquire all of the outstanding shares of the Company’s Class A common stock (“Class A Shares”) not owned or controlled by First American at an exchange ratio of 0.58 of a First American common share per Class A Share. The offer is scheduled to expire at 5:00 P.M. on Tuesday, November 10, 2009 (the “Expiration Time”).

First American has stated that the offer is conditioned upon, among other things, satisfaction of the “Minimum Condition”, which means that there must be validly tendered, and not properly withdrawn prior to the Expiration Time, at least a majority of the Class A Shares owned by stockholders other than certain parties described in the Offer as the “Excluded Parties.” As of October 26, 2009, there were 12,098,680 Class A Shares outstanding, of which we believe 632,544Class A Shares are held by Excluded Parties. Accordingly, we believe that at least 5,733,069 Class A Shares not owned by the Excluded Parties would have to be validly tendered into the Offer, and not have been properly withdrawn, as of the Expiration Time, in order to satisfy this condition. In addition, among others, the following conditions must also be satisfied or waived (except as noted below):

the Merger Condition — which means there must be sufficient Class A Shares validly tendered, and not properly withdrawn as of the Expiration Time, such that once such tendered Class A Shares are purchased by First American in the Offer, First American will own or control at least 90% of the outstanding Class A Shares (after giving effect to the conversion of the Class B Shares into Class A Shares on a one-for-one basis). We calculate that, based on the number of outstanding Class A Shares as of October 26, 2009, approximately 6,112,774 Class A Shares would have to be tendered in order to satisfy this condition;

the Registration Statement Effectiveness Condition — which means the registration statement on Form S-4 filed by First American shall have been declared effective by the Securities and Exchange Commission (the “SEC”);

the Listing Condition — which means the First American common shares to be issued in the Offer and the Merger shall have been approved for listing on the New York Stock Exchange; and

the absence of legal impediments to the Offer or the Merger and other General Conditions.

The Minimum Condition, the Registration Statement Effectiveness Condition and the Listing Condition will not be waived in the Offer. The Merger Condition is waivable in First American’s sole discretion. In the event that all of the conditions to the Offer have

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First Advantage Corporation

Notes to Consolidated Financial Statements

not been satisfied or waived at the then scheduled Expiration Time, First American may, in its discretion, extend the Expiration Time in such increments as it may determine. However, First American is under no obligation to extend the Offer if the conditions have not been satisfied, or waived if permitted, as of the Expiration Time. If the Offer is not consummated the market price of the Class A Shares may decline. The conditions to the Offer are for the sole benefit of First American and may be asserted by it in its sole discretion, regardless of the circumstances giving rise to such conditions, or, except as set forth above, may be waived by First American, in whole or in part, in its sole discretion, whether or not any other condition of the Offer also is waived.

First American has also announced that if the Merger Condition is satisfied and First American consummates the Offer, First American will convert (or cause to be converted) all of the Class B Shares that it owns or controls into Class A Shares and cause all such Class A Shares and the Class A Shares acquired by First American in the Offer to be contributed to Algonquin Corp., a wholly-owned subsidiary of First American (“Merger Sub”). If First American consummates the Offer, and thereafter owns or controls 90% or more of the outstanding Class A Shares (after giving effect to the conversion of Class B Shares into Class A Shares on a one-for-one basis), First American has stated that it shall promptly thereafter effect a short form merger with Merger Sub merging into First Advantage (the “Merger”) unless prohibited by court order or other applicable legal requirement. As provided by Delaware law, the Merger may be effected without the approvalof First Advantage’s board of directors or any remaining public stockholders. If First American consummates the Offer and does not own or control 90% or more of the outstanding Class A Shares (after giving effect to the conversion of Class B Shares into Class A Shares on a one-for-one basis), First American will use commercially reasonable efforts to acquire additional Class A Shares such that after such acquisition, Merger Sub owns or controls at least 90%of each class of the issued and outstanding capital stock of First Advantage (after giving effect to the conversion of Class B Shares into Class A Shares on a one-for-one basis); provided, however, that such use of commercially reasonable efforts to acquire additional Class A Shares shall not require First American to exchange more than 0.58 of a First American share (or equivalent value) for any Class A Share. In such event, once First American owns or controls 90%or more of the outstanding Class A Shares (after giving effect to the conversion of Class B Shares into Class A Shares on a one-for-one basis), First American shall effect the Merger promptly thereafter unless prohibited by court order or other applicable legal requirement. As a result of the Merger, any Class A Sharesnot previously purchased by First American in the Offer (and in subsequent purchases, if any) would be converted into First American common shares at the Exchange Ratio, other than the Class A Shares in respect of which appraisal rights have been properly perfected under Delaware law.

On October 8, 2009, First American filed the Offer to Exchange and related materials with the SEC on a Registration Statement on Form S-4. In addition, on October 8, 2009, the Company filed with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9. Stockholders are urged to read the Offer to Exchange and related materials and the Solicitation/Recommendation Statement and any amendments thereto

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First Advantage Corporation

Notes to Consolidated Financial Statements

filed from time to time, because they will contain important information. Stockholders will be able to obtain a free copy of the Offer to Exchange and related materials and the Solicitation/Recommendation Statement at the SEC’s website at www.sec.gov .. In addition, the Solicitation/Recommendation Statement, as well as the Company’s other public SEC filings, can be obtained at www.fadv.com. Stockholders may also read and copy any reports, statements and other information filed by First American or the Company with the SEC at the SEC public reference room at 100 F Street N.E., Washington, D.C. 20549. Please call the SEC at (800) 732-0330 or visit the SEC’s website for further information on its public reference room.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Notice to stockholders of Exchange Offer by First American

On October 8, 2009, The First American Corporation (“First American”) commenced an exchange offer (the “Offer”) to acquire all of the outstanding shares of the Company’s Class A common stock (“Class A Shares”) not owned or controlled by First American at an exchange ratio of 0.58 of a First American common share per Class A Share, and First American filed an Offer to Exchange and related materials with the Securities and Exchange Commission (“SEC”) on a Registration Statement on Form S-4. On October 8, 2009, the Company filed with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9. Stockholders are urged to read the Offer to Exchange and related materials and the Solicitation/Recommendation Statement and any amendments thereto filed from time to time, because they will contain important information. Stockholders will be able to obtain a free copy of the Offer to Exchange and related materials and the Solicitation/Recommendation Statement at the SEC’s website at www.sec.gov .. In addition, the Solicitation/Recommendation Statement, as well as the Company’s other public SEC filings, can be obtained at www.fadv.com. Stockholders may also read and copy any reports, statements and other information filed by First American or the Company with the SEC at the SEC public reference room at 100 F Street N.E., Washington, D.C. 20549. Please call the SEC at (800) 732-0330 or visit the SEC’s website for further information on its public reference room.

Note of Caution Regarding Forward Looking Statements

Certain statements in this quarterly report on Form 10-Q relate to future results of the Company and are considered “forward-looking ~~statements.”~~statements”. These statements, which may be expressed in a variety of ways, including the use of future or present tense language, relate to among other things, sufficiency and availability of cash flows and other sources of liquidity, current levels of operations, anticipated growth, future market positions, synergies from integration, ability to execute its growth strategy, levels of capital expenditures and ability to satisfy current debt. These forward-looking statements, and others forward-looking statements contained in other public disclosures of the Company are based on assumptions that involve risks and uncertainties, and that are subject to change based on various important factors (some of which are beyond the Company’s control). Risks and uncertainties exist that may cause results to differ materially from those set forth in these forward-looking statements. Factors that could cause the anticipated results to differ from those described in the forward-looking statements include: general volatility of the capital markets and the market price of the Company’s Class A common stock; the Company’s ability to successfully raise capital; the Company’s ability to identify and complete acquisitions and to successfully integrate businesses it acquires; changes in applicable government regulations; the degree and nature of the Company’s competition; increases in the Company’s expenses; continued consolidation among the Company’s competitors and customers; unanticipated technological changes and requirements; the Company’s ability to identify suppliers of quality and cost-effective data; statements with respect to First American's proposed exchange offer to acquire all of the outstanding shares of the Company’s Class A common stock (“Class A Shares”) not owned or controlled by First American at an exchange ratio of 0.58 of a First American common share per Class A Share; and other factors described in this quarterly report on Form 10-Q. In addition to the risk factors set forth above and in this quarterly report on Form 10-Q, ~~you~~stockholders should carefully consider the risk factors set forth in the Company’s Annual Report on Form 10-K, as amended by the Form 8-K filed October 8, 2009, for the year ended December 31, 2008, as well as the other information contained the Company’s Annual Report, as updated or modified in subsequent filings. The Company faces risks other than those listed in the Annual Report, as updated, including those that are unknown and others of which the Company may be aware but, at present, considers immaterial. Actual results may differ materially from those expressed or implied as a result of these risks and uncertainties. The forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Overview

First Advantage Corporation (Nasdaq: FADV) (“First Advantage” or the “Company”) provides global risk mitigation, screening services and credit reporting to enterprise and consumer customers. The Company operates in five primary business segments: Credit Services, Data Services, Employer Services, Multifamily Services, and Investigative & Litigation Support Services. In the first quarter of 2009, the Company consolidated the previous Lender Services and Dealer Services segments and moved the consumer credit business from the Data Services segment to create the Credit Services segment. The prior periods have been recast to reflect the changed segments. First Advantage is headquartered in Poway, California and has approximately ~~3,700~~3,800 employees in offices throughout the United States and abroad.

The current economic downturn has caused decreased service revenue in the Credit Services segment related to the mortgage and auto industries and the Data Services segment related to the transportation and specialty finance businesses. Management expects continued weakness in the real estate and mortgage markets to continue impacting the Company’s Credit Services segment and the transportation and specialty credit businesses in the Data Services segment. In addition, the effect of the issues in the real estate and related credit markets together with the other macroeconomic matters has resulted in higher unemployment rates negatively impacting the volumes in the Employer Services segment. Given this outlook, management is focusing on expense reductions, operating efficiencies, and increasing market share throughout the Company.

Operating results for the three months ended ~~June~~September 30, 2009 included total service revenue of ~~$164.7~~$156.0 million, this represents a decrease of ~~9.7%~~10.7% over the same period in 2008. Operating results for the ~~six~~nine months ended ~~June~~September 30, 2009 included total service revenue of ~~$354.7~~$510.7 million, this represents a decrease of ~~4.3%~~6.4% over the same period in 2008. Operating income for the three and ~~six~~nine months ended ~~June~~September 30, 2009 was ~~$21.9~~$18.4 million and ~~$40.8~~$59.2 million, respectively. Operating income decreased ~~$2.1~~$3.3 million for the three months ended ~~June~~September 30, 2009 in comparison to the same period in 2008. Operating income decreased ~~$10.4~~$13.7 million for the ~~six~~nine months ended ~~June~~September 30, 2009 in comparison to the same period in 2008.

On ~~June 29,~~October 8, 2009, ~~the Company received an unsolicited proposal from~~ First American issued a press release announcing its intention to commence an exchange offer (the “Offer”) to acquire all of the ~~issued and~~ outstanding shares of the ~~Company's~~Company’s Class A common stock (“Class A Shares”) not owned or controlled by First American at ~~a fixed~~an exchange ratio of ~~0.5375~~0.58 of a First American common share ofper Class A Share (See Note 11 – Subsequent Event). On October 9, 2009, First ~~American's common stock for each share of~~American filed a Registration Statement on Form S-4 with the ~~Company's common stock. First American's proposal is subject~~Securities and Exchange Commission (the “SEC”), which contains the Offer to ~~confirmatory due diligence,~~Exchange and related materials. On that same day, the ~~negotiation of an acceptable definitive acquisition agreement and~~Company filed with the ~~receipt of all necessary stockholder and regulatory approvals. First American's proposal is under consideration by~~SEC a Solicitation/Recommendation on Schedule 14D-9 pursuant to which the Special Committee of the Board of Directors of the Company recommended on behalf of the Board of Directors of the Company, that the stockholders of the Company accept the Offer and tender their shares pursuant to the Offer. The Offer is described in further detail in Note 11 – Subsequent Event.

Table of ~~directors who are unaffiliated with First American.~~Contents

~~Table of Contents~~

The following is a summary of the operating results by the Company’s business segments for the three and ~~six~~nine months ended ~~June~~September 30, 2009 and ~~June 30,~~ 2008.

(in thousands, except percentages)
Invest/Litigation Corporate
Three Months Ended June 30, 2009 Credit Services Data Services Employer Services Multifamily Services Support Services and Eliminations Total
Service revenue $ 67,705 $ 28,842 $ 40,168 $ 19,685 $ 8,694 $ (426 ) $ 164,668
Reimbursed government fee revenue 391 11,570 2,243 - - (863 ) 13,341
  Total revenue 68,096 40,412 42,411 19,685 8,694 (1,289 ) 178,009
Cost of service revenue 30,544 15,404 10,666 1,751 526 (630 ) 58,261
Government fees paid 391 11,570 2,243 - - (863 ) 13,341
  Total cost of service 30,935 26,974 12,909 1,751 526 (1,493 ) 71,602
Gross margin 37,161 13,438 29,502 17,934 8,168 204 106,407
Salaries and benefits 12,063 4,367 15,615 5,792 5,050 5,243 48,130
Facilities and telecommunications 1,633 659 2,128 730 725 990 6,865
Other operating expenses 4,393 3,832 5,306 2,324 1,396 1,346 18,597
Depreciation and amortization 1,488 2,427 3,772 1,509 727 972 10,895
Income (loss) from operations $ 17,584 $ 2,153 $ 2,681 $ 7,579 $ 270 $ (8,347 ) $ 21,920
Operating margin percentage 26.0 % 7.5 % 6.7 % 38.5 % 3.1 % N/A 13.3 %

Invest/Litigation Corporate
Three Months Ended June 30, 2008 Credit Services
Data Services

Employer Services

Multifamily Services
Support Services and Eliminations Total
Service revenue $ 66,984 $ 19,533 $ 55,511 $ 19,986 $ 21,178 $ (769 ) $ 182,423
Reimbursed government fee revenue - 11,906 2,226 - - (1,010 ) 13,122
  Total revenue 66,984 31,439 57,737 19,986 21,178 (1,779 ) 195,545
Cost of service revenue 30,392 5,710 16,070 1,759 440 (884 ) 53,487
Government fees paid - 11,906 2,226 - - (1,010 ) 13,122
  Total cost of service 30,392 17,616 18,296 1,759 440 (1,894 ) 66,609
Gross margin 36,592 13,823 39,441 18,227 20,738 115 128,936
Salaries and benefits 14,916 5,010 20,339 6,386 8,442 7,834 62,927
Facilities and telecommunications 2,136 640 2,554 896 713 1,145 8,084
Other operating expenses 6,014 1,875 9,952 2,947 3,190 (1,069 ) 22,909
Depreciation and amortization 1,565 2,534 3,295 1,429 858 1,045 10,726
Impairment loss - - 297 - - - 297
Income (loss) from operations $ 11,961 $ 3,764 $ 3,004 $ 6,569 $ 7,535 $ (8,840 ) $ 23,993
Operating margin percentage 17.9 % 19.3 % 5.4 % 32.9 % 35.6 % N/A 13.2 %

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(in thousands, except percentages)
													Invest/Litigation			Corporate						Credit			Data			Employer			Multifamily			Invest/Litigation			Corporate
Six Months Ended June 30, 2009	Credit Services			Data Services			Employer Services			Multifamily Services			Support Services			and Eliminations			Total
Three Months Ended September 30, 2009																						Services			Services			Services			Services			Support Services			and Eliminations			Total

Service revenue	$	132,124		$	87,942		$	77,619		$	37,588		$	20,420		$	(985	)	$	354,708		$	59,443		$	25,514		$	41,731		$	19,879		$	9,804		$	(391	)	$	155,980
Reimbursed government fee revenue		391			23,318			4,345			-			-			(1,735	)		26,319			223			11,987			2,138			-			-			(762	)		13,586
Total revenue		132,515			111,260			81,964			37,588			20,420			(2,720	)		381,027			59,666			37,501			43,869			19,879			9,804			(1,153	)		169,566

Cost of service revenue		59,601			56,387			20,716			3,239			871			(1,213	)		139,601			26,691			12,419			10,651			1,790			495			(617	)		51,429
Government fees paid		391			23,318			4,345			-			-			(1,735	)		26,319			223			11,987			2,138			-			-			(762	)		13,586
Total cost of service		59,992			79,705			25,061			3,239			871			(2,948	)		165,920			26,914			24,406			12,789			1,790			495			(1,379	)		65,015

Gross margin		72,523			31,555			56,903			34,349			19,549			228			215,107			32,752			13,095			31,080			18,089			9,309			226			104,551

Salaries and benefits		24,239			9,745			32,733			12,108			11,705			10,767			101,297			12,238			4,839			16,142			6,110			5,303			5,288			49,920
Facilities and telecommunications		3,382			1,207			4,212			1,493			1,310			1,920			13,524			1,771			551			2,036			754			675			954			6,741
Other operating expenses		9,634			7,872			10,490			4,484			3,666			1,798			37,944			4,721			1,680			5,202			2,415			1,270			3,165			18,453
Depreciation and amortization		2,937			4,932			7,287			3,011			1,452			1,962			21,581			1,533			2,435			3,771			1,542			724			988			10,993
Income (loss) from operations	$	32,331		$	7,799		$	2,181		$	13,253		$	1,416		$	(16,219	)	$	40,761		$	12,489		$	3,590		$	3,929		$	7,268		$	1,337		$	(10,169	)	$	18,444
Operating margin percentage		24.5	%		8.9	%		2.8	%		35.3	%		6.9	%		N/A			11.5	%		21.0	%		14.1	%		9.4	%		36.6	%		13.6	%		N/A			11.8	%

													Invest/Litigation			Corporate						Credit			Data			Employer			Multifamily			Invest/Litigation			Corporate
Six Months Ended June 30, 2008	Credit Services			Data Services			Employer Services			Multifamily Services			Support Services			and Eliminations			Total
Three Months Ended September 30, 2008																						Services			Services			Services			Services			Support Services			and Eliminations			Total

Service revenue	$	141,886		$	38,500		$	109,198		$	38,335		$	44,681		$	(1,923	)	$	370,677		$	60,837		$	21,922		$	54,199		$	19,702		$	18,600		$	(596	)	$	174,664
Reimbursed government fee revenue		-			24,215			5,031			-			-			(2,099	)		27,147			-			11,743			2,828			-			-			(938	)		13,633
Total revenue		141,886			62,715			114,229			38,335			44,681			(4,022	)		397,824			60,837			33,665			57,027			19,702			18,600			(1,534	)		188,297

Cost of service revenue		63,150			10,830			30,807			3,314			1,021			(1,919	)		107,203			28,985			8,628			14,234			1,915			503			(745	)		53,520
Government fees paid		-			24,215			5,031			-			-			(2,099	)		27,147			-			11,743			2,828			-			-			(938	)		13,633
Total cost of service		63,150			35,045			35,838			3,314			1,021			(4,018	)		134,350			28,985			20,371			17,062			1,915			503			(1,683	)		67,153

Gross margin		78,736			27,670			78,391			35,021			43,660			(4	)		263,474			31,852			13,294			39,965			17,787			18,097			149			121,144

Salaries and benefits		30,710			10,119			40,571			13,638			17,695			16,643			129,376			14,294			4,755			18,511			6,320			7,622			7,611			59,113
Facilities and telecommunications		4,341			1,279			5,050			1,830			1,495			2,289			16,284			2,203			643			2,280			836			722			1,105			7,789
Other operating expenses		12,625			3,707			19,624			5,414			5,787			(1,414	)		45,743			4,844			1,646			9,275			2,533			2,569			(968	)		19,899
Depreciation and amortization		2,752			5,031			6,374			2,798			1,623			2,044			20,622			1,728			2,570			3,255			1,444			837			1,064			10,898
Impairment loss		-			-			297			-			-			-			297			1,720			-			-			-			-			-			1,720
Income (loss) from operations	$	28,308		$	7,534		$	6,475		$	11,341		$	17,060		$	(19,566	)	$	51,152		$	7,063		$	3,680		$	6,644		$	6,654		$	6,347		$	(8,663	)	$	21,725
Operating margin percentage		20.0	%		19.6	%		5.9	%		29.6	%		38.2	%		N/A			13.8	%		11.6	%		16.8	%		12.3	%		33.8	%		34.1	%		N/A			12.4	%

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~~Credit Services Segment~~

~~Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008~~

	Credit			Data			Employer			Multifamily			Invest/Litigation			Corporate
Nine Months Ended September 30, 2009	Services			Services			Services			Services			Support Services			and Eliminations			Total

Service revenue	$	191,567		$	113,456		$	119,350		$	57,467		$	30,224		$	(1,376	)	$	510,688
Reimbursed government fee revenue		614			35,305			6,483			-			-			(2,497	)		39,905
Total revenue		192,181			148,761			125,833			57,467			30,224			(3,873	)		550,593

Cost of service revenue		86,292			68,806			31,367			5,029			1,366			(1,830	)		191,030
Government fees paid		614			35,305			6,483			-			-			(2,497	)		39,905
Total cost of service		86,906			104,111			37,850			5,029			1,366			(4,327	)		230,935

Gross margin		105,275			44,650			87,983			52,438			28,858			454			319,658

Salaries and benefits		36,477			14,584			48,875			18,218			17,008			16,055			151,217
Facilities and telecommunications		5,153			1,758			6,248			2,247			1,985			2,874			20,265
Other operating expenses		14,355			9,552			15,692			6,899			4,936			4,963			56,397
Depreciation and amortization		4,470			7,367			11,058			4,553			2,176			2,950			32,574
Income (loss) from operations	$	44,820		$	11,389		$	6,110		$	20,521		$	2,753		$	(26,388	)	$	59,205
Operating margin percentage		23.4	%		10.0	%		5.1	%		35.7	%		9.1	%		N/A			11.6	%

	Credit			Data			Employer			Multifamily			Invest/Litigation			Corporate
Nine Months Ended September 30, 2008	Services			Services			Services			Services			Support Services			and Eliminations			Total

Service revenue	$	202,723		$	60,422		$	163,397		$	58,037		$	63,281		$	(2,519	)	$	545,341
Reimbursed government fee revenue		-			35,958			7,859			-			-			(3,037	)		40,780
Total revenue		202,723			96,380			171,256			58,037			63,281			(5,556	)		586,121

Cost of service revenue		92,135			19,458			45,041			5,229			1,524			(2,664	)		160,723
Government fees paid		-			35,958			7,859			-			-			(3,037	)		40,780
Total cost of service		92,135			55,416			52,900			5,229			1,524			(5,701	)		201,503

Gross margin		110,588			40,964			118,356			52,808			61,757			145			384,618

Salaries and benefits		45,004			14,874			59,082			19,958			25,317			24,254			188,489
Facilities and telecommunications		6,544			1,922			7,330			2,666			2,217			3,394			24,073
Other operating expenses		17,469			5,353			28,899			7,947			8,356			(2,382	)		65,642
Depreciation and amortization		4,480			7,601			9,629			4,242			2,460			3,108			31,520
Impairment loss		1,720			-			297			-			-			-			2,017
Income (loss) from operations	$	35,371		$	11,214		$	13,119		$	17,995		$	23,407		$	(28,229	)	$	72,877
Operating margin percentage		17.4	%		18.6	%		8.0	%		31.0	%		37.0	%		N/A			13.4	%

Service revenue was $67.7 million for the three months ended June 30, 2009, an increase of $0.7 million compared to service revenue of $67.0 million for the three months ended June 30, 2008. The increase is due to a $6.0 million increase in revenue related to our direct to consumer credit business and a $4.8 million increase in mortgage related credit revenue reflecting increased lending volumes as compared to the same period in 2008. These increases are partially offset by a $10.1 million decrease in revenue related to vehicle financing reflecting an overall decline in auto and truck sales.

Gross margin was $37.2 million for the three months ended June 30, 2009, an increase of $0.6 million compared to gross margin of $36.6 million in the same period of 2008. The impact of the increase in transactions resulted in an overall increase in gross margin. Gross margin was 54.9% for the three months ended June 30, 2009 as compared to 54.6% for the three months ended June 30, 2008.

Salaries and benefits decreased by $2.9 million. Salaries and benefits were 17.8% of service revenue for the three months ended June 30, 2009 compared to 22.3% during the same period in 2008. Salaries and benefits expense decreased primarily due to operational efficiencies.

Facilities and telecommunication expenses decreased $0.5 million. Facilities and telecommunication expense were 2.4% and 3.2% of service revenue for the three months ended June 30, 2009 and 2008, respectively. The decrease is due to the consolidation of operations.

Other operating expenses decreased by $1.6 million. Other operating expenses were 6.5% of service revenue in the second quarter of 2009 compared to 9.0% for the same period of 2008. The decrease in 2009 is due to a decrease in lease expense, service fees, professional service fees, marketing expense, bad debt expense and travel expense, offset by an increase in temporary labor.

Depreciation and amortization was flat compared to the same period in 2008. Depreciation and amortization was 2.2% of service revenue during the second quarter of 2009 compared to 2.3% in the same period in 2008.

Income from operations was $17.6 million for the three months ended June 30, 2009 compared to $12.0 million in the same period of 2008. The operating margin percentage increased from 17.9% to 26.0% primarily due operational efficiencies gained related to the segment’s cost reduction measures in 2008.

~~Data Services Segment~~

~~Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008~~

Total service revenue was $28.8 million for the three months ended June 30, 2009, an increase of $9.3 million compared to service revenue of $19.5 million in the same period of 2008. This segment has experienced a significant increase in service revenue primarily due to the lead generation business, offset by reduced volumes in the specialty credit and transportation businesses as a result of the overall economic downturn.

Gross margin was $13.4 million for the three months ended June 30, 2009, a decrease of $0.4 million compared to gross margin of $13.8 million in the same period of 2008. Gross margin as a percentage of service revenue was 46.6% for the three months ended June 30, 2009 as compared to 70.8% for the three months ended June 30, 2008. The decrease in the gross margin as a percentage of service revenue is primarily due to the revenue mix. The lead generation eAdvertising business has lower margins.

Salaries and benefits decreased by $0.6 million. Salaries and benefits were approximately 15.1% of service revenue in the second quarter of 2009 compared to 25.6% of service revenue in the second quarter of 2008. The decrease in expense is related to the decrease in staffing as compared to the same period in 2008.

Facilities and telecommunication expenses for the second quarter of 2009 were comparable to the same period in 2008. Facilities and telecommunication expenses were approximately 2.3% of service revenue in the second quarter of 2009 compared to 3.3% of service revenue in the second quarter of 2008.

Other operating expenses increased by $2.0 million. Other operating expenses were 13.3% of service revenue in the second quarter of 2009 and 9.6% in the second quarter of 2008. The expense increase is primarily due to the increase in bad debt expense at the lead generation business.

Depreciation and amortization for the second quarter of 2009 was comparable to the same period in 2008. Depreciation and amortization was 8.4% of service revenue during the second quarter of 2009 compared to 13.0% in the same period in 2008.

The operating margin percentage decreased from 19.3% to 7.5% in comparing the second quarter of 2008 to the second quarter of 2009. The decrease in the operating margin is primarily due to the increase in bad debt expense and the change in the revenue mix of the businesses in the second quarter of 2009 compared to the same period in 2008.

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Income from operations was $2.2 million for the second quarter of 2009, a decrease of $1.6 million compared to $3.8 million in the second quarter of 2008. The decrease is primarily driven by the lead generation business where cost of service and operating expenses have increased offset by an increase in revenue.

~~Employer Services Segment~~

~~Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008~~

Total service revenue was $40.2 million for the three months ended June 30, 2009, a decrease of $15.3 million compared to service revenue of $55.5 million in the same period of 2008. The decrease was a result of a decrease in hiring in the United States and abroad. The recession has caused increased unemployment, which directly affects this segment.

Salaries and benefits decreased by $4.7 million. Salaries and benefits were 38.9% of service revenue in the second quarter of 2009 compared to 36.6% in the same period of 2008. The expense decrease is a direct effect of office consolidations and the reduction in staffing, offset by an increase in salary and benefit expense related to moving technology personnel from Corporate to Employer Services.

Facilities and telecommunication expenses decreased by $0.4 million. Facilities and telecommunication expenses were 5.3% of service revenue in the second quarter of 2009 and 4.6% in the second quarter of 2008. The expense decrease is a direct effect of office consolidations.

Other operating expenses decreased by $4.6 million. Other operating expenses were 13.2% and 17.9% of service revenue in the second quarter of 2009 and 2008, respectively. The expense decrease in other operating expenses is primarily due to moving technology personnel from Corporate to Employer Services which were previously allocated from Corporate to other expenses, a decrease in temporary labor, professional fees, bad debt expense and decreased foreign currency losses.

Depreciation and amortization increased by $0.5 million. Depreciation and amortization was 9.4% of service revenue in the second quarter of 2009 compared to 5.9% in the same period of 2008. The increase is primarily due to accelerated depreciation on software related to outsourcing some services in our drug screening division in the second quarter of 2009.

~~The operating margin percentage increased from 5.4% to 6.7% primarily due to the decline in operating expenses offset by a decline in revenue.~~

Income from operations was $2.7 million for the three months ended June 30, 2009, a decrease of $0.3 million compared to income from operations of $3.0 million in the same period of 2008. The decrease is due to the decline in service revenue, offset by an approximately 26% decrease in operating expenses.

~~Multifamily Services Segment~~

~~Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008~~

Total service revenue was $19.7 million for the three months ended June 30, 2009, a decrease of $0.3 million compared to service revenue of $20.0 million in the same period of 2008. The decrease is primarily due to a decline in revenue at the screening business due to the current economic conditions.

Salaries and benefits cost decreased $0.6 million. Salaries and benefits were 29.4% of service revenue for the second quarter of 2009 compared to 32.0% of service revenue in the same period of 2008. The expense decrease is primarily due to a reduction in employees.

Facilities and telecommunication expenses decreased $0.2 million. Facilities and telecommunication expenses were 3.7% of service revenue in the second quarter of 2009 and 4.5% in the second quarter of 2008. The expense decrease is a direct effect of office consolidations.

Other operating expenses decreased $0.6 million. Other operating expenses were 11.8% of service revenue in the second quarter of 2009 compared to 14.7% in the same period of 2008. The decrease is due to reduced leased equipment, marketing and travel expenses.

Depreciation and amortization was flat when compared to the second quarter of 2008. Depreciation and amortization was 7.7% of service revenue in the second quarter of 2009 compared to 7.2% in the same period of 2008.

Income from operations was $7.6 million in the second quarter of 2009 compared to income from operations of $6.6 million in the same period of 2008. The operating margin percentage increased from 32.9% to 38.5% primarily due to reduced operating expenses. The increase in operating margin is primarily due to management’s cost containment initiatives.

~~Table of Contents~~

~~Investigative and Litigation Services Segment~~

~~Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008~~

Total service revenue was $8.7 million for the three months ended June 30, 2009, a decrease of $12.5 million compared to service revenue of $21.2 million in the same period of 2008. The decrease is primarily due to the case activity level in the Litigation Support Services division.

Salaries and benefits decreased by $3.4 million. Salaries and benefits were 58.1% of service revenue in the second quarter of 2009 compared to 39.9% in the same period of 2008. The expense decrease is mainly due to the decline of compensation related to revenue and profitability.

Facilities and telecommunication expenses were flat compared to the same period in 2008. Facilities and telecommunication expenses were 8.3% of service revenue in the second quarter of 2009 and 3.4% in the second quarter of 2008.

~~Other operating expenses decreased by $1.8 million. Other operating expenses were 16.1% of service revenue in the second quarter of 2009 and 15.1% for the same period of 2008.~~ ~~The decrease in expense is primarily due to a reduction in bad debt expense, travel expenses and professional fees.~~

Depreciation and amortization was flat when compared to the second quarter of 2008. Depreciation and amortization was 8.4% of service revenue in the second quarter of 2009 compared to 4.1% in the same period of 2008.

~~The operating margin percentage decreased from 35.6% to 3.1%. The decrease in margin is primarily due to the revenue decline on the higher margin electronic discovery business.~~

Income from operations was $0.3 million for the second quarter of 2009 compared to $7.5 million for the same period of 2008. The decrease is primarily due to the revenue decrease on the higher margin electronic discovery business.

~~Corporate~~

~~Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008~~

Corporate costs and expenses represent primarily compensation and benefits for senior management, administrative staff, and their related expenses in addition to an administrative fee paid to First American. The corporate expenses were $8.3 million in the second quarter of 2009 compared to expenses of $8.8 million in the same period of 2008. The expense decrease is due to moving technology personnel from Corporate to Employer Services, decreases in compensation and benefit expenses, and travel expenses.

~~Table of Contents~~

~~Consolidated Results~~

~~Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008~~

Consolidated service revenue for the three months ended June 30, 2009 was $164.7 million, a decrease of $17.7 million compared to service revenue of $182.4 million in the same period in 2008. The decrease in service revenue compared to the second quarter of 2008 is directly related to the downturn in domestic and international hiring, weakness in the credit markets, and overall economic slowdown, offset by the increase in the Data Services segment.

Salaries and benefits decreased $14.8 million. Salaries and benefits were 29.2% of service revenue for the three months ended June 30, 2009 and 34.5% for the same period in 2008. The decrease is primarily due to strategic reductions in employees, a decline of compensation related to revenue and profitability, and a reduction in the 401(k) match expense.

Facilities and telecommunication decreased by $1.2 million compared to the same period in 2008. Facilities and telecommunication expenses were 4.2% of service revenue in the second quarter of 2009 and 4.4% in the second quarter of 2008. The decrease is primarily due to savings related to office consolidations.

Other operating expenses decreased by $4.3 million compared to the same period in 2008. Other operating expenses were 11.3% and 12.6% of service revenue for the three months ended June 30, 2009 and 2008, respectively. The decrease in expense is due to office consolidations and cost reduction measures. This is offset by an increase in bad debt expense at the Data Services segment.

Depreciation and amortization increased by $0.2 million due to fixed asset additions and the roll out of internally developed software, offset by certain fixed assets and intangibles becoming fully depreciated.

The consolidated operating margin was 13.3% for the three months ended June 30, 2009, compared to 13.2% for the same period in 2008. Income from operations was $21.9 million for the three months ended June 30, 2009 compared to $24.0 million for the same period in 2008. The decrease of $2.1 million is comprised of a decrease in operating income of $7.3 million in Investigative and Litigation Support Services, $1.6 million in Data Services, and $0.3 million at Employer Services offset by increases in operating income of $5.6 million in Credit Services, $1.0 million in Multifamily Services and a decrease of corporate expenses of $0.5 million.

Credit Services Segment

~~Six~~Three Months Ended ~~June~~September 30, 2009 Compared to ~~Six~~Three Months Ended ~~June~~September 30, 2008

Service revenue was ~~$132.1~~$59.4 million for the ~~six~~three months ended ~~June~~September 30, 2009, a decrease of ~~$9.8~~$1.4 million compared to service revenue of ~~$141.9~~$60.8 million for the ~~six~~three months ended ~~June~~September 30, 2008. The decrease is due to a $6.9 million decrease in revenue related to vehicle financing, reflecting an overall decline in auto and truck sales. This is partially offset by a $4.4 million increase in revenue related to our direct to consumer credit business and a $1.1 million increase in mortgage related credit revenue reflecting increased lending volumes as compared to the same period in 2008.

Gross margin was $32.8 million for the three months ended September 30, 2009, an increase of $0.9 million compared to gross margin of $31.9 million in the same period of 2008. The impact of the increase in transactions resulted in an overall increase in gross margin. Gross margin was 55.1% for the three months ended September 30, 2009 as compared to 52.4% for the three months ended September 30, 2008.

Salaries and benefits decreased by $2.1 million. Salaries and benefits were 20.6% of service revenue for the three months ended September 30, 2009 compared to 23.5% during the same period in 2008. Salaries and benefits expense decreased due to operational efficiencies and reduced staffing.

Facilities and telecommunication expenses decreased $0.4 million. Facilities and telecommunication expense were 3.0% in and 3.6% of service revenue for the three months ended September 30, 2009 and 2008, respectively. The decrease is due to the consolidation of operations.

Other operating expenses were flat compared to the three months ended September 30, 2009. Other operating expenses were 7.9% and 8.0% of service revenue in the third quarter of 2009 and 2008, respectively.

Table of Contents

Depreciation and amortization decreased $0.2 million. Depreciation and amortization was 2.6% of service revenue during the third quarter of 2009 compared to 2.8% in the same period in 2008.

Income from operations was $12.5 million for the three months ended September 30, 2009 compared to $7.1 million in the same period of 2008. The operating margin percentage increased from 11.6% to 21.0% primarily due operational efficiencies gained related to the segment’s cost reduction measures in the prior year and the $1.7 million impairment loss recorded in 2008.

Data Services Segment

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

Total service revenue was $25.5 million for the three months ended September 30, 2009, an increase of $3.6 million compared to service revenue of $21.9 million in the same period of 2008. This segment has experienced an increase in service revenue primarily due to the lead generation business, offset by reduced volumes in the specialty credit and transportation businesses as a result of the overall economic downturn.

Gross margin was $13.1 million for the three months ended September 30, 2009, a decrease of $0.2 million compared to gross margin of $13.3 million in the same period of 2008. Gross margin as a percentage of service revenue was 51.3% for the three months ended September 30, 2009 as compared to 60.6% for the three months ended September 30, 2008. The decrease in the gross margin as a percentage of service revenue is primarily due to the revenue mix. The lead generation’s eAdvertising business has lower margins.

Salaries and benefits were flat when compared to the three months ended September 30, 2008. Salaries and benefits were 19.0% of service revenue in the third quarter of 2009 compared to 21.7% of service revenue in the third quarter of 2008.

Facilities and telecommunication expenses for the third quarter of 2009 were comparable to the same period in 2008. Facilities and telecommunication expenses were 2.2% of service revenue in the third quarter of 2009 compared to 2.9% of service revenue in the third quarter of 2008.

Other operating expenses were flat when compared to the three months ended September 30, 2008. Other operating expenses were 6.6% of service revenue in the third quarter of 2009 and 7.5% in the third quarter of 2008.

Depreciation and amortization for the third quarter of 2009 was comparable to the same period in 2008. Depreciation and amortization was 9.5% of service revenue during the third quarter of 2009 compared to 11.7% in the same period in 2008.

The operating margin percentage decreased from 16.8% to 14.1% in comparing the third quarter of 2008 to the third quarter of 2009. The decrease in the operating margin is primarily due to the change in the revenue mix of the businesses in the third quarter of 2009 compared to the same period in 2008.

Income from operations was $3.6 million for the third quarter of 2009, a decrease of $0.1 million compared to $3.7 million in the third quarter of 2008. The decrease is primarily driven by the lead generation business where cost of service and operating expenses have increased related to the increase in service revenue.

Table of Contents

Employer Services Segment

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

Total service revenue was $41.7 million for the three months ended September 30, 2009, a decrease of $12.5 million compared to service revenue of $54.2 million in the same period of 2008. The decrease was a result of a decrease in hiring in the United States and abroad. The recession has caused increased unemployment, which directly affects this segment.

Salaries and benefits decreased by $2.4 million. Salaries and benefits were 38.7% of service revenue in the third quarter of 2009 compared to 34.2% in the same period of 2008. The expense decrease is a direct effect of office consolidations and the reduction in staffing, offset by an increase in salary and benefit expense related to moving technology personnel from Corporate to Employer Services.

Facilities and telecommunication expenses decreased by $0.2 million. Facilities and telecommunication expenses were 4.9% and 4.2% of service revenue in the third quarter of 2009 and 2008, respectively. The expense decrease is a direct effect of office consolidations.

Other operating expenses decreased by $4.1 million. Other operating expenses were 12.5% and 17.1% of service revenue in the third quarter of 2009 and 2008, respectively. The expense decrease in other operating expenses is primarily due to moving technology personnel from Corporate to Employer Services which were previously allocated from Corporate to other expenses, a decrease in professional fees, bad debt expense and decreased foreign currency losses.

Depreciation and amortization increased by $0.5 million. Depreciation and amortization was 9.0% of service revenue in the third quarter of 2009 compared to 6.0% in the same period of 2008. The increase is primarily due to accelerated depreciation on software related to outsourcing certain services in our drug screening division in 2009.

The operating margin percentage decreased from 12.3% to 9.4% primarily due to the decline in revenue.

Income from operations was $3.9 million for the three months ended September 30, 2009, a decrease of $2.7 million compared to income from operations of $6.6 million in the same period of 2008. The decrease is due to the decline in service revenue, offset by a 18.5% decrease in operating expenses.

Multifamily Services Segment

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

Total service revenue was $19.9 million for the three months ended September 30, 2009, an increase of $0.2 million compared to service revenue of $19.7 million in the same period of 2008.

Salaries and benefits cost decreased $0.2 million. Salaries and benefits were 30.7% of service revenue for the third quarter of 2009 compared to 32.1% of service revenue in the same period of 2008. The expense decrease is primarily due to a reduction in employees.

Facilities and telecommunication expenses were flat when compared to the third quarter of 2008. Facilities and telecommunication expenses were 3.8% of service revenue in the third quarter of 2009 and 4.2% in the third quarter of 2008.

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Other operating expenses were flat when compared to the third quarter of 2008. Other operating expenses were 12.1% of service revenue in the third quarter of 2009 compared to 12.9% in the same period of 2008. The decrease is due to reduced leased equipment, marketing and travel expenses.

Depreciation and amortization was flat when compared to the third quarter of 2008. Depreciation and amortization was 7.8% of service revenue in the third quarter of 2009 compared to 7.3% in the same period of 2008.

Income from operations was $7.3 million in the third quarter of 2009 compared to income from operations of $6.7 million in the same period of 2008. The operating margin percentage increased from 33.8% to 36.6% primarily due to management’s cost containment initiatives.

Investigative and Litigation Services Segment

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

Total service revenue was $9.8 million for the three months ended September 30, 2009, a decrease of $8.8 million compared to service revenue of $18.6 million in the same period of 2008. The decrease is primarily due to the diminished case activity level in the Litigation Support Services division.

Salaries and benefits decreased by $2.3 million. Salaries and benefits were 54.1% of service revenue in the third quarter of 2009 compared to 41.0% in the same period of 2008. The expense decrease is mainly due to the decline of compensation related to revenue and profitability.

Facilities and telecommunication expenses were flat compared to the same period in 2008. Facilities and telecommunication expenses were 6.9% of service revenue in the third quarter of 2009 and 3.9% in the third quarter of 2008.

Other operating expenses decreased by $1.3 million. Other operating expenses were 13.0% of service revenue in the third quarter of 2009 and 13.8% for the same period of 2008. The decrease in expense is primarily due to a reduction in bad debt expense, travel expenses and professional fees.

Depreciation and amortization was flat when compared to the third quarter of 2008. Depreciation and amortization was 7.4% of service revenue in the third quarter of 2009 compared to 4.5% in the same period of 2008.

The operating margin percentage decreased from 34.1% to 13.6%. The decrease in margin is primarily due to the revenue decline on the higher margin electronic discovery business.

Income from operations was $1.3 million for the third quarter of 2009 compared to $6.3 million for the same period of 2008. The decrease is primarily due to the revenue decrease on the higher margin electronic discovery business.

Corporate

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

Corporate costs and expenses represent primarily compensation and benefits for senior management, administrative staff, and their related expenses in addition to an administrative fee paid to First American. The corporate expenses were $10.2 million in the third quarter of 2009 compared to expenses of $8.7 million in the same period of 2008. The expense increase is primarily due to $1.6 million in legal expenses recorded related to the Offer and related litigation. This increase is offset by expense decreases due to moving technology personnel from Corporate to Employer Services, decreases in compensation and benefit expenses, and travel expenses.

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Consolidated Results

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

Consolidated service revenue for the three months ended September 30, 2009 was $156.0 million, a decrease of $18.7 million compared to service revenue of $174.7 million in the same period in 2008. The decrease in service revenue compared to the third quarter of 2008 is directly related to the downturn in domestic and international hiring, weakness in the credit markets, and overall economic slowdown, offset by the increase in the Data Services segment.

Salaries and benefits decreased $9.2 million. Salaries and benefits were 32.0% of service revenue for the three months ended September 30, 2009 and 33.8% for the same period in 2008. The decrease is primarily due to strategic reductions in employees, a decline of compensation related to revenue and profitability, and the elimination of the 401(k) match in 2009.

Facilities and telecommunication decreased by $1.0 million compared to the same period in 2008. Facilities and telecommunication expenses were 4.3% of service revenue in the third quarter of 2009 and 4.5% in the third quarter of 2008. The decrease is primarily due to savings related to office consolidations.

Other operating expenses decreased by $1.4 million compared to the same period in 2008. Other operating expenses were 11.8% and 11.4% of service revenue for the three months ended September 30, 2009 and 2008, respectively. The decrease in expense is due to office consolidations and cost reduction measures offset by an increase in legal fees.

Depreciation and amortization was flat when compared to the third quarter of 2008. Depreciation and amortization was 7.0% of service revenue in the third quarter of 2009 compared to 6.2% in the same period of 2008.

The consolidated operating margin was 11.8% for the three months ended September 30, 2009, compared to 12.4% for the same period in 2008. Income from operations was $18.4 million for the three months ended September 30, 2009 compared to $21.7 million for the same period in 2008. The decrease of $3.3 million is comprised of an increase in Corporate expenses of $1.5 million, a decrease in operating income of $5.0 million in Investigative and Litigation Support Services, $0.1 million in Data Services, and $2.7 million at Employer Services offset by increases in operating income of $5.4 million in Credit Services, and $0.6 million in Multifamily Services.

Credit Services Segment

Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

Service revenue was $191.6 million for the nine months ended September 30, 2009, a decrease of $11.1 million compared to service revenue of $202.7 million for the nine months ended September 30, 2008. A decrease in revenue at the dealer services division resulted in an overall decrease in service revenue, which is partially offset by an increase in revenue from the mortgage credit and consumer credit divisions. The challenging credit markets and overall economy continues to affect our credit reporting businesses compared to the ~~first half~~nine months ended September 30, 2008.

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Gross margin was ~~$72.5~~$105.3 million for the ~~six~~nine months ended ~~June~~September 30, 2009, a decrease of ~~$6.2~~$5.3 million compared to gross margin of ~~$78.7~~$110.6 million in the same period of 2008. The decline in gross margin is primarily due to the overall decrease in revenue and ~~the~~ revenue mix compared to prior year. Gross margin was ~~54.9%~~55.0% for the ~~six~~nine months ended ~~June~~September 30, 2009 as compared to ~~55.5%~~54.6% for the ~~six~~nine months ended ~~June~~September 30, 2008.

Salaries and benefits decreased by ~~$6.5~~$8.5 million. Salaries and benefits were ~~18.3%~~19.0% of service revenue in the ~~first six~~nine months ofended September 30, 2009 compared to ~~21.6%~~22.2% during the same period in 2008. Salaries and benefits expense decreased due to operational efficiencies and reduced staffing.

Facilities and telecommunication expenses decreased ~~$1.0~~$1.4 million. Facilities and telecommunication expense were ~~2.6%~~2.7% and 3.2% of service revenue in the ~~first six~~nine months ended September 30, 2009 and 2008, respectively. The expense decrease is due to the office consolidations.

Other operating expenses decreased by $3.1 million. Other operating expenses were 7.5% of service revenue in the nine months ended September 30, 2009 compared to ~~3.1% in~~8.6% for the same period of 2008. The decrease is due to ~~the consolidation of offices.~~

~~Other operating expenses decreased by $3.0 million. Other operating expenses were 7.3% of service revenue~~a decline in ~~the six months ended June 30, 2009 compared to 8.9% for the same period of 2008. The decrease in 2009 is due to a decrease in service fees,~~ lease expense, marketing expense, bad debt expense, office expenses and travel expense, offset by an increase in temporary labor and professional service fees.

Depreciation and amortization ~~increased by $0.2 million.~~was flat when compared to the nine months ended 2008. Depreciation and amortization was ~~2.2%~~2.3% of service revenue ~~during~~in the ~~first six months~~third quarter of 2009 compared to ~~1.9%~~2.2% in the same period inof 2008. ~~The increase is primarily due to the rollout of new software projects.~~

Income from operations was ~~$32.3~~$44.8 million for the ~~six~~nine months ended ~~June~~September 30, 2009 compared to ~~$28.3~~$35.4 million in the same period of 2008. The operating margin percentage increased from ~~20.0%~~17.4% to ~~24.5%~~23.4% primarily due operational efficiencies gained related to the segment’s cost reduction measures in 2008 the $1.7 million impairment loss recorded in 2008.

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Data Services Segment

~~Six~~Nine Months Ended ~~June~~September 30, 2009 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2008

Total service revenue was ~~$87.9~~$113.5 million for the ~~six~~nine months ended ~~June~~September 30, 2009, an increase of ~~$49.4~~$53.1 million compared to service revenue of ~~$38.5~~$60.4 million in the same period of 2008. This segment has experienced a significant increase in service revenue primarily due to the lead generation business, offset by reduced volumes in the specialty credit and transportation businesses as a result of the overall economic downturn.

Gross margin was ~~$31.6~~$44.7 million for the ~~six~~nine months ended ~~June~~September 30, 2009, an increase of ~~$3.9~~$3.7 million compared to gross margin of ~~$27.7~~$41.0 million in the same period of 2008. Gross margin as a percentage of service revenue was ~~35.9%~~39.4% for the ~~six~~nine months ended ~~June~~September 30, 2009 as compared to ~~71.9%~~67.8% for the ~~six~~nine months ended ~~June~~September 30, 2008. The decrease in the gross margin as a percentage of service revenue is primarily due to the revenue mix. The lead ~~generation~~generation’s eAdvertising business has lower margins.

Salaries and benefits decreased by ~~$0.4~~$0.3 million. Salaries and benefits were ~~approximately 11.1%~~12.9% of service revenue in the ~~first six~~nine months ofended September 30, 2009 compared to ~~26.3%~~24.6% of service revenue in the same period of 2008. The decrease in expense is related to the ~~decrease~~reduction in staffing as compared to the same period in 2008.

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Facilities and telecommunication expenses ~~for the six months ended June 30, 2009 were comparable to the same period in 2008.~~decreased $0.2 million. Facilities and telecommunication expenses were ~~approximately 1.4%~~1.5% of service revenue in the ~~first six~~nine months ofended September 30, 2009 compared to ~~3.3%~~3.2% of service revenue in the same period of 2008.

Other operating expenses increased by $4.2 million. Other operating expenses were ~~9.0%~~8.4% of service revenue for the ~~six~~nine months ended ~~June~~September 30, 2009 and ~~9.6%~~8.9% in the same period of 2008. The expense increase is primarily due to the increase in bad debt expense at the lead generation business.

Depreciation and amortization ~~for~~decreased by $0.2 million. Depreciation and amortization was 6.5% of service revenue in the ~~six~~nine months ended ~~June~~September 30, 2009 ~~was comparable~~compared to 12.6% in the same period inof 2008.

The operating margin percentage decreased from ~~19.6%~~18.6% to ~~8.9% in comparing the six months ended June 30, 2008 to same period of 2009. The decrease in the operating margin is~~10.0% primarily due to the revenue mix of the businesses in the ~~first half of~~nine months ended September 30, 2009 compared to the same period in 2008.

Income from operations was ~~$7.8~~$11.4 million for the ~~six~~nine months ended ~~June~~September 30, 2009, an increase of ~~$0.3~~$0.2 million compared to ~~$7.5~~$11.2 million in the ~~first six~~nine months ofended September 30, 2008. The increase is primarily driven by the lead generation business where revenue has increased, offset by increased cost of service and operating expenses.

Employer Services Segment

~~Six~~Nine Months Ended ~~June~~September 30, 2009 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2008

Total service revenue was ~~$77.6~~$119.4 million for the ~~six~~nine months ended ~~June~~September 30, 2009, a decrease of ~~$31.6~~$44.0 million compared to service revenue of ~~$109.2~~$163.4 million in the same period of 2008. The decrease was a result of ~~a decrease~~the decline in hiring in the United States and abroad. The recession has caused increased unemployment, which directly affects this segment.

Salaries and benefits decreased by ~~$7.8~~$10.2 million. Salaries and benefits were ~~42.2%~~41.0% of service revenue in the ~~first six~~nine months ofended September 30, 2009 compared to ~~37.2%~~36.2% in the same period of 2008. The decrease in expense is a direct effect of office consolidations and the reduction in staffing, offset by an increase in expense related to moving technology personnel from Corporate to Employer Services.

Facilities and telecommunication expenses decreased by ~~$0.8~~$1.1 million. Facilities and telecommunication expenses were ~~5.4%~~5.2% and 4.5% of service revenue in the ~~six~~nine months ended ~~June~~September 30, 2009 and ~~4.6% in the same period of 2008.~~2008, respectively. The expense decrease is a direct effect of office consolidations.

Other operating expenses decreased by ~~$9.1~~$13.2 million. Other operating expenses were ~~13.5%~~13.1% and ~~18.0%~~17.7% of service revenue in the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008, respectively. The expense decrease in other operating expenses is primarily due to moving technology personnel from Corporate to Employer Services which increased costs allocated out of Employer services, a decrease in temporary labor, a decrease in bad debt expense and decreased foreign currency losses.

Depreciation and amortization increased by ~~$0.9 million primarily.~~$1.4 million. Depreciation and amortization was ~~9.4%~~9.3% of service revenue in the ~~second quarter of~~nine months ended September 30, 2009 compared to ~~5.8%~~5.9% in the same period of 2008. The increase is primarily due to the rollout of internally developed software and the accelerated depreciation on software related to outsourcing ~~some~~certain services in our drug screening division.

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The operating margin percentage decreased from ~~5.9%~~8.0% to ~~2.8%~~5.1% primarily due to the decline in service revenue.

Income from operations was ~~$2.2~~$6.1 million for the ~~six~~nine months ended ~~June~~September 30, 2009, a decrease of ~~$4.3~~$7.0 million compared to income from operations of ~~$6.5~~$13.1 million in the same period of 2008. The decrease is due to the decline in service revenue, offset by ~~an approximately 24%~~a 22.2% decrease in operating expenses.

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Multifamily Services Segment

~~Six~~Nine Months Ended ~~June~~September 30, 2009 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2008

Total service revenue was ~~$37.6~~$57.5 million for the ~~six~~nine months ended ~~June~~September 30, 2009, a decrease of ~~$0.7~~$0.5 million compared to service revenue of ~~$38.3~~$58.0 million in the same period of 2009. The decrease is primarily due to a decline in revenue ~~due~~related to the current economic conditions.

Salaries and benefits cost decreased ~~$1.5~~$1.7 million. Salaries and benefits were ~~32.2%~~31.7% of service revenue for the ~~six~~nine months ended ~~June~~September 30, 2009 compared to ~~35.6%~~34.4% of service revenue in the same period of 2008. The expense decrease is primarily due to a reduction in employees.

Facilities and telecommunication expenses decreased ~~$0.3~~$0.4 million. Facilities and telecommunication expenses were ~~4.0%~~3.9% of service revenue in the ~~first six~~nine months ofended September 30, 2009 and ~~4.8%~~4.6% in the same period of 2008. The expense decrease is a direct effect of office consolidations.

Other operating expenses decreased ~~$0.9~~$1.0 million. Other operating expenses were ~~11.9%~~12.0% of service revenue in the ~~first six~~nine months ofended September 30, 2009 compared to ~~14.1%~~13.7% in the same period of 2008. The decrease is due to reduced leased equipment, marketing and travel expenses.

Depreciation and amortization increased ~~$0.2~~$0.3 million. Depreciation and amortization was ~~8.0%~~7.9% of service revenue in the ~~first quarter of~~nine months ended September 30, 2009 compared to 7.3% in the same period of 2008.

The operating margin percentage increased from ~~29.6%~~31.0% to ~~35.3%~~35.7% primarily due to ~~reduced operating expenses.~~

management’s cost containment initiatives. Income from operations was ~~$13.3~~$20.5 million in the ~~first six~~nine months ofended September 30, 2009 compared to income from operations of ~~$11.3~~$18.0 million in the same period of 2008.

Investigative and Litigation Services Segment

~~Six~~Nine Months Ended ~~June~~September 30, 2009 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2008

Total service revenue was ~~$20.4~~$30.2 million for the ~~six~~nine months ended ~~June~~September 30, 2009, a decrease of ~~$24.3~~$33.1 million compared to service revenue of ~~$44.7~~$63.3 million in the same period of 2008. The decrease is primarily due to the diminished case activity level in the Litigation Support Services division.

Salaries and benefits decreased by ~~$6.0~~$8.3 million. Salaries and benefits were ~~57.3%~~56.3% of service revenue in the ~~first six~~nine months ofended September 30, 2009 compared to ~~39.6%~~40.0% in the same period of 2008. The expense decrease is mainly due to the decline of compensation related to revenue and profitability.

Facilities and telecommunication expenses decreased $0.2 million. Facilities and telecommunication expenses were ~~6.4%~~6.6% of service revenue in the ~~six~~nine months ended ~~June~~September 30, 2009 and ~~3.3%~~3.5% in the first quarter of 2008.

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Other operating expenses decreased by ~~$2.1~~$3.4 million. Other operating expenses were ~~18.0%~~16.3% of service revenue in the ~~first six~~nine months ofSeptember 30, 2009 and ~~13.0%~~13.2% for the same period of 2008. The decrease in expense is primarily due to a reduction in bad debt expense, travel expenses and professional fees.

Depreciation and amortization decreased ~~$0.2~~$0.3 million. Depreciation and amortization was ~~7.1%~~7.2% of service revenue in the ~~six~~nine months ended ~~June~~September 30, 2009 compared to ~~3.6%~~3.9% in the same period of 2008.

The operating margin percentage decreased from ~~38.2%~~37.0% to ~~6.9%~~9.1%. ~~The decrease in margin is primarily due to the revenue decline on the higher margin electronic discovery business.~~

Income from operations was ~~$1.4~~$2.8 million for the ~~six~~nine months ended ~~June~~September 30, 2009 compared to ~~$17.1~~$23.4 million for the same period of 2008. The decrease in margin is primarily due to the revenue decrease on the higher margin electronic discovery business.

Corporate

~~Six~~Nine Months Ended ~~June~~September 30, 2009 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2008

Corporate costs and expenses represent primarily compensation and benefits for senior management, administrative staff, and their related expenses in addition to an administrative fee paid to First American. The ~~corporate~~Corporate expenses were ~~$16.2~~$26.4 million in the ~~six~~nine months ended ~~June~~September 30, 2009 compared to expenses of ~~$19.6~~$28.2 million in the same period of 2008. The expense decrease is due to moving technology personnel from Corporate to Employer Services, decreases in compensation and benefit expenses, and travel expenses.

The decrease is offset by $1.6 million in legal expenses recorded in the current quarter related to the Offer and related litigation.

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Consolidated Results

~~Six~~Nine Months Ended ~~June~~September 30, 2009 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2008

Consolidated service revenue for the ~~six~~nine months ended ~~June~~September 30, 2009 was ~~$354.7~~$510.7 million, a decrease of ~~$16.0~~$34.6 million compared to service revenue of ~~$370.7~~$545.3 million in the same period in 2008. The decrease in service revenue is directly related to the downturn in domestic and international hiring, the decline in the mortgage industry, weakness in the credit markets, and overall economic slowdown, partially offset by an increase in the Data Services segment.

Salaries and benefits decreased ~~$28.1~~$37.3 million. Salaries and benefits were ~~28.6%~~29.6% of service revenue for the ~~six~~nine months ended ~~June~~September 30, 2009 and ~~34.9%~~34.6% for the same period in 2008. The decrease is primarily due to strategic reductions in employees, office consolidations, a decline of compensation related to revenue and profitability, and a reduction in the 401(k) match expense.

Facilities and telecommunication decreased by ~~$2.8~~$3.8 million compared to the same period in 2008. Facilities and telecommunication expenses were ~~3.8%~~4.0% of service revenue in the ~~first six~~nine months ofended September 30, 2009 and 4.4% in the ~~first quarter~~same period of 2008. The decrease is primarily due to savings related to office consolidations.

Other operating expenses decreased by ~~$7.8~~$9.2 million compared to the same period in 2008. Other operating expenses were ~~10.7%~~11.0% and ~~12.3%~~12.0% of service revenue for the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008, respectively. The decrease in expense is due to office consolidations and cost reduction measures. This is offset by an increase in bad debt expense at the Data Services ~~segment.~~segment and $1.6 million in legal expenses recorded related to the Offer and related litigation.

Depreciation and amortization increased by ~~$1.0~~$1.1 million due to fixed asset additions and the roll out of internally developed software, offset by certain fixed assets and intangibles becoming fully depreciated.

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The consolidated operating margin was ~~11.5%~~11.6% for the ~~six~~nine months ended ~~June~~September 30, 2009, compared to ~~13.8%~~13.4% for the same period in 2008. Income from operations was ~~$40.8~~$59.2 million for the ~~six~~nine months ended ~~June~~September 30, 2009 compared to ~~$51.2~~$72.9 million for the same period in 2008. The decrease of ~~$10.4~~$13.7 million is comprised of a decrease in operating income of ~~$15.6~~$20.6 million in Investigative and Litigation Support Services, and ~~$4.3~~$7.0 million at Employer Services offset by increases in operating income of ~~$4.0~~$9.4 million in Credit Services, ~~$1.9~~$0.2 million in ~~Multifamily~~Data Services, ~~$0.3~~$2.5 million in ~~Data~~Multifamily Services and a decrease of ~~corporate~~Corporate expenses of ~~$3.3~~$1.8 million.

Critical Accounting Estimates

Critical accounting policies are those policies used in the preparation of the Company’s financial statements that require management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosure of contingencies. A summary of these policies can be found in Management’s Discussion and Analysis in the Company’s Annual Report on Form 10-K for year ended December 31, 2008.

Liquidity and Capital Resources

Overview

The Company’s principal sources of capital include, but are not limited to, existing cash balances, operating cash flows and borrowing under its Secured Credit Facility (see Note 6 to the Consolidated Financial Statements). The Company’s short-term and long-term liquidity depends primarily upon its level of net income, working capital management (accounts receivable, accounts payable and accrued expenses), capital expenditures and bank borrowings. The Company believes that, based on current forecasts and anticipated market conditions, sufficient operating cash flow will be generated to meet all operating needs, to make planned capital expenditures, scheduled debt payments, and tax obligations for the next twelve months. Any material variance of operating results could require us to seek other funding alternatives including raising additional capital, which may be difficult in the current economic conditions.

In previous years, First Advantage sought to acquire other businesses as part of its growth strategy. The Company will continue to evaluate acquisitions in order to achieve economies of scale, expand market share and enter new markets.

While uncertainties within the Company’s industry exist, management is not aware of any trends or events likely to have a material adverse effect on liquidity or the accompanying financial statements. Management expects continued weakness in the real estate and mortgage markets to continue impacting the Company’s Credit Services segment and the transportation and specialty credit businesses in the Data Services segment. In addition, the effect of the issues in the real estate and related credit markets and other macroeconomic matters has resulted in higher unemployment rates negatively impacting the volumes in the Employer Services segment. Given this outlook, management is focusing on expense reductions, operating efficiencies, and increasing market share throughout the Company.

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Statements of Cash Flows

The Company’s primary source of liquidity is cash flow from operations and amounts available under credit lines the Company has established with a bank. As of ~~June~~September 30, 2009, cash and cash equivalents were ~~$60.5~~$57.8 million.

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Net cash provided by operating activities of continuing operations was ~~$37.2~~$57.0 million and $33.0 million in the ~~six~~nine months ended ~~June~~September 30, 2009 ~~compared to cash used in operating activities of continuing operations was $2.5 million for same period in 2008.~~and 2008, respectively. Cash provided by operating activities of continuing operations increased by ~~$39.7~~$24.0 million when comparing the ~~six~~nine months ended ~~June~~September 30, 2009 and the same period in 2008. Income from continuing operations was ~~$23.4~~$34.8 million in the ~~first half of~~nine months ended September 30, 2009 ~~and $29.6~~compared to $41.9 million for the same period in 2008. The increase in cash provided by operating activities was primarily due to the first quarter 2008 income tax payments of $56.9 million ~~in 2008~~ related to the sale of DealerTrack shares.

Cash used in investing activities of continuing operations was ~~$30.4~~$36.1 million and ~~$70.4~~$78.4 million for the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008, respectively. In the ~~six~~nine months ended ~~June~~September 30, 2009, net cash in the amount of $19.5 million was used for earnout provisions from prior year acquisitions, compared to $51.2 million in the same period of 2008. Purchases of property and equipment were ~~$9.8~~$14.5 million in the ~~first half of~~nine months ended September 30, 2009 compared to ~~$17.5~~$24.3 million in the same period of 2008.

Cash used in financing activities of continuing operations was $16.5 million for the nine months ended September 30, 2009, compared to cash provided by financing activities of continuing operations ~~was $0.5~~of $12.4 million for the ~~six~~nine months ended ~~June 30, 2009, compared to $35.6 million for the six months ended June~~September 30, 2008. In the ~~six~~nine months ended ~~June~~September 30, 2009, proceeds from existing credit facilities were ~~$50.4~~$50.9 million compared to ~~$90.0~~$100.3 million in the same period of 2008. Repayment of debt was ~~$45.1~~$62.3 million in the ~~first half of~~nine months ended September 30, 2009 and ~~$52.0~~$85.5 million in the same period of 2008. Cash used to acquire noncontrolling interest in a consolidated subsidiary was ~~$5.1~~$5.9 million and $8.0 million for the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008, respectively. In addition, $1.1 million was distributed to noncontrolling interests in the nine months ended September 30, 2008.

Debt and Capital

In 2005, the Company executed a revolving credit agreement with a bank syndication (the “Credit Agreement”). Borrowings available under the Credit Agreement total up to $225 million. The Credit Agreement includes a $10 million sub-facility for the issuance of letters of credit and up to a $5 million swing loan facility. The credit facility maturity date is September 28, 2010. The Credit Agreement is collateralized by the stock and accounts receivable of the Company’s subsidiaries.

At ~~June~~September 30, 2009, the Company had available lines of credit of ~~$195.1 million. At June 30, 2009, the Company~~$209.7 million, and was in compliance with the financial covenants of its loan agreements. In the event that the First American Offer is accepted and consummated with a merger, this may be determined to be an "Event of Default," under the terms of the Credit Agreement.

First Advantage filed a Registration Statement with the Securities and Exchange Commission for the issuance of up to 5.0 million shares of our Class A common stock, par value $.001 per share, from time to time as full or partial consideration for the acquisition of businesses, assets or securities of other business entities. The Registration Statement was declared effective on January 9, 2006. A total of 1,338,631 shares were issued for acquisitions as of ~~June~~September 30, 2009.

Contractual Obligations and Commercial Commitments

The following is a schedule of long-term contractual commitments, as of ~~June~~September 30, 2009, over the periods in which they are expected to be paid.

(In thousands)	2009		2010		2011		2012		2013		Thereafter		Total
Minimum contract purchase commitments	$	1,019	$	2,653	$	897	$	41	$	41	$	26	$	4,677
Advertising commitments		105		-		-		-		-		-		105
Operating leases		3,670		12,576		8,931		7,024		6,958		14,907		54,066
Debt and capital leases		2,359		18,420		492		72		78		53		21,474
Interest payments related to debt (1)		197		231		4		-		-		-		432
Total (2)	$	7,350	$	33,880	$	10,324	$	7,137	$	7,077	$	14,986	$	80,754

(1) Estimated interest payments are calculated assuming current interest rates over minimum maturity periods specified in debt agreements.

(2) Excludes tax liability of $4.9 million due to uncertainty of payment period.

(In thousands) 2009 2010 2011 2012 2013 Thereafter Total
Minimum contract purchase commitments $ 2,042 $ 2,618 $ 902 $ 41 $ 41 $ 26 $ 5,670
Advertising commitments 167 - - - - - 167
Operating leases 7,161 12,222 8,849 7,029 6,963 13,402 55,626
Debt and capital leases 4,548 32,921 492 72 78 53 38,164
Interest payments related to debt (1) 768 549 4 - - - 1,321
Total (2) $ 14,686 $ 48,310 $ 10,247 $ 7,142 $ 7,082 $ 13,481 $ 100,948

~~(1) Estimated interest payments are calculated assuming current interest rates over minimum maturity periods specified in debt agreements.~~

~~(2) Excludes FIN 48 tax liability of $4.9 million due to uncertainty of payment period.~~

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the Company’s risk since filing its Form 10-K for the year ended December 31, 2008.

Item4. Controls and Procedures

The Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), after evaluating the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, have concluded that, as of the end of the fiscal quarter covered by this report on Form 10-Q, the Company’s disclosure controls and procedures were effective to provide reasonable assurances that information required to be disclosed in the reports filed or submitted under such Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and such information is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding disclosures.

There was no change in the Company’s internal control over financial reporting during the quarter ended ~~June~~September 30, 2009 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

On July 2, 2009, Norfolk County Retirement System filed a Verified Class Action Complaint in the Court of Chancery of the State of Delaware against First American, First Advantage and Parker S. Kennedy. Norfolk County Retirement System contends that as a result of the June 26, 2009 offer, the defendants breached their fiduciary duties to the minority public stockholders of First Advantage. The plaintiff seeks, among other things, to enjoin the consummation or closing of the Offer.

In addition, First Advantage’s subsidiaries are involved in litigation from time to time in the ordinary course of their businesses. The Company does not believe that the outcome of any pending or threatened litigation involving these entities will have a material adverse effect on our financial position, operating results or cash flows.

Item 1A.

Risk Factors

There have been no material changes from the risk factors previously disclosed in the Company’s Form 10-K for Fiscal Year Ending December 31, 2008.

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Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.

Defaults Upon Senior Securities

None

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~~Item~~Item 4.

Submission of Matters to a Vote of Security Holders

a)	~~The~~ ~~annual meeting of the shareholders (the “Meeting”) of First Advantage Corporation (the “Company”) was held on April 28, 2009.~~ None

The names of the persons who were nominated to serve as directors of the Company for the ensuing year are listed below, together with a tabulation of the results of the voting with respect to each nominee. Each of the persons named was recommended by the Board of Directors and Nominating Committee of the Company and all such nominees were elected.

Name of Nominee Votes For Votes Withheld

Parker Kennedy 9,947,340 442,683
Anand Nallathambi 9,999,555 390,468
J. David Chatham 9,708,958 681,065
Barry Connelly 9,953,281 436,742
Frank McMahon 9,742,635 647,388
Donald Nickelson 7,769,680 2,620,343
Donald Robert 10,324,492 65,531
Jill Kanin-Lovers 10,187,926 202,097
D. Van Skilling 9,708,902 681,121
David Walker 9,092,155 1,297,868

~~Item~~Item 5.

Other Information

None

Item 6.

Exhibits

See Exhibit Index.

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~~SIGNATURES~~SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FIRST ADVANTAGE CORPORATION

(Registrant)



Date: ~~July 30,~~October 29, 2009	By:	/s/ ANAND NALLATHAMBI
		~~Name~~Name: Anand Nallathambi
		~~Title~~Title: Chief Executive Officer

	~~Company Name~~

Date: ~~July 30,~~October 29, 2009	By:	/s/ JOHN LAMSON
		Name: John Lamson
		Title: Chief Financial Officer

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EXHIBIT INDEX

Exhibit No. Description

10.1

Third Amended and Restated Services Agreement between The First American Corporation and First Advantage Corporation, effective January 1, 2009.

31.1

Certification pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certifications pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certifications pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(in thousands, except percentages)

Acquisition notes:
Weighted average interest rate of 3.65% with maturities
through 2011	$	11,699
Bank notes:
$225 million Secured Credit Facility, interest at 30-day LIBOR
plus 1.13% (1.44% at June 30, 2009) matures September 2010		25,000
Capital leases and other debt:
Various interest rates with maturities through 2011		1,465
Total long-term debt and capital leases	$	38,164
Less current portion of long-term debt and capital leases		8,807
Long-term debt and capital leases, net of current portion	$	29,357

Name of Nominee	Votes For	Votes Withheld

Parker Kennedy	9,947,340	442,683
Anand Nallathambi	9,999,555	390,468
J. David Chatham	9,708,958	681,065
Barry Connelly	9,953,281	436,742
Frank McMahon	9,742,635	647,388
Donald Nickelson	7,769,680	2,620,343
Donald Robert	10,324,492	65,531
Jill Kanin-Lovers	10,187,926	202,097
D. Van Skilling	9,708,902	681,121
David Walker	9,092,155	1,297,868