☐

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

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

Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, ~~[ ]~~

indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange ~~Act Rule 12-b)~~Act). Yes ~~[ ]~~☐ No ~~[X]~~

~~There were 12,098,680~~☒

As of November 4, 2022, the registrant had 151,929,522 shares of ~~outstanding Class A Common Stock of the registrant as of October 26, 2009.~~

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

common stock, $0.001 par value per share, outstanding.

Table of Contents

~~INDEX~~

~~Part I: FINANCIAL INFORMATION~~

~~Item 1.~~ ~~Financial Statements~~						3
								Page

PART I.	FINANCIAL INFORMATION	2

Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets ~~as of September 30, 2009 and December 31, 2008 (unaudited)~~		4 2

	Condensed Consolidated Statements of Operations and Comprehensive Income ~~for the Three and Nine Months Ended September 30, 2009 and September 30, 2008 (unaudited)~~ (Loss)							5 3

	~~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

	Condensed Consolidated Statements of Cash Flows ~~for the Nine Months Ended September 30, 2009 and September 30, 2008 (unaudited)~~							8 4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity							5
	Notes to Unaudited Condensed Consolidated Financial Statements ~~(unaudited)~~			10 6

Item 2.							~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations		26 25

Item 3.					Quantitative and Qualitative Disclosures About Market Risk				42 44

Item 4.			Controls and Procedures						42

~~Part II: OTHER INFORMATION~~

~~Item 1.~~ ~~Legal Proceedings~~					42 44

~~Item 1A.~~ ~~Risk Factors~~ PART II.	OTHER INFORMATION		42 45

Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43 45

Item 3.			Defaults Upon Senior Securities			43 46
Item 4.	Mine Safety Disclosures				46
Item 4. ~~Submission of Matters to a Vote of Security Holders~~ 5.	43 Other Information	46
Item 6.	Exhibits				47
~~Item 5.~~ ~~Other Information~~Signatures				43

~~Item 6.~~ ~~Exhibits~~					43

~~Signatures~~					44 48

~~Table of Contents~~

PART I. I—FINANCIAL INFORMATION

Item 1. ~~Financial Statements~~

~~First Advantage Corporation~~

Condensed Consolidated Financial Statements (Unaudited)

~~For the Three and Nine Months Ended~~

~~September 30, 2009 and 2008~~

~~Table of Contents~~

First Advantage Corporation

Condensed Consolidated Balance Sheets

(Unaudited)

(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


(in thousands, except share and per share amounts)	September 30, 2022			December 31, 2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	390,262		$	292,642
Restricted cash		138			148
Short-term investments		—			941
Accounts receivable (net of allowance for doubtful accounts of $1,126 and $1,258 at September 30, 2022 and December 31, 2021, respectively)		151,197			155,772
Prepaid expenses and other current assets		27,318			14,365
Income tax receivable		2,556			2,292
Total current assets		571,471			466,160
Property and equipment, net		125,623			154,309
Goodwill		791,574			793,892
Trade name, net		72,928			79,585
Customer lists, net		340,556			384,766
Deferred tax asset, net		1,744			1,413
Other assets		18,020			6,456
TOTAL ASSETS	$	1,921,916		$	1,886,581
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$	52,285		$	53,977
Accrued compensation		23,470			30,054
Accrued liabilities		17,873			21,829
Current portion of operating lease liability		5,500			—
Income tax payable		1,661			2,573
Deferred revenues		847			873
Total current liabilities		101,636			109,306
Long-term debt (net of deferred financing costs of $8,532 and $9,879 at September 30, 2022 and December 31, 2021, respectively)		556,192			554,845
Deferred tax liability, net		90,842			84,653
Operating lease liability, less current portion		9,947			—
Other liabilities		3,316			5,539
Total liabilities		761,933			754,343
COMMITMENTS AND CONTINGENCIES (Note 12)
EQUITY
Common stock - $0.001 par value; 1,000,000,000 shares authorized, 153,169,055 and 152,901,040 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		153			153
Additional paid-in-capital		1,173,787			1,165,163
Accumulated earnings (deficit)		10,769			(31,441	)
Accumulated other comprehensive (loss)		(24,726	)		(1,637	)
Total equity		1,159,983			1,132,238
TOTAL LIABILITIES AND EQUITY	$	1,921,916		$	1,886,581

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

~~Table of Contents~~

First Advantage Corporation

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(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


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except share and per share amounts)	2022			2021			2022			2021
REVENUES	$	205,986		$	192,867		$	597,428		$	499,763

OPERATING EXPENSES:
Cost of services (exclusive of depreciation and amortization below)		104,300			94,151			301,023			244,964
Product and technology expense		13,250			11,313			39,969			33,546
Selling, general, and administrative expense		28,034			27,203			87,715			76,256
Depreciation and amortization		34,744			35,812			103,185			106,493
Total operating expenses		180,328			168,479			531,892			461,259
INCOME FROM OPERATIONS		25,658			24,388			65,536			38,504

OTHER EXPENSE, NET:
Interest expense, net		1,740			4,706			4,002			21,875
Loss on extinguishment of debt		—			—			—			13,938
Total other expense, net		1,740			4,706			4,002			35,813
INCOME BEFORE PROVISION FOR INCOME TAXES		23,918			19,682			61,534			2,691
Provision for income taxes		6,709			3,397			17,076			2,025
NET INCOME	$	17,209		$	16,285		$	44,458		$	666

Foreign currency translation (loss)		(10,253	)		(3,059	)		(23,089	)		(1,594	)
COMPREHENSIVE INCOME (LOSS)	$	6,956		$	13,226		$	21,369		$	(928	)

NET INCOME	$	17,209		$	16,285		$	44,458		$	666
Basic net income per share	$	0.11		$	0.11		$	0.29		$	0.00
Diluted net income per share	$	0.11		$	0.11		$	0.29		$	0.00
Weighted average number of shares outstanding - basic		150,930,340			149,943,998			150,740,518			137,232,289
Weighted average number of shares outstanding - diluted		152,357,307			152,400,419			152,375,212			138,170,488

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

~~Table of Contents~~

First Advantage Corporation

Condensed Consolidated Statements of ~~Comprehensive Income~~ Cash Flows

(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


	Nine Months Ended September 30,
(in thousands)	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	44,458		$	666
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		103,185			106,493
Loss on extinguishment of debt		—			13,938
Amortization of deferred financing costs		1,347			5,496
Bad debt (recovery)		(6	)		(163	)
Deferred taxes		5,536			(4,465	)
Share-based compensation		5,824			4,569
Loss (gain) on foreign currency exchange rates		115			(281	)
Loss on disposal of property and equipment		197			80
Change in fair value of interest rate swaps		(11,376	)		(845	)
Changes in operating assets and liabilities:
Accounts receivable		3,063			(35,815	)
Prepaid expenses and other assets		700			(14,096	)
Accounts payable		165			1,547
Accrued compensation and accrued liabilities		(9,337	)		5,898
Deferred revenues		(116	)		73
Operating lease liabilities		(773	)		—
Other liabilities		1,055			509
Income taxes receivable and payable, net		(1,195	)		256
Net cash provided by operating activities		142,842			83,860
CASH FLOWS FROM INVESTING ACTIVITIES
Changes in short-term investments		826			305
Acquisitions of businesses, net of cash acquired		(19,044	)		(7,588	)
Purchases of property and equipment		(6,034	)		(5,743	)
Capitalized software development costs		(16,320	)		(11,966	)
Proceeds from disposal of property and equipment		46			—
Net cash used in investing activities		(40,526	)		(24,992	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock in initial public offering, net of underwriting discounts and commissions		—			320,559
Payments of initial public offering issuance costs		—			(3,848	)
Shareholder distribution		—			(313	)
Capital contributions		—			241
Share repurchases		(2,248	)		—
Borrowings from Successor First Lien Credit Facility		—			261,413
Repayments of Successor First Lien Credit Facility		—			(363,875	)
Repayment of Successor Second Lien Credit Facility		—			(146,584	)
Payments of debt issuance costs		—			(1,257	)
Payments on capital and finance lease obligations		(673	)		(1,286	)
Payments on deferred purchase agreements		(704	)		(533	)
Proceeds from issuance of common stock under share-based compensation plans		3,090			187
Net settlement of share-based compensation plan awards		(292	)		(332	)
Net cash (used in) provided by financing activities		(827	)		64,372
Effect of exchange rate on cash, cash equivalents, and restricted cash		(3,879	)		(522	)
Increase in cash, cash equivalents, and restricted cash		97,610			122,718
Cash, cash equivalents, and restricted cash at beginning of period		292,790			152,970
Cash, cash equivalents, and restricted cash at end of period	$	390,400		$	275,688

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes, net of refunds received	$	11,321		$	6,069
Cash paid for interest	$	17,640		$	18,362
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Offering costs included in accounts payable and accrued liabilities	$	—		$	187
Property and equipment acquired on account	$	105		$	2,796

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

~~Table of Contents~~

First Advantage Corporation

Condensed Consolidated ~~Statement~~Statements of Changes in Stockholders’ Equity

~~For the Nine Months Ended 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 - - - 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


(in thousands)	Common Stock		Additional Paid-In-Capital			Accumulated Earnings (Deficit)			Accumulated Other Comprehensive (Loss)			Total Stockholders’ Equity
BALANCE – December 31, 2021	$	153	$	1,165,163		$	(31,441	)	$	(1,637	)	$	1,132,238
Share-based compensation		—		1,859			—			—			1,859
Proceeds from issuance of common stock under share-based compensation plans		0		547			—			—			547
Foreign currency translation		—		—			—			(1,517	)		(1,517	)
Net income		—		—			13,013			—			13,013
BALANCE – March 31, 2022	$	153	$	1,167,569		$	(18,428	)	$	(3,154	)	$	1,146,140
Share-based compensation		—		1,943			—			—			1,943
Proceeds from issuance of common stock under share-based compensation plans		0		723			—			—			723
Common stock withheld for tax obligations on restricted stock unit settlement		—		(98	)		—			—			(98	)
Foreign currency translation		—		—			—			(11,319	)		(11,319	)
Net income		—		—			14,236			—			14,236
BALANCE – June 30, 2022	$	153	$	1,170,137		$	(4,192	)	$	(14,473	)	$	1,151,625
Share-based compensation		—		2,022			—			—			2,022
Repurchases of common stock		0		—			(2,248	)		—			(2,248	)
Proceeds from issuance of common stock under share-based compensation plans		0		1,820			—			—			1,820
Common stock withheld for tax obligations on restricted stock unit and option settlement		0		(192	)		—			—			(192	)
Foreign currency translation		—		—			—			(10,253	)		(10,253	)
Net income		—		—			17,209			—			17,209
BALANCE – September 30, 2022	$	153	$	1,173,787		$	10,769		$	(24,726	)	$	1,159,983


(in thousands)	Common Stock		Additional Paid-In-Capital			Accumulated Deficit			Accumulated Other Comprehensive Income			Total Stockholders’ Equity
BALANCE – December 31, 2020	$	130	$	839,148		$	(47,492	)	$	2,484		$	794,270
Share-based compensation		—		562			—			—			562
Foreign currency translation		—		—			—			2,760			2,760
Net (loss)		—		—			(19,389	)		—			(19,389	)
BALANCE – March 31, 2021	$	130	$	839,710		$	(66,881	)	$	5,244		$	778,203
Share-based compensation		—		2,664			—			—			2,664
Capital contributions		—		241			—			—			241
Issuance of common stock in connection with initial public offering, net of offering costs, underwriting discounts and commissions		23		316,502			—			—			316,525
Shareholder distribution		—		(313	)		—			—			(313	)
Foreign currency translation		—		—			—			(1,295	)		(1,295	)
Net income		—		—			3,770			—			3,770
BALANCE – June 30, 2021	$	153	$	1,158,804		$	(63,111	)	$	3,949		$	1,099,795
Share-based compensation		—		1,343			—			—			1,343
Proceeds from issuance of common stock under share-based compensation plans		—		187			—			—			187
Common stock withheld for tax obligations and net settlement of stock option exercise		—		(332	)		—			—			(332	)
Foreign currency translation		—		—			—			(3,059	)		(3,059	)
Net income		—		—			16,285			—			16,285
BALANCE – September 30, 2021	$	153	$	1,160,002		$	(46,826	)	$	890		$	1,114,219

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

~~Table of Contents~~

First Advantage Corporation

~~Consolidated Statements of Cash Flows~~

~~For the Nine Months Ended 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

~~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 Nine Months Ended September 30, 2009 and 2008 (Unaudited)~~

For the Nine Months Ended
(in thousands) September 30,
2009 2008
Supplemental disclosures of cash flow information:
Cash paid for interest $ 684 $ 2,106
Cash received for income tax refunds $ 1,081 $ 1,248
Cash paid for income taxes $ 33,996 $ 75,661
Non-cash investing and financing activities:
Notes issued in connection with acquisitions $ - $ 3,026
Class A shares issued for compensation $ 4,997 $ 2,788
Unrealized gain (loss) on investment, net of tax $ 10,528 $ (25,483 )

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

~~Table of Contents~~

~~First Advantage Corporation~~

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1.Organization, ~~and~~ Nature of Business,

and Basis of Presentation

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~~Delaware corporation, was formed on November 15, 2019. Hereafter, First ~~American~~Advantage Corporation and its ~~affiliates (“First American”) currently own or control, directly or indirectly,~~subsidiaries will collectively be referred to as the “Company”.

The Company derives its revenues from a variety of background check and compliance services performed across all phases of the ~~Company's Class B shares of common stock, which represents approximately 80% of equity interests of the Company~~workforce lifecycle from pre-onboarding services to post-onboarding and approximately 98% of the voting power of the Company as of 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 October 8, 2009, First American issued a press release announcing the commencement~~ongoing monitoring services, covering employees, contractors, contingent and extended workers, drivers, tenants, and volunteers. We generally classify our service offerings into three categories: pre-onboarding, post-onboarding, and adjacent products.

Pre-onboarding services are comprised of an ~~exchange offer (the “Offer”)~~extensive array of products and solutions that customers typically utilize to ~~acquire all~~enhance their evaluation process and support compliance from the time a job or other application is submitted to a successful applicant’s onboarding date. This includes searches such as criminal background checks, drug / health screenings, extended workforce screening, biometrics and identity checks, education / workforce verification, driver records and compliance, healthcare credentials, and executive screening.

Post-onboarding services are comprised of ~~the outstanding shares of the Company’s Class A common stock (“Class A Shares”) not owned~~continuous monitoring and re-screening solutions which are important tools to help keep their end customers, workforces, and other stakeholders safer, productive, and compliant. Our post-monitoring solutions include criminal records, healthcare sanctions, motor vehicle records, social media, and global sanctions screening continuously or ~~controlled~~at regular intervals selected by ~~First American at an exchange ratio of 0.58 of a First American common share per Class A Share (See Note 11 – Subsequent Event). On October 9, 2009, First American filed a Registration Statement on Form S-4 with the Securities~~our customers.

Adjacent products include products that complement our pre-onboarding and ~~Exchange Commission (the “SEC”), which contains the Offer to Exchange~~post-onboarding products and related materials. On that same day, the Company filed with the 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 Offersolutions. This includes fleet / vehicle compliance, hiring tax credits 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~~incentives, resident / tenant screening, employment eligibility, 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 currently estimated to be approximately $3.0 million.

investigative research.

~~Table of Contents~~

~~First 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 accompanying unaudited condensed consolidated financial ~~information included in this report has~~statements have been prepared in accordance with accounting principles generally accepted in the ~~instructions to Form 10-Q~~United States of America (“GAAP”) and ~~does not~~ include ~~all~~the accounts of the ~~information~~Company and ~~notes required by generally accepted accounting principles (“GAAP”) for complete~~its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated. The Company includes the results of operations of acquired companies prospectively from the date of acquisition.

The condensed consolidated financial ~~statements. In~~statements included herein are unaudited, but in the opinion of management, such financial statements include all adjustments, ~~are~~consisting of a normal recurring ~~nature~~adjustments, necessary to summarize fairly the Company’s financial position, results of operations, and ~~are considered necessary for a fair statement of the results~~cash flows for the interim ~~period.~~periods presented. The ~~year-end balance sheet data was derived from audited~~interim results reported in these condensed consolidated financial statements ~~but does~~should not ~~include all disclosures required by generally accepted accounting principles. This report~~be taken as indicative of results that may be expected for future interim periods or the full year. For a more comprehensive understanding of the Company and its condensed consolidated financial statements, these interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2008~~2021.

The Company has historically experienced seasonality with respect to certain customer industries as a result of fluctuations in hiring volumes and ~~as amended~~other economic activities. Generally, the Company’s highest revenues have historically occurred between October and November of each year, driven by many customers’ pre-holiday season hiring initiatives.

Segments — Operating segments are businesses for which separate financial information is available and evaluated regularly by our chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance.

During the first quarter of 2022, the Company made organizational changes and modified information provided to its CODM to better align with how its CODM assesses performance and allocates resources. As a result, the Company now has two reportable segments, Americas and International:

•

Americas provides technology solutions for screening, verifications, safety, and compliance in the United States, Canada, and Latin America markets; and

•

International provides technology solutions for screening, verifications, safety, and compliance outside of the Americas.

Accordingly, prior period results have been recast to conform to the current presentation of segments. These changes do not impact the Company’s consolidated results.

The Company’s segment disclosure is intended to provide the users of its consolidated financial statements with a view of the business that is consistent with management of the Company. Details of segment results are discussed in Note 16, “Reportable Segments.”

Use of Estimates — The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Changes in these estimates and assumptions may have a material impact on the ~~Current Form 8-K filed~~condensed consolidated financial statements and accompanying notes.

Significant estimates, judgments, and assumptions, include, but are not limited to, the determination of the fair value and useful lives of assets acquired and liabilities assumed through business combinations, the impairment of long-lived assets, goodwill impairment, collectability of receivables, revenue recognition, capitalized software, assumptions used for purposes of determining share-based compensation and income tax liabilities and assets. The Company bases its estimates on ~~October 8, 2009~~historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.

Note 2. Summary of Significant Accounting Policies

Fair Value of Financial Instruments — Certain financial assets and liabilities are reported at fair value in the accompanying consolidated balance sheets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurement. ASC 820 establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 defines fair value as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation techniques required by ASC 820 are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 — Significant inputs to the valuation model are unobservable (supported by little or no market activities). These inputs may be used with internally developed methodologies that reflect the Company’s best estimate of fair value from a market participant.

The fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, rather than the amount that would be paid to settle the liability with the ~~Securities~~creditor. Assets and ~~Exchange Commission.~~liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

The carrying amounts of cash and cash equivalents, short-term investments, receivables, short-term debt, and accounts payable approximate fair value due to the short-term maturities of these financial instruments (Level 1). The fair values and carrying values of the Company’s long-term debt are disclosed in Note 6.

The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of September 30, 2022 (in thousands):


	Level 1		Level 2		Level 3
Assets
Interest rate swaps	$	—	$	11,754	$	—

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Other intangible assets are subject to nonrecurring fair value measurement as the result of business acquisitions. The fair values of these assets were estimated using the present value of expected future cash flows through unobservable inputs (Level 3).

Business Combinations — The Company records business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Under the acquisition method of accounting, identifiable assets acquired and liabilities assumed are recorded at their acquisition-date fair values. The excess of the purchase price over the estimated fair value is recorded as goodwill. Changes in the estimated fair values of net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will adjust the amount of the purchase price allocable to goodwill. Measurement period adjustments are reflected in the period in which they occur.

In valuing the trade names, customer lists, and software developed for internal use, the Company utilizes variations of the income approach, which relies on historical financial and qualitative information, as well as assumptions and estimates for projected financial information. The Company considers the income approach the most appropriate valuation technique because the inherent value of these assets is their ability to generate current and future income. Projected financial information is subject to risk if estimates are incorrect. The most significant estimate relates to projected revenues and profitability. If the projected revenues and profitability used in the valuation calculations are not met, then the asset could be impaired.

Goodwill, Trade Name, and Customer Lists — The Company tests goodwill for impairment annually as of December 31 or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or indefinite-lived intangible asset below its carrying value. Goodwill is tested for impairment at the reporting unit level using a fair value approach. At December 31, 2021, the Company had two reporting units comprised of the Americas and International. When testing goodwill for impairment, the Company may first perform an optional qualitative assessment. If the Company determines it is not more likely than not the reporting unit’s fair value is less than its carrying value, then no further analysis is necessary. If the Company determines that it is more likely than not that the fair value of its reporting unit is less than its carrying amount, then the quantitative impairment test will be performed. Under the quantitative impairment test, if the carrying amount of the Company’s reporting unit exceeds its fair value, the Company will recognize an impairment loss in an amount equal to that excess but limited to the total amount of goodwill. No impairment charges have been required.

The Company’s trade name is amortized on an accelerated basis over its expected useful life of twenty years. The Company recorded $1.9 million and $2.0 million of amortization expense related to the trade name for the three months ended September 30, 2022 and 2021, respectively. Amortization expense related to the trade name was $5.7 million and $6.0 million for the nine months ended September 30, 2022 and 2021, respectively.

Customer lists are amortized on an accelerated basis based upon their estimated useful life of thirteen to fourteen years. The Company recorded $15.1 million and $16.4 million of amortization expense related to customer lists for the three months ended September 30, 2022 and 2021, respectively. Amortization expense related to customer lists was $45.6 million and $49.1 million for the nine months ended September 30, 2022 and 2021, respectively.

The Company regularly evaluates the amortization period assigned to each intangible asset to determine whether there have been any events or circumstances that warrant revised estimates of useful lives. In December 2021, and since that time, the Company determined that there have been no triggering events that would require impairment of trade names or customer lists.

Revenue Recognition — Revenues are recognized when control of the Company’s services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. In accordance with ASC 606, Revenue from Contracts with Customers, which was adopted as of January 1, 2019 using the modified retrospective method, revenues are recognized based on the following steps:

~~Certain~~a)

Identify the contract with a customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when (or as) the entity satisfies a performance obligation

A substantial majority of the Company’s revenues are derived from pre-onboarding and related services to our customers on a transactional basis, in which an individual background screening package or selection of services is ordered by a customer related to a single individual. Substantially all of the Company’s customers are employers, staffing companies, and other businesses or organizations. The Company satisfies its performance obligations and recognizes revenues for services rendered as the orders are completed and the completed reports are transmitted, or otherwise made available. The Company’s remaining services, substantially consisting of tax consulting, fleet management, and driver qualification services, are delivered over time as the customer simultaneously receives and consumes the benefits of the services delivered. To measure the Company’s performance over time, the output method is utilized to measure the value to the customer based on the transfer to date of the services promised, with no rights of return once consumed. In these cases, revenues on transactional contracts with a defined price but an undefined quantity are recognized utilizing the right to invoice expedient resulting in revenues being recognized when the service is provided and becomes billable. Additionally, under this practical expedient, the Company is not required to estimate the transaction price.

The Company considers negotiated and anticipated incentives and estimated adjustments, including historical collections experience, when recording revenues.

The Company’s contracts with customers generally include standard commercial payment terms acceptable in each region, and do not include any financing components. The Company does not have any significant obligations for refunds, warranties, or similar obligations. The Company records revenues net of sales taxes. Due to the Company’s contract terms and the nature of the background screening industry, the Company determined its contract terms for ASC 606 purposes are less than one year. As a result, the Company uses the practical expedient which allows it to expense incremental costs of obtaining a contract, primarily consisting of sales commissions, as incurred.

The Company records third-party pass-through fees incurred as part of screening related services on a gross revenue basis, with the related expense recorded as a cost of services expense, as the Company has control over the transaction and is therefore considered to be acting as a principal. The Company records motor vehicle registration and other tax payments paid on behalf of the Company’s fleet management customers on a net revenue basis as the Company does not have control over the transaction and therefore, is considered to be acting as an agent of the customer. Amounts received from fleet management customers are recorded in cash and cash equivalents in the accompanying consolidated balance sheets as the funds are not legally restricted.

Contract balances are generated when the revenues recognized in a given period varies from billing. A contract asset is created when the Company performs a service for a customer and recognizes more revenues than what has been billed. Contract assets are included in accounts receivable in the accompanying condensed consolidated balance sheets. A contract liability is created when the Company transfers a good or service to a customer and recognizes less than what has been billed. The Company recognizes these contract liabilities as deferred revenues when the Company has an obligation to perform services for a customer in the future and has already received consideration from the customer. Contract liabilities are included in deferred revenues in the accompanying condensed consolidated balance sheets.

Foreign Currency — The functional currency of all of the Company’s foreign subsidiaries is the applicable local currency. The translation of the applicable foreign currencies into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenues and expense accounts using average exchange rates prevailing during the fiscal year. Adjustments resulting from the translation of foreign currency financial statements are accumulated net of tax in a separate component of equity. Currency translation (loss) income included in accumulated other comprehensive income (loss) was approximately $(10.3) million and $(3.1) million for the three months ended September 30, 2022 and 2021, respectively. Currency translation (loss) income included in accumulated other comprehensive income (loss) was approximately $(23.1) million and $(1.6) million for the nine months ended September 30, 2022 and 2021, respectively.

Gains or losses resulting from foreign currency transactions are included in the accompanying condensed consolidated statements of operations and comprehensive income (loss), except for those relating to intercompany transactions of a long-term investment nature, which are captured in a separate component of equity as accumulated other comprehensive income (loss). Currency transaction income included in the accompanying condensed consolidated statements of operations and comprehensive income (loss) was approximately $1.1 million and $(0.2) million for the three months ended September 30, 2022 and 2021, respectively. Currency transaction income included in the accompanying condensed consolidated statements of operations and comprehensive income (loss) was approximately $2.4 million and $0.1 million for the nine months ended September 30, 2022 and 2021, respectively.

Recent Accounting Pronouncements — The Company qualifies as an emerging growth company under the Jumpstart Our Business Startups (“JOBS”) Act. The JOBS Act permits the Company an extended transition period for complying with new or revised accounting standards affecting public companies. The Company has elected to use this extended transition period and adopt certain new accounting standards on the private company timeline, which means that the Company’s financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards on a non-delayed basis.

There were no accounting pronouncements issued during the nine months ended September 30, 2022 that are expected to have a material impact on the condensed consolidated financial statements.

Recently Adopted Accounting Pronouncements — In February 2016, the FASB issued ASU 2016-02, Leases, and subsequently issued additional ASUs amending this ASU (collectively ASC 842, Leases). ASC 842 was issued to increase transparency and comparability among organizations by requiring the recognition of right of use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted the provisions of ASC 842 on January 1, 2022 using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption in line with the new transition method allowed under ASU 2018-11. ASC 842 provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients” which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight and elected the practical expedient pertaining to land easements. The new standard also provides practical expedients for an entity’s ongoing accounting for leases. The Company elected the short-term lease exemption for all leases that qualify, meaning the Company will not recognize ROU assets or lease liabilities for leases with terms shorter than twelve months. The Company also elected the practical expedient to not separate lease and non-lease components for a majority of its asset classes, including real estate and most equipment.

The adoption of ASC 842 had a material impact on the Company’s condensed consolidated balance sheets but did not have a material impact on our condensed consolidated statements of operations or cash flow. The most significant impact was the recognition of ROU assets of $12.7 million and lease liabilities for operating leases of $15.0 million based on the present value of the future minimum rental payments for existing operating leases. The difference in the balances is due to deferred rent, tenant incentive allowances, and prepaid amounts taken into account for adoption. Our accounting for finance leases, described in Note 13, remained unchanged.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU removes specific exceptions to the general principles in Topic 740. Among other things it eliminates the need for an organization to analyze whether the following apply in a given period: exception to the incremental approach for intra-period tax allocation; exceptions to accounting for basis differences when there are ownership changes in foreign investments; and exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. This amendment also improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP for: franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; separate financial statements of legal entities that are not subject to tax; and enacted changes in tax laws in interim periods. Adoption of this standard on January 1, 2022 did not have a material impact on the condensed consolidated financial statements.

Note 3. Acquisitions

2021 Acquisitions

On March 31, 2021, the Company completed its acquisition of selected assets and specified liabilities comprising the United Kingdom background screening business unit of a United Kingdom based company for cash consideration of $7.6 million. The Company recognized $3.1 million of goodwill and $3.0 million of intangible assets subject to amortization. Goodwill recognized is primarily attributable to assembled workforce and the expected growth of the Company and is not deductible for tax purposes. Results of operations have been included in the condensed consolidated financial statements of the Company’s International segment since the closing date.

On November 30, 2021, the Company completed its acquisition of a background screening and verification provider based in Mexico. Goodwill recognized as result of this acquisition was not deductible for tax purposes. Results of operations have been included in the condensed consolidated financial statements of the Company’s Americas segment since the closing date.

On November 30, 2021, the Company, through one of its wholly-owned subsidiaries in the United States, entered into an agreement to acquire 100% of the outstanding equity of Corporate Screening Services, LLC (“Corporate Screening”), a U.S.-based screening and compliance solutions provider which strengthened the Company’s healthcare and higher education solutions by adding technology and expertise tailored to those customers, for cash consideration of $39.4 million. The acquisition was considered an acquisition of assets for tax purposes and, accordingly, a significant portion of the $22.2 million of goodwill recognized was deductible for tax purposes. Identifiable intangible assets related to this acquisition totaled $15.5 million, of which $11.8 million was attributable to a customer related intangible asset, with an estimated useful life of fourteen years and $3.6 million was attributable to developed technology with a useful life of five years. In addition, the Company acquired current assets of $2.9 million and assumed liabilities of $1.6 million. The allocation was finalized as of June 30, 2022. Results of operations have been included in the condensed consolidated financial statements of the Company’s Americas segment since the closing date.

2022 Acquisition

The Company completed its asset purchase of Form I-9 Compliance, a U.S.-based technology solution and consulting service provider for I-9 and E-Verify compliance, for cash consideration of approximately $19.8 million. The transfer of ownership became effective as of January 1, 2022 and strategically expands the Company’s product suite offerings through the addition of new I-9 and employment eligibility solutions. The acquired assets were determined to constitute a business and the Company was deemed to be the acquirer under ASC 805. The Company recorded a preliminary allocation of the purchase price to assets acquired and liabilities assumed based on their estimated fair values as of January 1, 2022. The allocation was finalized as of September 30, 2022 and no adjustments were recorded to the Company’s previously recognized fair values.

The allocation of the purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date. The following table summarizes the consideration paid and the amounts recognized for the assets acquired and liabilities assumed (in thousands):


Consideration
Cash, net of cash acquired	$	19,087
Total fair value of consideration transferred	$	19,087
Current assets	$	1,151
Property and equipment, including software developed for internal use		3,045
Customer lists		6,100
Current liabilities		(325	)
Total identifiable net assets	$	9,971
Goodwill	$	9,116

Goodwill recognized in the acquisition of Form I-9 Compliance is deductible for tax purposes. Results of operations have been included in the condensed consolidated financial statements of the Company’s Americas segment since the effective date of the acquisition.

Note 4. Property and Equipment, net

Property and equipment, net as of September 30, 2022 and December 31, 2021 consisted of the following (in thousands):


	September 30, 2022			December 31, 2021
Furniture and equipment	$	23,785		$	20,462
Capitalized software for internal use, acquired by business combination		227,405			225,005
Capitalized software for internal use, developed internally or otherwise purchased		54,039			37,326
Leasehold improvements		2,906			3,001
Total property and equipment		308,135			285,794
Less: accumulated depreciation and amortization		(182,512	)		(131,485	)
Property and equipment, net	$	125,623		$	154,309

Depreciation and amortization expense of property and equipment was approximately $17.7 million and $17.4 million for the three months ended September 30, 2022 and 2021, respectively. Depreciation and amortization expense of property and equipment was approximately $51.9 million and $51.4 million for the nine months ended September 30, 2022 and 2021, respectively.

Note 5. Goodwill, Trade Name, and Customer Lists

The changes in the carrying amount of goodwill for the nine months ended September 30, 2022 by reportable segment were as follows (in thousands):


	Americas			International			Total
Balance – December 31, 2021	$	668,048		$	125,844		$	793,892
Acquisitions		9,116			—			9,116
Adjustments to initial purchase price allocations		(167	)		—			(167	)
Foreign currency translation		144			(11,411	)		(11,267	)
Balance – September 30, 2022	$	677,141		$	114,433		$	791,574

The following summarizes the gross carrying value and accumulated amortization for the Company’s trade name and customer lists as of September 30, 2022 and December 31, 2021 (in thousands):


	September 30, 2022
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Useful Life (in years)
Trade name	$	93,809	$	(20,881	)	$	72,928	20 years
Customer lists		514,894		(174,338	)		340,556	13-14 years
Total	$	608,703	$	(195,219	)	$	413,484


	December 31, 2021
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Useful Life (in years)
Trade name	$	95,026	$	(15,441	)	$	79,585	20 years
Customer lists		515,524		(130,758	)		384,766	14 years
Total	$	610,550	$	(146,199	)	$	464,351

Amortization expense of trade name and customer lists was approximately $17.0 million and $18.4 million for the three months ended September 30, 2022 and 2021, respectively. Amortization expense of trade name and customer lists was approximately $51.3 million and $55.1 million for the nine months ended September 30, 2022 and 2021, respectively.

Note 6. Long-term Debt

The fair value of the Company’s long-term debt obligations approximated their book value as of September 30, 2022 and December 31, 2021 and consisted of the following (in thousands):


	September 30, 2022			December 31, 2021
Successor First Lien Credit Facility	$	564,724		$	564,724
Less: Deferred financing costs		(8,532	)		(9,879	)
Long-term debt, net	$	556,192		$	554,845

In February 2020, a new financing structure was established consisting of a new First Lien Credit Agreement (“Successor First Lien Agreement”) and a new Second Lien Credit Agreement (“Successor Second Lien Agreement”) (collectively, the “Successor Credit Agreements”). The Successor First Lien Agreement provided financing in the form of a $670.0 million term loan due January 31, 2027, carrying an interest rate of 3.25% to 3.50%, based on the first lien leverage ratio, plus LIBOR (“Successor First Lien Credit Facility”) and a new $75.0 million revolving credit facility due January 31, 2025 (“Successor Revolver”). The Successor First Lien Credit Facility required mandatory quarterly repayments of 0.25% of the original loan balance commencing September 30, 2020. Beginning with the year ending December 31, 2021, the Successor First Lien Credit Facility required mandatory payments based on calculated excess cash flow, as defined within the Successor First Lien Credit Agreement. The Successor Second Lien Agreement provided financing in the form of a $145.0 million term loan due January 31, 2028, carrying an interest rate of 8.50% plus LIBOR (“Successor Second Lien Credit Facility”). The Successor Credit Agreements are collateralized by substantially all assets and capital stock owned by direct and indirect domestic subsidiaries and are governed by certain restrictive covenants including limitations on indebtedness, liens, and other corporate actions such as investments and acquisitions. In the event the Company’s outstanding indebtedness under the Successor Revolver exceeds 35% of the aggregate principal amount of the revolving commitments then in effect, it is required to maintain a consolidated first lien leverage ratio no greater than 7.75 to 1.00.

In February 2021, the Company refinanced its Successor First Lien Credit Facility at an increased principal amount of $766.6 million due January 31, 2027, carrying a reduced interest rate of 3.00% to 3.25%, based on the first lien leverage ratio, plus LIBOR. No changes were made to the associated revolving credit facility due January 31, 2025. In connection with the refinancing of the Successor First Lien Credit Facility, the Company fully repaid its Successor Second Lien Credit Facility. As a result of these transactions the Company recorded a total loss on extinguishment of debt of $13.9 million, composed of the write-off of unamortized deferred financing costs plus a prepayment premium, accrued interest, and other fees.

In connection with the closing of the Company’s initial public offering (“IPO”), on June 30, 2021, the Company repaid $200.0 million of its Successor First Lien Credit Facility outstanding, of which $44.3 million was applied to the remaining quarterly principal payments due under the Successor First Lien Agreement. As a result of the IPO, the Company’s interest rate under the Successor First Lien Credit Facility was reduced by 0.25% to a range of 2.75% to 3.00%, based on the first lien ratio, plus LIBOR. The remaining $564.7 million term loan is scheduled to mature on January 31, 2027. As a result of the prepayment, the Company recorded additional interest expense of $3.7 million associated with the accelerated amortization of the related deferred financing costs.

Additionally, in connection with the closing of the IPO, the Company entered into an amendment that increased the borrowing capacity under the Successor Revolver from $75.0 million to $100.0 million and extended the maturity date from January 31, 2025 to July 31, 2026. As of September 30, 2022, the Company had no outstanding amounts under the Successor Revolver, and therefore, was not subject to the consolidated first lien leverage ratio covenant and was compliant with all other covenants under the agreement.

Note 7. Derivatives

In February 2020, the Company entered into an interest rate collar agreement with a counterparty bank in order to reduce its exposure to interest rate volatility. In this agreement, the Company and the counterparty bank agreed to a one-month USD LIBOR floor of 0.48% and a cap of 1.50% on a portion of the Company’s Successor First Lien Facility. The notional amount of this agreement was $405.0 million through February 2022 at which time the notional amount was reduced to $300.0 million through February 2024.

The following is a summary of location and fair value of the financial position recorded related to the derivative instruments (in thousands):


		Fair Value
Derivatives not designated as hedging instruments	Balance Sheet Location	As of September 30, 2022		As of December 31, 2021
Interest rate swaps	Prepaid expenses and other current assets	$	11,754	$	197

The following is a summary of location and amount of gains and (losses) recorded related to the derivative instruments (in thousands):


		Gain/(Loss)
		Three Months Ended September 30,					Nine Months Ended September 30,
Derivatives not designated as hedging instruments	Income Statement Location	2022		2021			2022		2021
Interest rate swaps	Interest expense, net	$	3,998	$	(108	)	$	11,376	$	845

Note 8. Income Taxes

The Company’s income tax expense and balance sheet accounts reflect the results of the Company and its subsidiaries.

For the three and nine months ended September 30, 2022, the Company estimated the annual effective tax rate based on projected income for the full year and recorded a quarterly tax provision in accordance with the annual effective tax rate and adjusted for discrete tax items in the period.

The effective income tax rate for the three and nine months ended September 30, ~~2008~~2022 was 28.1% and ~~at December 31, 2008 have been reclassified to conform with the 2009 presentation.~~

~~Operating results~~27.8%, respectively. The Company’s effective income tax rate for the three and nine months ended September 30, ~~2009~~2022 was higher than the U.S. federal statutory rate of 21% primarily due to the Global Intangible Low-Taxed Income (“GILTI”) inclusion, nondeductible share-based compensation, and ~~2008 are not necessarily indicative~~U.S. state income taxes.

The Company’s effective income tax rate for the three and nine months ended September 30, 2021 was 17.3% and 75.3%, respectively. The Company’s effective income tax rate for the three months ended September 30, 2021 was lower than the U.S. federal statutory rate of 21%, primarily due to the impact of applying the annual effective tax rate in the third quarter of 2021 versus calculating the year-to-date tax expense based on actuals in the second quarter of 2021 which resulted in a true-up that was reflected in the quarter to date amount, an increase of research and development tax credits, and a favorable discrete income tax adjustment from certain changes in estimate as a result of filing certain prior year tax returns. The Company’s effective income tax rate for the nine months ended September 30, 2021 was higher than the U.S. federal statutory rate of 21%, primarily due to the increase of the ~~results that may be expected~~foreign income tax as a result of increased foreign income in various foreign tax jurisdictions, the increase of the deferred income tax liability on intangibles as a result of the UK corporate income tax rate increase, foreign withholding tax, and increased U.S. state income tax for the ~~entire fiscal year.~~nine months ended September 30, 2021. These items were partially offset by an increase of research and development tax credits and a favorable discrete adjustment from the finalization of the 2020 income tax returns.

Note 9. Revenues

Performance obligations

Substantially all of the Company’s revenues are recognized at a point in time when the orders are completed and the completed reports are reported, or otherwise made available. For revenues delivered over time, the output method is utilized to measure the value to the customer based on the transfer to date of the services promised, with no rights of return once consumed. In these cases, revenues on transactional contracts with a defined price but an undefined quantity is recognized utilizing the right to invoice expedient resulting in revenues being recognized when the service is provided and becomes billable. Additionally, under this practical expedient, the Company is not required to estimate the transaction price.

Accordingly, in any period, the Company does not recognize a significant amount of revenues from performance obligations satisfied or partially satisfied in prior periods and the amount of such revenues recognized during the three and nine months ended September 30, 2022 and 2021 were immaterial.

Contract assets and liabilities

The contract asset balance was $13.5 million and $7.4 million as of September 30, 2022 and December 31, 2021, respectively, and is included in accounts receivable, net in the accompanying condensed consolidated balance sheets. The contract liability balance was $0.8 million and $0.9 million as of September 30, 2022 and December 31, 2021, respectively, and is included in deferred revenues in the accompanying condensed consolidated balance sheets. An immaterial amount of revenues was recognized in the current period related to the beginning balance of deferred revenues.

Concentrations

The Company did not have any customers which represented 10% or more of consolidated revenues for the three months ended September 30, 2021 or during the nine months ended September 30, 2021 and 2022. The Company had one customer which represented approximately 10% of its consolidated revenues during the three months ended September 30, 2022. Additionally, the Company did not have any customers which represented 10% or more of consolidated accounts receivable, net for any period presented.

For additional disclosures about the disaggregation of our revenues see Note 16, “Reportable Segments.”

Note 10. Share-based Compensation

Share-based compensation expense is recognized in cost of services, product and technology expense, and selling, general, and administrative expense, in the accompanying condensed consolidated statements of operations and comprehensive income (loss) as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Share-based compensation expense
Cost of services	$	292	$	3	$	842	$	76
Product and technology expense		402		55		918		176
Selling, general, and administrative expense		1,328		1,285		4,064		4,317
Total share-based compensation expense	$	2,022	$	1,343	$	5,824	$	4,569

Successor Plan

Prior to the IPO, all share-based awards were issued by Fastball Holdco, L.P., the Company’s previous parent company, under individual grant agreements and the partnership agreement of such parent company (collectively the “Successor Plan”).

Awards issued under the Successor Plan consist of options and profits interests and vest based on two criteria (50% each): (1) Time — awards vest over five years at a rate of 20% per year; and (2) Performance — awards vest based upon a combination of the five year time vesting, subject to the Company’s investors receiving a targeted money-on-money return. Options issued under the Successor Plan generally expire ten years after the grant date. No awards were issued under the plan during the period from January 1, 2021 through September 30, 2021.

In connection with the Company’s IPO, the Company’s parent was dissolved. Awards issued by the Company’s parent were converted in accordance with non-discretionary anti-dilution provisions of the Successor grants as follows:

•

All vested outstanding profits interest grants issued by the Company’s parent were converted to common stock in the Company and all unvested outstanding profits interest grants issued by the Company’s parent were converted to restricted stock in the Company under the 2021 Omnibus Incentive Plan (the “2021 Equity Plan”). The number of common stock and restricted stock shares issued to each profits interest holder was ratably adjusted to preserve the fair value of the awards. Additionally, the vesting conditions and equity classification of the awards remained unchanged as a result of the conversion.

•

All outstanding stock option grants issued by the Company’s parent were converted into stock options issued by the Company under the terms of the individual grant agreements. The number of options granted and the strike price of the options was ratably adjusted using an exchange ratio calculated to preserve the fair value of the awards. Additionally, the vesting, vesting conditions, and equity classification of the awards remained unchanged as a result of the conversion.

~~Subsequent events have been evaluated~~


		Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
December 31, 2021	Grants outstanding		3,519,563		$	6.66
	Grants exercised		(309,087	)	$	6.65
	Grants cancelled/forfeited		(315,865	)	$	6.61
September 30, 2022	Grants outstanding		2,894,611		$	6.66	7.3 Years	$17.8 million
September 30, 2022	Grants vested		707,264		$	6.64	7.0 Years	$4.4 million
September 30, 2022	Grants unvested		2,187,347		$	6.67

2021 Equity Plan

In connection with the IPO, the Company adopted the 2021 Equity Plan. The 2021 Equity Plan is intended to provide a means through ~~October 29, 2009,~~which to attract and retain key personnel and to provide a means whereby our directors, officers, employees, consultants, and advisors can acquire and maintain an equity interest in us, or be paid incentive compensation, including incentive compensation measured by reference to the ~~date these financial statements were issued.~~

value of our common stock, thereby strengthening their commitment to our welfare and aligning their interests with those of our stockholders. The 2021 Equity Plan provides for the grant of awards of stock options, stock appreciation rights, restricted shares, restricted stock units, and other equity-based or cash-based awards as determined by the Company’s Compensation Committee. The 2021 Equity Plan initially had a total of 17,525,000 shares of common stock reserved. The number of reserved shares automatically increases on the first day of each calendar year commencing on January 1, 2022 and ending on January 1, 2030, in an amount equal to the lesser of (x) 2.5% of the total number of shares of common stock outstanding on the last day of the immediately preceding calendar year and (y) a number of shares as determined by the Board of Directors. As of September 30, ~~2009,~~2022, 13,578,273 shares were available for issuance under the 2021 Equity Plan.

Stock Options

Stock options issued immediately prior to the IPO vest based on two criteria (50% each): (1) Time — awards vest over five years at a rate of 20% per year; and (2) Performance — awards vest based upon a combination of the five year time vesting, subject to the Company’s ~~significant~~investors receiving a targeted money-on-money return. Stock options issued after the IPO vest annually, generally over four to five years. Stock options generally expire ten years after the grant date.

A summary of the option activity for the nine months ended September 30, 2022 is as follows:


		Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
December 31, 2021	Grants outstanding		3,714,540		$	15.33
	Grants issued		608,122		$	14.68
	Grants cancelled/forfeited		(11,000	)	$	17.52
September 30, 2022	Grants outstanding		4,311,662		$	15.24	8.9 Years	$	—
September 30, 2022	Grants vested		1,004,552		$	15.08	8.7 Years	$	—
September 30, 2022	Grants unvested		3,307,110		$	15.28

The fair value for stock options granted for the nine months ended September 30, 2022 was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighed average assumptions:


	Options
Expected stock price volatility		34.66	%
Risk-free interest rate		2.77	%
Expected term (in years)		6.2
Fair-value of the underlying unit	$	14.68

Restricted Stock Units

Restricted stock units (“RSU”) vest annually, generally over three to five years.

A summary of the RSU activity for the nine months ended September 30, 2022 is as follows:


		Shares			Weighted Average Grant Date Fair Value
December 31, 2021	Nonvested RSUs		340,875		$	17.19
	Granted		203,032		$	14.36
	Vested		(42,300	)	$	16.63
	Forfeited		(4,400	)	$	17.52
September 30, 2022	Nonvested RSUs		497,207		$	16.08

Restricted Stock

The following table summarizes the restricted stock issued by the Company. These include grants of unvested Successor profits interests grants that were converted into restricted stock as described above, as well as restricted stock issued to new recipients. The restricted stock granted as a result of the conversion of Successor profits interests retain the vesting attributes (including original service period vesting start date) of the original award. A summary of the restricted stock activity for the nine months ended September 30, 2022 is as follows:


		Shares			Weighted Average Grant Date Fair Value
December 31, 2021	Nonvested restricted stock		2,613,359		$	3.85
	Granted		—		$	—
	Vested		(332,059	)	$	3.85
September 30, 2022	Nonvested restricted stock		2,281,300		$	3.85

As of September 30, 2022, the Company had approximately $36.7 million of unrecognized pre-tax noncash compensation expense, comprised of approximately $7.9 million related to restricted stock, $7.0 million related to restricted stock units, and approximately $21.8 million related to stock options, which the Company expects to recognize over a weighted average period of 3.1 years.

2021 Employee Stock Purchase Plan

On June 25, 2021, in connection with the IPO, the Company adopted the First Advantage Corporation 2021 Employee Stock Purchase Plan (“ESPP”) that allows eligible employees to voluntarily make after-tax contributions of up to 15% of such employee’s cash compensation to acquire Company stock during designated offering periods. During each offering period, there will be one six-month purchase period, which will have the same duration and coincide with the length of the offering period. During the holding period, ESPP purchased shares are not eligible for sale or broker transfer. The Company recorded an associated expense of approximately $0.1 million and $0.3 million for the three and nine months ended September 30, 2022, respectively.

Note 11. Equity

Common and Preferred Stock

On June 11, 2021, the Company’s Board of Directors approved and made effective a 1,300,000-for-one stock split of the Company’s common stock and filed an Amended and Restated Certificate of Incorporation, which authorized a total of 1,000,000,000 shares of Common Stock, $0.001 par value per share and 250,000,000 shares of Preferred Stock, par value $0.001 per share (the “Preferred Stock”). The par value per share of common stock remained unchanged at $0.001 per share. Authorized shares were increased from 10,000 shares to 1,000,000,000 shares. The condensed consolidated financial statements and accompanying notes give retroactive effect to the stock split for all periods presented. After giving retroactive effect to the stock split, as of December 31, 2020, 130,000,000 shares of common stock were issued and outstanding.

In connection with the IPO, Fastball Holdco, L.P., the Company’s parent, was dissolved and all outstanding Class A LP Units, Class B LP Units, and Class C LP Units of Fastball Holdco, L.P. were exchanged for 130,000,000 shares of the Company’s common stock.

As of September 30, 2022, no preferred stock had been issued.

Stock Repurchase Program

On August 2, 2022, the Company’s Board of Directors authorized the repurchase of up to $50.0 million of the Company’s common stock over the 12-month period ending August 2, 2023 (the “Repurchase Program”). Stock repurchases may be effected through open market repurchases at prevailing market prices, including through the use of block trades and trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, privately-negotiated transactions, through other transactions in accordance with applicable securities laws, or a combination of these methods on such terms and in such amounts as the Company deems appropriate and will be funded from available capital. The Company is not obligated to repurchase any specific number of shares, and the timing, manner, value, and actual number of shares repurchased will depend on a variety of factors, including the Company’s stock price and liquidity requirements, other business considerations and general market and economic conditions. No shares will be purchased from SLP Fastball Aggregator, L.P. and its affiliates. The Company may discontinue or modify purchases without notice at any time.

A summary of the stock repurchase activity under the Repurchase Program, is summarized as follows (in thousands, except share and per share amounts):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022		2022
Shares repurchased		155,697		155,697
Average price per share	$	14.42	$	14.42
Costs recorded to accumulated earnings (deficit)
Total repurchase costs	$	2,245	$	2,245
Additional associated costs		3		3
Total costs recorded to accumulated earnings (deficit)	$	2,248	$	2,248

As of September 30, 2022, the remaining authorized value of shares available to be repurchased under this program was approximately $47.8 million.

The purchase price for the shares of our stock repurchased is reflected as a reduction to accumulated earnings (deficit).

Note 12. Commitments and Contingencies

Except for certain changes to our lease agreements discussed in Note 13, there have been no material changes to the Company’s contractual obligations as compared to December 31, 2021.

Litigation — The Company is involved in litigation from time to time in the ordinary course of business. At times, the Company, given the nature of its background screening business, could become subject to lawsuits, or potential class action lawsuits, in multiple jurisdictions, related to claims brought primarily by consumers or individuals who were the subject of its screening services.

For all pending matters, the Company believes it has meritorious defenses and intends to defend vigorously or otherwise seek indemnification from other parties as appropriate. However, the Company has recorded a liability of $4.0 million and $7.9 million at September 30, 2022 and December 31, 2021, respectively, for matters that it believes a loss is both probable and estimable. This is included in accrued liabilities in the accompanying condensed consolidated balance sheets.

In February 2022, the Company settled and paid $5.5 million related to a settlement agreement the parties had agreed upon in April 2020 and was approved by the court in December 2021. In March 2022, the Company received a recovery of $2.2 million, which represented the portion of the legal settlement and legal fees incurred by the Company which were recovered from the Company’s insurers related to this case.

The Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable.

Note 13. Leases

Effective January 1, 2022, the Company adopted ASC 842, which requires recognition of ROU assets and lease liabilities on the balance sheet, based on the present value of the future minimum rental payments for existing operating leases. The Company adopted the provisions of ASC 842 on January 1, 2022 using a modified retrospective approach through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption in line with the new transition method allowed under ASU 2018-11. ASC 842 provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients” which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight and elected the practical expedient pertaining to land easements. The new standard also provides practical expedients for an entity’s ongoing accounting for leases. The Company elected the short-term lease exemption for all leases that qualify, meaning the Company will not recognize ROU assets or lease liabilities for leases with terms shorter than twelve months. The Company also elected the practical expedient to not separate lease and non-lease components for a majority of its asset classes, including real estate and most equipment.

The Company measures the ROU assets and liabilities based on the present value of the future minimum lease payments over the lease term at the commencement date. Minimum lease payments include the fixed lease and non-lease components of the agreement, as well as any variable rent payments that depend on an index, initially measured using the index at the lease commencement date. The ROU assets are adjusted for any initial direct costs incurred less any lease incentives received, in addition to payments made on or before the commencement date of the lease. The Company recognizes lease expense for leases on a straight-line basis over the lease term.

As the implicit rate is not readily determinable for most of the Company’s lease agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments.

The Company determines if a contract is or contains a lease at inception. The Company has operating and finance leases for office space, data centers, and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company enters into lease contracts ranging from 1 to 9 years with a majority of the Company’s lease terms ranging from 3 to 5 years.

Some leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 5 years or more. The exercise of these lease renewal options is at the Company’s sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease term.

Certain of our leases include rental payments that will adjust periodically for inflation or certain adjustments based on step increases. An insignificant number of our leases contain residual value guarantees and none of our agreements contain material restrictive covenants. Variable rent expenses consist primarily of maintenance, property taxes, and charges based on usage.

The components of lease costs are as follows (in thousands):


	Three Months Ended September 30, 2022			Nine Months Ended September 30, 2022
Operating lease costs
Fixed	$	1,814		$	5,401
Short-term		63			176
Variable		7			21
Sub-leases		(22	)		(34	)
Total operating lease costs	$	1,863		$	5,564

Finance lease costs
Amortization of leased assets	$	181		$	581
Interest on lease liabilities		5			26
Total finance lease costs	$	187		$	607
Total lease cost	$	2,049		$	6,171

Supplemental balance sheet information related to leases is as follows (in thousands):


	Classification	September 30, 2022
Assets
Operating leases
Right of use operating lease assets	Other assets	$	14,058
Finance leases
Property and equipment, gross	Property and equipment, net		5,095
Accumulated depreciation	Property and equipment, net		(4,885	)
Property and equipment, net	Property and equipment, net		210
Total lease assets		$	14,268

Liabilities
Operating leases
Other current	Current portion of operating lease liability	$	5,500
Non-current	Operating lease liability, less current portion		9,947
Total operating liabilities			15,447
Finance leases
Other current	Accrued liabilities		308
Non-current	Other liabilities		7
Total finance liabilities			315
Total lease liabilities		$	15,762

Maturities of lease liabilities are as follows (in thousands):


Years Ending December 31,
	Finance Leases			Operating Leases			Total
2022 (excluding the nine months ended September 30, 2022)	$	214		$	1,895		$	2,109
2023		106			6,041			6,147
2024		—			5,264			5,264
2025		—			2,032			2,032
2026		—			1,523			1,523
Thereafter		—			383			383
Total minimum lease payments	$	320		$	17,138		$	17,458
Less: Imputed interest		(5	)		(1,270	)
Present value of minimum lease payments	$	315		$	15,868

For additional information regarding the Company’s Commitments and Contingencies as of December 31, 2021 as disclosed for capital and operating leases, see Note 12 in its 2021 Annual Report filed on Form 10-K.

Lease term and discount rates are as follows:


	September 30, 2022
Weighted average remaining lease term
Operating leases	3.0 Years
Finance leases	0.6 Years

Weighted average discount rate
Operating leases		4.84	%
Finance leases		5.41	%

Supplemental cash flow information related to leases was as follows (in thousands):


	Nine Months Ended September 30, 2022
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	5,886
Operating cash flows from finance leases		26
Financing cash flows from finance leases		673
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	19,972
Finance leases		—
Amortization:
Amortization of right-of-use operating lease assets (1)	$	4,817

(1)

Amortization of right of use operating lease assets during the period is reflected in operating lease liabilities on the condensed consolidated statements of cash flows.

Note 14. Related Party Transactions

The Company has no material related party transactions.

Note 15. Net Income Per Share

Basic weighted-average shares outstanding excludes nonvested restricted stock. Diluted weighted average shares outstanding is similar to basic weighted-average shares outstanding, except that the weighted-average number of shares is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common share had been issued, including the dilutive impact of nonvested restricted stock. Basic and diluted net income per share was calculated as follows:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2022		2021			2022		2021
Basic net income per share	$	0.11	$	0.11		$	0.29	$	0.00
Diluted net income per share	$	0.11	$	0.11		$	0.29	$	0.00
Numerator:					��
Net income (in thousands)	$	17,209	$	16,285		$	44,458	$	666
Denominator:
Weighted average number of shares outstanding - basic		150,930,340		149,943,998			150,740,518		137,232,289
Add stock options to purchase shares and restricted stock units		1,426,967		2,456,421			1,634,694		938,199
Weighted average number of shares outstanding - diluted		152,357,307		152,400,419			152,375,212		138,170,488

For the three and nine months ended September 30, 2022, 2,918,315 and 2,614,866 stock options were excluded from the calculation of diluted net income per share, respectively, because their effects were anti-dilutive.

Note 16. Reportable Segments

During the first quarter of 2022, the Company made organizational changes and modified additional information provided to its CODM to better align with how its CODM assesses performance and allocates resources. As a result, we have two reportable segments, Americas and International. Our CODM uses the profit measure of Adjusted EBITDA, on both a consolidated and a segment basis, to allocate resources and assess performance of our businesses. We use Adjusted EBITDA as our profit measure because it eliminates the impact of certain items that we do not consider indicative of operating performance, which is useful to compare operating results between periods. Our board of directors and executive management team also use Adjusted EBITDA as a compensation measure for both segment and corporate management under our incentive compensation plans. Adjusted EBITDA is also a measure frequently used by securities analysts, investors, and other interested parties in their evaluation of the operating performance of companies similar to ours.

We define Adjusted EBITDA as net income before interest, taxes, depreciation, and amortization, and as further adjusted for loss on extinguishment of debt, share-based compensation, transaction and acquisition-related charges, integration and restructuring charges, and other non-cash charges. We exclude the impact of share-based compensation because it is a non-cash expense and we believe that excluding this item provides meaningful supplemental information regarding performance and ongoing cash generation potential. We exclude loss on extinguishment of debt, transaction and acquisition related charges, integration and restructuring charges, and other charges because such expenses are episodic in nature and have no direct correlation to the cost of operating our business on an ongoing basis.

The segment financial information below aligns with how we report information to our CODM to assess operating performance and how the Company manages the business. Corporate costs are generally allocated to the segments based upon estimated revenues levels and other assumptions that management considers reasonable. The CODM does not review the Company’s assets by segment; therefore, such information is not presented. The accounting policies of the segments are the same as described in Note 2, “Significant Accounting and ~~estimates,~~Reporting Policies” and Note 9, “Revenues.”

The following is a description of our two reportable segments:

Americas. This segment performs a variety of background check and compliance services across all phases of the workforce lifecycle from pre-onboarding services to post-onboarding and ongoing monitoring services, covering employees, contractors, contingent and extended workers, drivers, tenants, and volunteers. We generally classify our service offerings into three categories: pre-onboarding, post-onboarding, and adjacent products. We deliver our solutions across multiple vertical industries in the United States, Canada, and Latin America markets.

International. The International segment provides services similar to our Americas segment in regions outside of the Americas. We primarily deliver our solutions across multiple vertical industries in the Europe, India, and Asia Pacific markets.

A reconciliation of Segment Adjusted EBITDA to net income for the three and nine months ended September 30, 2022 and 2021 is as follows (in thousands):


	Three Months Ended September 30,					Nine Months Ended September 30,
	2022			2021		2022			2021
Adjusted EBITDA
Americas	$	57,205		$	53,223	$	156,978		$	136,278
International		6,983			10,721		21,644			20,578
Total	$	64,188		$	63,944	$	178,622		$	156,856
Adjustments to reconcile to net income:
Interest expense, net		1,740			4,706		4,002			21,875
Provision for income taxes		6,709			3,397		17,076			2,025
Depreciation and amortization		34,744			35,812		103,185			106,493
Loss on extinguishment of debt		—			—		—			13,938
Share-based compensation		2,022			1,343		5,824			4,569
Transaction and acquisition-related charges (a)		1,908			2,144		4,585			6,510
Integration, restructuring, and other charges (b)		(144	)		257		(508	)		780
Net income	$	17,209		$	16,285	$	44,458		$	666

(a)

Represents charges incurred related to acquisitions and similar transactions, primarily consisting of change in control-related costs, professional service fees, and other third-party costs. Additionally includes incremental professional service fees incurred related to the initial public offering and subsequent one-time compliance efforts. The three and nine months ended September 30, 2022 includes a transaction bonus expense related to one of the Company’s 2021 acquisitions.

(b)

Represents charges from organizational restructuring and integration activities, non-cash, and other charges primarily related to legal exposures inherited from legacy acquisitions, foreign currency (gains) losses, and (gains) losses on the sale of assets.

Geographic Information

The Company bases revenues by geographic region in which the revenues and invoicing are ~~detailed~~recorded. Other than the United States, no single country accounted for 10% or more of our total revenues during these periods.

The following summarizes revenues by geographical region for the three and nine months ended September 30, 2022 and 2021 (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenues
Americas	$	176,091		$	158,972		$	506,770		$	421,795
International		31,628			35,595			96,413			82,237
Eliminations		(1,733	)		(1,700	)		(5,755	)		(4,269	)
Total revenues	$	205,986		$	192,867		$	597,428		$	499,763

The following table sets forth net long-lived assets by geographic area as of September 30, 2022 and December 31, 2021 (in thousands):


	September 30, 2022		December 31, 2021
Long-lived assets, net
United States, country of domicile	$	1,161,230	$	1,213,093
All other countries		183,509		199,459
Total long-lived assets, net	$	1,344,739	$	1,412,552

Note 17. Subsequent Events

On November 8, 2022, the Company' Board of Directors authorized an increase to the total available amount under its Repurchase Program to $150.0 million and extended the program through December 31, 2023. Through November 4, 2022, the Company had made $21.6 million of purchases under the Repurchase Program.

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

The following discussion and analysis of First Advantage Corporation’s financial condition and results of operations is provided as a supplement to the condensed consolidated financial statements for the three and nine months ended September 30, 2022, and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021, our “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2008, have not changed from December 31, 2008, except for~~2021.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the ~~adoption~~meaning of the ~~Financial Accounting Standards Board's (“FASB”) GAAP updates related~~Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, ~~business combinations, noncontrolling interest in consolidated~~among other things, our operations and financial performance. Forward-looking statements ~~subsequent events,~~

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~~First Advantage Corporation~~

~~Notes to Consolidated Financial Statements~~

~~interim disclosures about fair value of financial instruments, and FASB Accounting Standards Codification.~~

~~Purchase Accounting~~

~~In December 2007, the FASB updated GAAP related to business combinations. This update retains the fundamental requirements in previous~~include all statements that ~~the acquisition method of accounting (which is called the purchase method) be used for all~~are not historical facts. These forward-looking statements relate to matters such as our industry, business ~~combinations~~strategy, goals and ~~for an acquirer to be identified for each business combination.~~expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information. In ~~general, the update 1) broadens the guidance, extending its applicability to all events where one entity obtains control over one or more other businesses, 2) broadens~~some cases, you can identify these forward-looking statements by the use of ~~fair value measurements used~~words such as “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “future,” “will,” “seek,” “foreseeable,” the negative version of these words, or similar terms and phrases.

These forward-looking statements are subject to ~~recognize~~various risks, uncertainties, assumptions, or changes in circumstances that are difficult to predict or quantify. Such risks and uncertainties include, but are not limited to, the ~~assets acquired~~following: the impact of COVID-19 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~~continuously evolving risks to our results of ~~this update prospectively to business combinations for which the acquisition date is on~~ operations, financial position and/or ~~after January 1, 2009.~~

~~Noncontrolling Interest~~

~~In December 2007, the FASB updated GAAP related to noncontrolling interests in consolidated financial statements. This update requires that a noncontrolling interest~~liquidity; our operations in a ~~subsidiary be reported as equity~~highly regulated industry and the ~~amount~~fact that we are subject to numerous and evolving laws and regulations, including with respect to personal data and data security; our reliance on third-party data providers; negative changes in external events beyond our control, including our customers’ onboarding volumes, economic drivers which are sensitive to macroeconomic cycles, such as interest rate volatility and inflation, geopolitical unrest, and the COVID-19 pandemic; potential harm to our business, brand, and reputation as a result of ~~consolidated net income specifically attributable~~security breaches, cyber-attacks or the mishandling of personal data; liability and litigation due to the ~~noncontrolling interest~~sensitive and privacy-driven nature of our products and solutions, which could be ~~identified~~costly and time-consuming to defend and may not be fully covered by insurance; the continued integration of our platforms and solutions with human resource providers such as applicant tracking systems and human capital management systems as well as our relationships with such human resource providers; risks relating to public opinion, which may be magnified by incidents or adverse publicity concerning our industry or operations; our contracts with our customers, which do not guarantee exclusivity or contracted volumes; our reliance on third-party vendors to carry out certain portions of our operations; disruptions, outages, or other errors with our technology and network infrastructure, including our data centers, servers and third-party cloud and internet providers and our migration to the cloud; disruptions at our Global Operating Center and other operating centers; operating in ~~the consolidated financial statements. It also requires consistency in the manner of reporting~~a penetrated and competitive market; our ability to obtain, maintain, protect, and enforce our intellectual property and other proprietary information; our indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the ~~parent’s ownership interest~~economy or our industry, and ~~requires fair value measurement~~prevent us from meeting our obligations; Silver Lake’s control of ~~any noncontrolling equity investment retained in a deconsolidation. The Company has applied the provisions of this update effective beginning on January 1, 2009~~us and the ~~adoption did not have a material effect on its consolidated financial statements.~~

~~Fair Value of Financial Instruments~~

In April 2009, the FASB updated GAAP related to interim disclosures about fair value of financial instruments. This amends 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 also requires those disclosures in summarized financial information at interim reporting periods. This is effective for interim reporting periods ending after June 15, 2009. The 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 update requires comparative disclosures only for periods ending after initial adoption. The Company adopted this new standard effective April 1, 2009.

The carrying amount of the Company’s financial instruments at 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 estimatespotential conflict of its ~~fixed rate debt were determined using discounted cash flow methods~~interest with ~~a discount rate~~ours or those of ~~3.25%, which are~~our stockholders; our ability to maintain, protect, and enforce the ~~estimated rates that similar instruments could be negotiated at September 30, 2009 and December 31, 2008.~~

~~The estimated fair values~~confidentiality of our trade secrets; the ~~Company’s financial instruments, none~~use of ~~which are held for trading purposes, are summarized as follows:~~

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

~~Subsequent Events~~

In May 2009, the FASB 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. It is effective for reporting periods ending after June 15, 2009. The Company adopted this update effective April 1, 2009.

~~Accounting Standards Codification~~

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 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 nine months ended September 30, 2009, the Company paid consideration of approximately $19.5 million in cash related to earnout provisions from prior year acquisitions, approximately $5.1 million for the final purchase of a portion of noncontrolling interests in LeadClick Media, 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 nine months ended September 30, 2009:~~

Acquisitions, Adjustments
Balance at (Disposals) to net assets Balance at
(in thousands) December 31, 2008 and Earnouts acquired September 30, 2009
Credit Services $ 107,578 $ - $ - $ 107,578
Data Services 218,505 (611 ) - 217,894
Employer Services 272,461 2,266 3,308 278,035
Multifamily Services 49,174 - - 49,174
Investigative and Litigation Support Services 83,651 17,199 16 100,866
Consolidated $ 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~~open-source software in our ~~Investigative and Litigation Support Services segment, and CMSI, which was included~~applications; the indemnification provisions 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.~~

~~The following amounts have been segregated from continuing operations~~contracts with our customers and ~~are reflected as discontinued operations for the nine months ended September 30, 2008.~~

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~~First Advantage Corporation~~

~~Notes~~third-party data suppliers; our ability to ~~Consolidated Financial Statements~~

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 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 nine months ended September 30, 2009.

~~Given the current economic environment and the uncertainties regarding the impact~~identify attractive targets or successfully complete such transactions; our international business; our dependence on the ~~Company’s business, there can be no assurance~~service of our key executive and other employees, and our ability to find and retain qualified employees; seasonality in our operations from quarter to quarter; failure to comply with anti-corruption laws and regulations; the timing, manner and volume of repurchases of common stock pursuant to our share repurchase program; and changing interpretations of tax laws.

For additional information on these and other factors that ~~the Company’s estimates and assumptions regarding the duration of the ongoing economic downturn, or the period or strength of recovery, made~~could cause First Advantage’s actual results to differ materially from expected results, please see our Annual Report on Form 10-K for ~~purposes of the Company’s goodwill impairment testing during~~ the year ended December 31, ~~2008 will prove~~2021, filed with the Securities and Exchange Commission (the “SEC”), as such factors may be updated from time to ~~be accurate predictions~~time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. The forward-looking statements included in this Quarterly Report on Form 10-Q speak only as of the ~~future. If~~date of this Form 10-Q, and we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by law.

Glossary of Selected Terminology

The following terms are used in this Form 10-Q, unless otherwise noted or indicated by the context:

•

“Americas” in regards to our business, means the United States, Canada, and Latin America;

•

“Enterprise customers” means our customers who contribute $500,000 or more to our revenues in a calendar year;

•

“First Advantage,” the “Company,” “we,” “us,” and “our” mean the business of First Advantage
Corporation and its subsidiaries;

•

“International” in regards to our business, means all geographical regions outside of the United States, Canada, and Latin America;

•

“Revenues attributable to the Company’s ~~assumptions regarding forecasted revenue~~acquisitions” means revenues recognized in the first year following each acquisition; and

•

“Silver Lake” means Silver Lake Group, L.L.C., together with its affiliates, successors, and assignees.

Certain monetary amounts, percentages, and other figures included in this Quarterly Report on Form 10-Q have been subject to rounding adjustments. Percentage amounts included in this Quarterly Report on Form 10-Q have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Quarterly Report on Form 10-Q may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Certain other amounts that appear in this Quarterly Report on Form 10-Q may not sum due to rounding.

Website and Social Media Disclosure

We use our websites (https://fadv.com/ and https://investors.fadv.com/) to distribute company information. We make available free of charge a variety of information for investors, including our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file that material with or ~~margin growth rates~~furnish it to the Securities and Exchange Commission (“SEC”). The information we post on our websites may be deemed material. Accordingly, investors should monitor our websites, in addition to following our press releases, filings with the SEC, and public conference calls and webcasts. In addition, you may opt in to automatically receive email alerts and other information about First Advantage when you enroll your email address by visiting the “Email Alerts” section of ~~certain reporting units~~our investor website at https://investors.fadv.com/. The contents of our websites and social media channels are not, ~~achieved,~~however, a part of this Quarterly Report on Form 10-Q.

Overview

First Advantage is a leading global provider of HR technology solutions for screening, verifications, safety, and compliance. We deliver innovative solutions and insights that help our customers manage risk and hire the ~~Company may~~best talent. Enabled by our proprietary technology, our products and solutions help companies protect their brands and provide safer environments for their customers and their most important resources: employees, contractors, contingent and extended workers, drivers, tenants, and volunteers.

Our comprehensive product suite includes criminal background checks, drug / health screening, extended workforce screening, biometrics and identity, education / work verifications, resident screening, fleet / driver compliance, executive screening, data analytics, continuous monitoring, social media monitoring, and hiring tax incentives. We derive a substantial majority of our revenues from pre-onboarding screening and perform screens in over 200 countries and territories, enabling us to serve as a one-stop-shop provider to both multinational companies and growth companies. Our more than 33,000 customers are global enterprises, mid-sized companies, and small companies, and our products and solutions are used by personnel in recruiting, human resources, risk, compliance, vendor management, safety, and/or security.

Our products are sold both individually and bundled. The First Advantage platform offers flexibility for customers to specify which products to include in their screening package, such as Social Security numbers, criminal records, education and work verifications, sex offender registry, and global sanctions. Generally, our customers order a bundled background screening package or selected combination of screens related to a single individual before they onboard that individual. The type and mix of products and solutions we sell to a customer vary by customer size, their screening requirements, and industry vertical. Therefore, order volumes are not comparable across both customers and periods. Pricing can also vary considerably by customer depending on the product mix in their screening packages, order volumes, screening requirements and preferences, pass-through and third-party out of pocket costs, and bundling of products.

We enter into contracts with our customers that are typically three years in length. These contracts set forth the general terms and pricing of our products and solutions but generally do not include minimum order volumes or committed order volumes. Accordingly, contracts do not provide guarantees of future revenues. Due to our contract terms and the nature of the background screening industry, we determined our contract terms for ASC 606 purposes are less than one year. Through our ongoing dialogue with our customers, we have visibility into their expected future order volumes, although these can be ~~required~~difficult to ~~record additional goodwill impairment losses in connection with~~accurately forecast due to the ~~Company’s next annual impairment testing~~dynamic nature of forecasting hiring and business needs. We typically bill our customers at the end of each month and recognize revenues as completed orders are reported or otherwise made available to our customers. Over 90% of the criminal searches performed in the ~~fourth quarter~~United States are completed the same day they are submitted.

We generated revenues of ~~2009 or in 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 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

~~Amortization of customer lists and other identifiable intangible assets totaled approximately $3.6 million and $5.3~~$206.0 million for the three months ended September 30, ~~2009~~2022, as compared to $192.9 million for the three months ended September 30, 2021 and ~~2008, respectively, and approximately $11.0 million and $13.8~~generated revenues of $597.4 million for the nine months ended September 30, ~~2009 and 2008, respectively.~~

~~An impairment loss~~2022, as compared to $499.8 million for the nine months ended September 30, 2021. Approximately 84% of ~~$1.3 million~~our revenues for the nine months ended September 30, 2022 was ~~recorded~~generated in the Americas, predominantly in the United States, while the remaining 16% was generated internationally. Other than the United States, no single country accounted for 10% or more of our total revenues for the three and nine months ended September 30, ~~2008 in the Credit Services segment. The charge is related~~2022. Please refer to ~~the write-off~~“Results 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 September 30, 2009, is expected to be as follows over the next five years:~~

(in thousands)
Remainder of 2009 $ 3,609
2010 13,956
2011 11,323
2012 10,231
2013 8,831
Thereafter 12,245
$ 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~~Operations” for ~~the nine months ended 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

6.~~Debt~~

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

(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 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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7.~~Earnings Per Share~~

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

Three Months Ended Nine Months Ended
(in thousands, except per share amounts) September 30, September 30,
2009 2008 2009 2008
Income from continuing operations attributable to FADV shareholders $ 11,450 $ 12,631 $ 35,035 $ 42,549
Loss from discontinued operations attributable to FADV shareholders, net of tax - - - (4,241 )
    Net income attributable to FADV shareholders
$ 11,450 $ 12,631 $ 35,035 $ 38,308
Denominator:
Weighted-average shares for basic earnings per share 59,803 59,478 59,722 59,358
Effect of restricted stock 255 42 135 72
Effect of dilutive securities - employee stock options and warrants 28 9 10 16
Denominator for diluted earnings per share 60,086 59,529 59,867 59,446
Earnings per share:
Basic
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 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

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

8.~~Share-Based Compensation~~

Infurther details.

Segments

During the first quarter of ~~2008,~~2022, the Company ~~changed from granting stock options as~~made organizational changes and modified additional information provided to its chief operating decision maker (“CODM”) to better align with how its CODM assesses performance and allocates resources. As a result, the ~~primary means~~Company now has two reportable segments, Americas and International:

•

Americas. This segment performs a variety of ~~share-based compensation to granting restricted stock units (“RSU”). The fair value of any RSU grant is based on the market value~~background check and compliance services across all phases of the workforce lifecycle from pre-onboarding services to post-onboarding and ongoing monitoring services, covering employees, contractors, contingent and extended workers, drivers, tenants, and volunteers. We generally classify our service offerings into three categories: pre-onboarding, post-onboarding, and adjacent products. We deliver our solutions across multiple vertical industries in the United States, Canada, and Latin America markets.

•

Seasonality

We experience seasonality with respect to certain industries due to fluctuations in hiring volumes and other economic activity. For example, pre-onboarding revenues generated from our customers in the retail and transportation industries are historically highest during the months of October and November leading up to the holiday season and lowest at the beginning of the new year, following the holiday season. Certain customers across various industries also historically ramp up their hiring throughout the second quarter of the year as winter concludes, commercial activity tied to outdoor activities increases, and the school year ends, giving rise to student and graduate hiring. We expect that further growth in e-commerce, the continued digital transformation of the economy, and other economic forces may impact future seasonality, but we are unable to predict these potential shifts and how our business may be impacted.

Recent Developments

M&A

The Company completed its asset purchase of Form I-9 Compliance, a U.S.-based technology solution and consulting service provider for I-9 and E-Verify compliance. The acquisition is effective as of January 1, 2022 and strategically expands the Company’s ~~shares on~~product suite offerings through the addition of new I-9 and employment eligibility solutions. The results of Form I-9 Compliance, which were not material, have been included in our Americas segment from the effective date of the ~~grant~~acquisition.

Impact of COVID-19 and Current Economic Conditions

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, and created significant volatility and disruption of financial markets. Additionally, other recent macroeconomic events including rising inflation, the U.S. Federal Reserve raising interest rates, and the Russian invasion of Ukraine have led to further economic uncertainty.

Despite the continuing uncertainty associated with these events, we are confident in the long-term overall health of our business, the strength of our product offerings, and our ability to continue to execute on our strategy and help our customers hire smarter and onboard faster. Our ability to deliver innovative products and solutions that enhance workplace safety and address compliance risks has contributed to the durability of our financial results.

In 2022, COVID-19 continues to affect different parts of the world to different degrees. In our continued response to the COVID-19 pandemic, we have implemented operational changes to ensure the safety of our workforce and to ensure that we continue to provide high quality products and services to our customers. We have successfully adopted a highly distributed, hybrid workforce model which has not significantly affected our operations.

While our overall productivity has not been materially adversely impacted by the events described above, if the economic uncertainty is ~~recognized as compensation expense over~~sustained or increases, we may experience a negative impact on new business, customer renewals and demand levels, sales and marketing efforts, revenues growth rates, customer deployments, customer collections, product development, or other financial metrics. Any of these factors could harm our business, financial condition, and operating results. For additional information, see our “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the ~~vesting period. RSUs generally vest over three years at a rate of 33.3%~~Company’s Annual Report on Form 10-K for the ~~first two years and 33.4% for last year.~~

~~Restricted stock activity since~~year ended December 31, ~~2008~~2021.

Recently Issued Accounting Standards

See Note 2 to the condensed consolidated financial statements for disclosure of the impact that recent accounting pronouncements may have on the condensed consolidated financial statements.

Components of our Results of Operations

Revenues

The Company derives revenues from a variety of background screening and adjacent products that cover all phases of the workforce lifecycle from pre-onboarding screening services to post-onboarding and ongoing monitoring services, covering employees, contractors, contingent and extended workers, drivers, tenants, and volunteers. We generally classify our products and solutions into three major categories: pre-onboarding, post-onboarding, and adjacent products, each of which is ~~summarized~~enabled by our technology, proprietary databases, and data analytics capabilities. Pre-onboarding products, which comprise the substantial majority of our revenues, span an extensive array of products that customers typically utilize to enhance their applicant evaluation process and ensure compliance with their workforce onboarding criteria from the time an application is submitted to an applicant’s successful onboarding. Post-onboarding products are comprised of continuous monitoring, re-screening, and other solutions to help our customers keep their end customers, workforces, and other stakeholders safer, productive, and compliant. Adjacent products include products that complement our pre-onboarding and post-onboarding solutions such as ~~follows:~~

fleet / vehicle compliance, hiring tax credits and incentives, resident / tenant screening, employment eligibility, and investigative research.

Our suite of products is available individually or through bundled solutions that can be configured and tailored according to our customers’ needs. We typically bill our customers at the end of each month and recognize revenues after completed orders are reported or otherwise made available to our customers, with a substantial majority of our customers’ orders completed the same day they are submitted. We recognize revenues for other products over time as the customer simultaneously receives and consumes the benefits of the products and solutions delivered.

Operating Expenses

We incur the following expenses related to our cost of revenues and operating expenses:

•

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

Cost of Services: Consists of amounts paid to third parties for access to government records, other third-party data and services, and our internal processing fulfillment and customer care functions. In addition, cost of services includes expenses from our drug screening lab and collection site network as well as our court runner network. Third-party cost of services are largely variable in nature and are typically invoiced to our customers as direct pass-through costs. Cost of services also includes our salaries and benefits expense for personnel involved in the processing and fulfilment of our screening products and solutions, as well as our customer care organization and robotics process automation implementation team. Other costs included in cost of services relate to allocations of certain overhead costs for our revenue-generating products and solutions, primarily consisting of certain facility costs and administrative services allocated by headcount or another related metric. We do not allocate depreciation and amortization to cost of services.

•

Product and Technology Expense: Consists of salaries and benefits of personnel involved in the maintenance of our technology and its integrations and APIs, product marketing, management of our network and infrastructure capabilities, and maintenance of our information security and business continuity functions. A portion of the personnel costs are related to the development of new products and features that are primarily developed through agile methodologies. These costs are partially capitalized, and therefore, are partially reflected as amortization expense within the depreciation and amortization cost line item. Product and technology expense also includes third-party costs related to our cloud computing services, software licensing and maintenance, telecommunications, and other data processing functions. We do not allocate depreciation and amortization to product and technology expense.

•

Selling, General, and Administrative Expense: Consists of sales, customer success, marketing, and general and administrative expenses. Sales, customer success, and marketing expenses consist primarily of employee compensation such as salaries, bonuses, sales commissions, stock-based compensation, and other employee benefits for our verticalized Sales and Customer Success teams. General and administrative expenses include travel expenses and various corporate functions including finance, human resources, legal, and other administrative roles, in addition to certain professional service fees and expenses incurred in connection with our IPO and now as a public company. We expect our selling, general, and administrative expenses to increase in the short-term, primarily as a result of additional public company related reporting and compliance costs. Over the long-term, we expect our selling, general, and administrative expenses to decrease as a percentage of revenues as we leverage our past investments. We do not allocate depreciation and amortization to selling, general, and administrative expenses.

•

~~Table~~Depreciation and Amortization: Property and equipment consisting mainly of ~~Contents~~capitalized software costs, furniture, hardware, and leasehold improvements are depreciated or amortized and reflected as operating expenses. We also amortize the capitalized costs of finite-life intangible assets acquired in connection with business combinations.

~~First Advantage Corporation~~

~~Notes~~

We have a flexible cost structure that allows our business to ~~Consolidated Financial Statements~~adjust quickly to the impacts of macroeconomic events and scale to meet the needs of large new customers. Operating expenses are influenced by the amount of revenues, customer mix, and product mix that contribute to our revenues for any given period. As revenues grow, we would generally expect cost of services to grow in a similar fashion, albeit influenced by the effects of automation, productivity, and other efficiency initiatives as well as customer and product mix shifts and third-party pass-through costs. We regularly review expenses and investments in the context of revenues growth and any shifts we see in the business in order to align with our overall financial objectives. While we expect internal operating expenses to increase in absolute dollars to support our continued growth, we believe that, in the long term, operating expenses will decline gradually as a percentage of total revenues in the future as our business grows and our operating efficiency and automation initiatives continue to advance.

Other Expense, Net

Our other expense, net consists of the following:

•

Interest Expense, Net: Relates primarily to our debt service costs, the interest-related unrealized gains and losses of our interest rate swaps and, to a lesser extent, the interest on our capital lease obligations and the amortization of deferred financing costs. Additionally, interest expense, net includes interest income earnings on our cash and cash equivalent balances held in interest-bearing accounts. We also earn interest income on our short-term investments which are fixed-time deposits having a maturity date within twelve months.

•

Loss on Extinguishment of Debt: Reflects losses on the extinguishment of certain debt.

Provision for Income Taxes

Provision for income taxes consists of domestic and foreign corporate income taxes related to earnings from our sale of services, with statutory tax rates that differ by jurisdiction. Our effective tax rate may be affected by many other factors including changes in tax laws, regulations or rates, new interpretations of existing laws or regulations, shifts in the allocation of income earned throughout the world, and changes in overall levels of income before tax. For example, there are several proposals to change the current tax law, including changes in GILTI. If any or all of these (or similar) proposals are ultimately enacted into law, in whole or in part, they could increase our effective tax rate.

Results of Operations

The ~~following table illustrates~~information contained below should be read in conjunction with our accompanying historical condensed consolidated financial statements and the ~~share-based compensation expense recognized~~related notes.

Comparison of Results of Operations for the three and nine months ended September 30, ~~2009 and 2008.~~

Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) 2009 2008 2009 2008
Stock options $ 457 $ 1,165 $ 1,578 $ 3,875
Restricted stock 1,363 1,169 4,109 3,357
Employee stock purchase plan 20 26 73 112
$ 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
(in thousands, except exercise prices) Number of Average Intrinsic
Shares Exercise Price Value
Options outstanding at December 31, 2008 3,492 $ 23.06 $ 863
Options exercised
(26 ) $ 15.51
Options forfeited
(294 ) $ 24.66
Options outstanding at September 30, 2009 3,172 $ 22.98 $ 697
Options exercisable, end of the quarter 2,956 $ 22.83 $ 692

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

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

Options Outstanding Options Exercisable
Weighted Avg Weighted Weighted
Remaining Contractual Average Average
Range of Exercise Prices Shares Life in Years Exercise Price Shares Exercise Price
$ 7.00 - $ 12.50 9 1.9 $ 11.13 9 $ 11.13
$ 12.51 - $ 25.00 2,075 4.6 $ 20.90 2,018 $ 20.91
$ 25.01 - $ 50.00 1,084 6.1 $ 26.97 925 $ 27.01
$ 50.01 - $242.25 4 1.8 $ 50.25 4 $ 50.25
3,172 2,956

~~The Company had outstanding warrants~~2022 compared to purchase up to 41,462 shares of its common stock at exercise prices of $12.05 per share as of September 30, 2009. The weighted average remaining contractual life in years for the warrants outstanding is 1.68.

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.~~

~~Table of Contents~~

~~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 September 30, 2009, the Company has a $4.9 million total liability recorded for unrecognized tax benefits as well as a $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 $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.

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 $0.9 million and $1.2 million of inter-segment sales for the three ~~months ended September 30, 2009~~ and ~~2008, respectively, and $2.8 million and $4.0 million of inter-segment sales for the~~ nine months ended 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

2021


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except percentages)	2022			2021			2022			2021
Revenues	$	205,986		$	192,867		$	597,428		$	499,763

Operating Expenses:
Cost of services (exclusive of depreciation and amortization below)		104,300			94,151			301,023			244,964
Product and technology expense		13,250			11,313			39,969			33,546
Selling, general, and administrative expense		28,034			27,203			87,715			76,256
Depreciation and amortization		34,744			35,812			103,185			106,493
Total operating expenses		180,328			168,479			531,892			461,259
Income from operations		25,658			24,388			65,536			38,504

Other Expense, Net:
Interest expense, net		1,740			4,706			4,002			21,875
Loss on extinguishment of debt		—			—			—			13,938
Total other expense, net		1,740			4,706			4,002			35,813
Income before provision for income taxes		23,918			19,682			61,534			2,691
Provision for income taxes		6,709			3,397			17,076			2,025
Net income	$	17,209		$	16,285		$	44,458		$	666
Net income margin		8.4	%		8.4	%		7.4	%		0.1	%

~~Table of Contents~~

~~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 $0.6 million of inter-segment sales for the nine months ended September 30, 2009 and 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 September 30, 2009 and 2008, and $0.5 million of inter-segment sales for the nine months ended September 30, 2009 and 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 $8.0 million and $11.9~~

Revenues


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2022			2021			2022			2021
Revenues
Americas	$	176,091		$	158,972		$	506,770		$	421,795
International		31,628			35,595			96,413			82,237
Eliminations		(1,733	)		(1,700	)		(5,755	)		(4,269	)
Total revenues	$	205,986		$	192,867		$	597,428		$	499,763

Revenues were $206.0 million for the three months ended September 30, ~~2009~~2022, compared to $192.9 million for the three months ended September 30, 2021. Revenues for the three months ended September 30, 2022 increased by $13.1 million, or 6.8%, compared to the three months ended September 30, 2021.

The increase in revenues was primarily due to:

•

increased revenues of $9.3 million attributable to new customers in both the Americas and ~~2008, respectively,~~International segments; and ~~$21.4~~

•

revenues of $8.4 million ~~and $35.3~~attributable to the Company’s acquisitions in the Americas segment.

The increase in revenues was offset by:

•

a net decrease of $4.6 million in existing customer revenues, primarily driven by the effects of changes in foreign currencies on our International segment. The remaining net change within our existing customer revenues primarily relates to macro-economic driven declines in our International segment.

Revenues were $597.4 million for the nine months ended September 30, ~~2009 and 2008, respectively. Service revenue~~2022, compared to $499.8 million for ~~international operations included~~the nine months ended September 30, 2021. Revenues for the nine months ended September 30, 2022 increased by $97.7 million, or 19.5%, compared to the nine months ended September 30, 2021.

The increase in revenues was primarily due to:

•

a net increase of $39.0 million in existing customer revenues, primarily driven by strength across our business in the ~~Investigative~~first half of the year, which was supported by positive jobs market trends including sustained job switching and ~~Litigation Support~~churn. These existing customer increases were offset by the impact of lost accounts and the effects of changes in foreign currencies;

•

revenues of $31.6 million attributable to the Company’s acquisitions in the Americas and International segments; and

•

increased revenues of $27.1 million attributable to new customers in both the Americas and International segments.

In 2022, the Company has experienced high demand among customers across numerous industry verticals and account sizes in both its Americas and International segments. However, in the third quarter of 2022, certain industry verticals and International segment markets experienced reduced revenues volumes as a result of macro-economic headwinds and negative foreign currency impacts due to strengthening of the U.S. Dollar. Pricing remained relatively stable across all periods.

Cost of Services ~~segment~~


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except percentages)	2022			2021			2022			2021
Revenues	$	205,986		$	192,867		$	597,428		$	499,763
Cost of services		104,300			94,151			301,023			244,964
Cost of services as a % of revenue		50.6	%		48.8	%		50.4	%		49.0	%

Cost of services was ~~$0.4 million and $7.6~~$104.3 million for the three months ended September 30, ~~2009~~2022, compared to $94.2 million for the three months ended September 30, 2021. Cost of services for the three months ended September 30, 2022 increased by $10.1 million, or 10.8%, compared to the three months ended September 30, 2021.

The increase in cost of services was primarily due to:

•

an increase in variable third-party data expenses of $7.2 million as a direct result of increased revenues, increases in the prices of certain third-party data usage, and ~~2008, respectively,~~variation in customer ordering mix;

•

a $3.0 million increase in personnel related expenses in our operations and ~~$1.3~~customer care functions as a result of additional operational support headcount to process and fulfill the Company’s order volume growth; and

•

a number of cost of services related operating expense increases attributable to insurance, travel, and other expenses related to the increased revenue volumes experienced in 2022.

The increase in cost of services was partially offset by:

•

foreign currency exchange gains of $0.9 million due to the impact of foreign exchange rate volatility.

Cost of services as a percentage of revenues was 50.6% for the three months ended September 30, 2022, compared to 48.8% for the three months ended September 30, 2021. The cost of services percentage of revenues in the third quarter 2022 was impacted by increases in certain third-party data costs, variation in customer ordering mix to lower margin products, and ~~$32.3~~acquisitions having a larger mix of third-party data expenses. This increase was partially offset by cost savings from the Company’s continued implementation of automation and other process efficiencies.

Cost of services was $301.0 million for the nine months ended September 30, ~~2009~~2022, compared to $245.0 million for the nine months ended September 30, 2021. Cost of services for the nine months ended September 30, 2022 increased by $56.1 million, or 22.9%, compared to the nine months ended September 30, 2021.

The increase in cost of services was primarily due to:

•

an increase in variable third-party data expenses of $41.3 million as a direct result of increased revenues, increases in the prices of certain third-party data usage, variation in customer ordering mix, and ~~2008, respectively.~~

acquisitions having a larger mix of third-party data expenses;

•

a $13.6 million increase in personnel related expenses in our operations and customer care functions as a result of additional operational support headcount to process and fulfill the Company’s order volume growth; and

•

21a number of cost of services related operating expense increases attributable to insurance, travel, software licenses, and other expenses related to the increased revenue volumes experienced in 2022.

The increase in cost of services was partially offset by:

•

foreign currency exchange gains of $1.7 million due to the impact of foreign exchange rate volatility.

Cost of services as a percentage of revenues was 50.4% for the nine months ended September 30, 2022, compared to 49.0% for the nine months ended September 30, 2021. The cost of services percentage of revenues for the nine months ended September 30, 2022 was impacted by increases in certain third-party data costs, variation in customer ordering mix to lower margin products, and acquisitions having a larger mix of third-party data expenses. This increase was partially offset by cost savings from the Company’s continued implementation of automation and other process efficiencies.

Product and Technology Expense


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Product and technology expense	$	13,250	$	11,313	$	39,969	$	33,546

Product and technology expense was $13.3 million for the three months ended September 30, 2022, compared to $11.3 million for the three months ended September 30, 2021. Product and technology expense for the three months ended September 30, 2022 increased by $1.9 million, or 17.1%, compared to the three months ended September 30, 2021.

The increase in product and technology expense was primarily due to:

•

a $1.6 million increase in software licensing related expenses.

Product and technology expense was $40.0 million for the nine months ended September 30, 2022, compared to $33.5 million for the nine months ended September 30, 2021. Product and technology expense for the nine months ended September 30, 2022 increased by $6.4 million, or 19.1%, compared to the nine months ended September 30, 2021.

The increase in product and technology expense was primarily due to:

•

a $4.2 million increase in software licensing related expenses; and

•

~~Table~~a $1.6 million increase in personnel-related expenses as a result of ~~Contents~~

~~First Advantage Corporation~~

~~Notes~~additional investments made to ~~Consolidated Financial Statements~~enhance our product, solutions, and technology platform and certain reorganization expenses.

Selling, General, and Administrative Expense


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Selling, general, and administrative expense	$	28,034	$	27,203	$	87,715	$	76,256

Selling, general, and administrative expense was $28.0 million for the three months ended September 30, 2022, compared to $27.2 million for the three months ended September 30, 2021. Selling, general, and administrative expense for the three months ended September 30, 2022 increased by $0.8 million, or 3.1%, compared to the three months ended September 30, 2021.

Selling, general, and administrative expense increased primarily due to:

•

a $1.5 million increase in personnel related expenses primarily due to additional investments made in the Company’s Sales and Customer Success functions and additional headcount related to the Company’s growth and operating as a public company;

•

a $1.0 million increase in expenses related to litigation activities in the ordinary course of business; and

•

a number of other corporate expenses that increased primarily as a result of the Company now being a publicly traded company and the Company’s M&A activity.

The increase in selling, general, and administrative expense was partially offset by:

•

a $1.8 million decrease in commissions and bonus related expenses due to lower variable commissions based on performance against internal targets; and

•

a $0.9 million decrease in professional service fees incurred related to the Company’s preparation for its 2021 IPO and secondary offering that did not reoccur in 2022.

Selling, general, and administrative expense was $87.7 million for the nine months ended September 30, 2022, compared to $76.3 million for the nine months ended September 30, 2021. Selling, general, and administrative expense for the nine months ended September 30, 2022 increased by $11.5 million, or 15.0%, compared to the nine months ended September 30, 2021.

Selling, general, and administrative expense increased primarily due to:

•

a $6.4 million increase in personnel related expenses primarily due to additional investments made in the Company’s Sales and Customer Success functions and additional headcount related to the Company’s growth and operating as a public company;

•

a $1.9 million increase in liability insurance related expenses;

•

a $1.9 million increase in expenses related to litigation activities in the ordinary course of business;

•

a $1.2 million increase in marketing related expenses; and

•

a number of other corporate expenses that increased primarily as a result of the Company now being a publicly traded company and the Company’s M&A activity.

The increase in selling, general, and administrative expense was partially offset by:

•

a $4.1 million decrease in professional service fees incurred related to the Company’s preparation for its 2021 IPO and secondary offering that did not reoccur in 2022.

Depreciation and Amortization


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Depreciation and amortization	$	34,744	$	35,812	$	103,185	$	106,493

Depreciation and amortization was $34.7 million for the three months ended September 30, 2022, compared to $35.8 million for the three months ended September 30, 2021. Depreciation and amortization for the three months ended September 30, 2022 decreased by $1.1 million, or 3.0%, compared to the three months ended September 30, 2021. This decrease was partially offset by increases in depreciation related to assets placed in service during the three months ended September 30, 2022.

Depreciation and amortization was $103.2 million for the nine months ended September 30, 2022, compared to $106.5 million for the nine months ended September 30, 2021. Depreciation and amortization for the nine months ended September 30, 2022 decreased by $3.3 million, or 3.1% compared to the nine months ended September 30, 2021. This decrease was partially offset by increases in depreciation related to assets placed in service during the nine months ended September 30, 2022.

Interest Expense, Net


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Interest expense, net	$	1,740	$	4,706	$	4,002	$	21,875

Interest expense, net was $1.7 million for the three months ended September 30, 2022, compared to $4.7 million for the three months ended September 30, 2021. Interest expense for the three months ended September 30, 2022 decreased by $3.0 million, or 63.0%, compared to the three months ended September 30, 2021.

The decrease in interest cost was primarily attributable to $4.0 million of unrealized gains on the interest rate swap as a result of the increased interest rate volatility that continued in the third quarter of 2022. This decrease was further impacted by $1.6 million of interest income earned on cash held within interest bearing accounts. These decreases were offset by higher interest expense on the Successor First Lien Credit Facility as a result of rising interest rates.

Interest expense, net was $4.0 million for the nine months ended September 30, 2022, compared to $21.9 million for the nine months ended September 30, 2021. Interest expense for the nine months ended September 30, 2022 decreased by $17.9 million, or 81.7%, compared to the nine months ended September 30, 2021.

The decrease in interest cost was primarily attributable to $11.4 million of unrealized gains on the interest rate swap as a result of the increased interest rate volatility observed in 2022. This decrease was further impacted by the Company’s February 2021 refinancing of the Successor First Lien Credit Facility, early repayment of the Successor Second Lien Credit Facility, and the prepayment of $200.0 million of the Successor First Lien Credit Facility in June 2021, resulting in interest rate savings due to lower principal and more favorable interest rate margins and interest income earned on cash held within interest bearing accounts. These decreases were partially offset by higher interest expense on the Successor First Lien Credit Facility as a result of rising interest rates in 2022.

Loss on Extinguishment of Debt


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Loss on extinguishment of debt	$	—	$	—	$	—	$	13,938

Loss on extinguishment of debt for the nine months ended September 30, 2021 relates to expenses stemming from the write-off of debt issuance costs associated with the February 2021 refinancing of the Successor First Lien Credit Facility.

Provision for Income Taxes


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Provision for income taxes	$	6,709	$	3,397	$	17,076	$	2,025

Our provision for income taxes was $6.7 million for the three months ended September 30, 2022, compared to $3.4 million for the three months ended September 30, 2021. Our provision for income taxes for the three months ended September 30, 2022 increased by $3.3 million, or 97.5%, compared to the three months ended September 30, 2021.

The increase in our provision for income taxes was primarily due to the increase of income before income taxes during the three months ended September 30, 2022, as compared to the three months ended September 30, 2021, due to higher levels of pre-tax income.

Our provision for income taxes was $17.1 million for the nine months ended September 30, 2022, compared to $2.0 million for the nine months ended September 30, 2021. Our provision for income taxes for the nine months ended September 30, 2022 increased by $15.1 million, or 743.3%, compared to the nine months ended September 30, 2021.

The increase in our provision for income taxes was primarily due to the increase of income before income taxes during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, due to higher levels of pre-tax income.

Net Income and Net Income Margin


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except percentages)	2022			2021			2022			2021
Net income	$	17,209		$	16,285		$	44,458		$	666
Net income margin		8.4	%		8.4	%		7.4	%		0.1	%

Net income was $17.2 million for the three months ended September 30, 2022, compared to $16.3 million for the three months ended September 30, 2021. Net income for the three months ended September 30, 2022 increased by $0.9 million compared to the three months ended September 30, 2021.

Net income margin was 8.4% for the three months ended September 30, 2022, consistent with the three months ended September 30, 2021, as overall improvements in the Company’s operating results were impacted by increases in our provision for income taxes due to the increased profitability.

Net income was $44.5 million for the nine months ended September 30, 2022, compared to a net income of $0.7 million for the nine months ended September 30, 2021. Net income for the nine months ended September 30, 2022 increased by $43.8 million compared to the nine months ended September 30, 2021.

Net income margin was 7.4% for the nine months ended September 30, 2022, compared to 0.1% the nine months ended September 30, 2021. The improvement in our net income margin is attributable to our ability to leverage operating efficiencies to control our overall expenses while increasing revenues and reducing interest and other debt related expenses incurred as a result of the February 2021 refinancing.

Key Operating and Financial Metrics

In addition to our results determined in accordance with GAAP, we believe certain measures are useful in evaluating our operating performance. Management believes these non-GAAP measures are useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate, and capital investments. Management uses Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Diluted Earnings Per Share to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation, and to compare our performance against that of other peer companies using similar measures. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.

The presentations of these measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP.

Adjusted EBITDA and Adjusted EBITDA Margin

Management believes that Adjusted EBITDA is a strong indicator of our overall operating performance and is useful to management and investors as a measure of comparative operating performance from period to period. We define Adjusted EBITDA as net income before interest, taxes, depreciation, and amortization, and as further adjusted for loss on extinguishment of debt, share-based compensation, transaction and acquisition-related charges, integration and restructuring charges, and other non-cash charges. We exclude the impact of share-based compensation because it is a non-cash expense and we believe that excluding this item provides meaningful supplemental information regarding performance and ongoing cash generation potential. We exclude loss on extinguishment of debt, transaction and acquisition related charges, integration and restructuring charges, and other charges because such expenses are episodic in nature and have no direct correlation to the cost of operating our business on an ongoing basis.

Adjusted EBITDA was $64.2 million for the three months ended September 30, 2022 and represented an Adjusted EBITDA Margin of 31.2%. Adjusted EBITDA was $63.9 million for the three months ended September 30, 2021 and represented an Adjusted EBITDA Margin of 33.2%. Adjusted EBITDA for the three months ended September 30, 2022 increased by $0.2 million, or 0.4%, compared to the three months ended September 30, 2021.

For the three months ended September 30, 2022, Adjusted EBITDA remained flat as revenues growth attributed to new customers and acquisitions, and cost structure benefits due to increased automation, operational efficiencies, and operating leverage were offset by increases in insurance premiums, increases in third-party data verification costs, additional investments in technology and sales, the effects of changes in foreign currencies, and lower margin revenues from our acquisitions.

Adjusted EBITDA was $178.6 million for the nine months ended September 30, 2022 and represented an Adjusted EBITDA Margin of 29.9%. Adjusted EBITDA was $156.9 million for the nine months ended September 30, 2021 and represented an Adjusted EBITDA Margin of 31.4%. Adjusted EBITDA for the nine months ended September 30, 2022 increased by $21.8 million, or 13.9%, compared to the nine months ended September 30, 2021.

For the nine months ended September 30, 2022, Adjusted EBITDA increased more significantly due to revenues growth attributed to new and existing customers, primarily driven by strength across our business during the first half of the year.

The following table ~~sets forth~~presents a reconciliation of Adjusted EBITDA for the periods presented.


	Three Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	2022			2021		2022			2021
Net income	$	17,209		$	16,285	$	44,458		$	666
Interest expense, net		1,740			4,706		4,002			21,875
Provision for income taxes		6,709			3,397		17,076			2,025
Depreciation and amortization		34,744			35,812		103,185			106,493
Loss on extinguishment of debt		—			—		—			13,938
Share-based compensation		2,022			1,343		5,824			4,569
Transaction and acquisition-related charges (a)		1,908			2,144		4,585			6,510
Integration, restructuring, and other charges (b)		(144	)		257		(508	)		780
Adjusted EBITDA	$	64,188		$	63,944	$	178,622		$	156,856

(a)

(b)

We define Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenues. The following table presents the calculation of Adjusted EBITDA Margin for the periods presented.


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except percentages)	2022			2021			2022			2021
Adjusted EBITDA	$	64,188		$	63,944		$	178,622		$	156,856
Revenues		205,986			192,867			597,428			499,763
Adjusted EBITDA Margin		31.2	%		33.2	%		29.9	%		31.4	%

The following table presents a reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin by segment ~~information~~for the periods presented.


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except percentages)	2022			2021			2022			2021
Adjusted EBITDA (1):
Americas	$	57,205		$	53,223		$	156,978		$	136,278
International		6,983			10,721			21,644			20,578
Adjusted EBITDA	$	64,188		$	63,944		$	178,622		$	156,856

Revenues
Americas	$	176,091		$	158,972		$	506,770		$	421,795
International		31,628			35,595			96,413			82,237
Less: intersegment eliminations		(1,733	)		(1,700	)		(5,755	)		(4,269	)
Total revenues	$	205,986		$	192,867		$	597,428		$	499,763

Adjusted EBITDA Margin
Americas		32.5	%		33.5	%		31.0	%		32.3	%
International		22.1	%		30.1	%		22.4	%		25.0	%
Adjusted EBITDA Margin		31.2	%		33.2	%		29.9	%		31.4	%

(1)

See the reconciliation of net income to Adjusted EBITDA above. Segment Adjusted EBITDA margins are calculated using segment gross revenues and segment Adjusted EBITDA. Consolidated Adjusted EBITDA margin is calculated using consolidated revenues and consolidated Adjusted EBITDA.

Adjusted Net Income and Adjusted Diluted Earnings Per Share

Similar to Adjusted EBITDA, management believes that Adjusted Net Income and Adjusted Diluted Earnings Per Share are strong indicators of our overall operating performance and are useful to our management and investors as measures of comparative operating performance from period to period. We define Adjusted Net Income for a particular period as net income before taxes adjusted for debt-related costs, acquisition-related depreciation and amortization, share-based compensation, transaction and acquisition related charges, integration and restructuring charges, and other non-cash charges, to which we then apply the related effective tax rate. We define Adjusted Diluted Earnings Per Share as Adjusted Net Income divided by adjusted weighted average number of shares outstanding—diluted.

Adjusted Net Income was $40.0 million for the three months ended September 30, 2022, compared to $42.2 million for the three months ended September 30, 2021. Adjusted Net Income for the three months ended September 30, 2022 decreased by $2.2 million, or 5.1%, compared to the three months ended September 30, 2021.

Adjusted Diluted Earnings Per Share was $0.26 for the three months ended September 30, 2022 decreased by $0.02, or 7.1% compared to the three months ended September 30, 2021.

Adjusted Net Income was $111.5 million for the nine months ended September 30, 2022, compared to $95.9 million for the nine months ended September 30, 2021. Adjusted Net Income for the nine months ended September 30, 2022 increased by $15.6 million, or 16.3%, compared to the nine months ended September 30, 2021.

Adjusted Diluted Earnings Per Share was $0.73 for the nine months ended September 30, 2022, compared to $0.69 for the nine months ended September 30, 2021. Adjusted Diluted Earnings Per Share for the nine months ended September 30, 2022 increased by $0.04, or 5.8% compared to the nine months ended September 30, 2021.

Adjusted Net Income and Adjusted Diluted Earnings Per Share were impacted by changes in acquisition-related depreciation and amortization and changes in our capital structure that are captured in interest expense, the impacts of which were offset by the factors contributing to Adjusted EBITDA growth. The prepayment of the Company’s Successor First Lien and Successor Second Lien debt and gains or losses on the Company’s interest rate swaps impact the comparability of Adjusted Net Income and Adjusted Diluted Earnings Per Share across historical periods.

The following tables present a reconciliation of Adjusted Net Income for the periods presented.


	Three Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	2022			2021		2022			2021
Net income	$	17,209		$	16,285	$	44,458		$	666
Provision for income taxes		6,709			3,397		17,076			2,025
Income before provision for income taxes		23,918			19,682		61,534			2,691
Debt-related charges(a)		(3,545	)		437		(10,029	)		19,703
Acquisition-related depreciation and amortization(b)		28,927			31,749		87,071			95,047
Share-based compensation		2,022			1,343		5,824			4,569
Transaction and acquisition-related charges(c)		1,908			2,144		4,585			6,510
Integration, restructuring, and other charges (d)		(144	)		257		(508	)		780
Adjusted Net Income before income tax effect		53,086			55,612		148,477			129,300
Less: Income tax effect(e)		13,083			13,443		36,971			33,431
Adjusted Net Income	$	40,003		$	42,169	$	111,506		$	95,869

The following table presents the calculation of Adjusted Diluted Earnings Per Share for the periods presented. Prior to the IPO, the equity awards under the Successor Plan were issued by the Company’s Parent. As a result, these awards are not considered equity awards issued by the Company, and therefore, not included in the calculation of adjusted weighted average number of shares outstanding—diluted.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Diluted net income per share (GAAP)	$	0.11		$	0.11		$	0.29		$	0.00
Adjusted Net Income adjustments per share
Income taxes		0.04			0.02			0.11			0.01
Debt-related charges (a)		(0.02	)		0.00			(0.07	)		0.14
Acquisition-related depreciation and amortization (b)		0.19			0.21			0.57			0.69
Share-based compensation		0.01			0.01			0.04			0.03
Transaction and acquisition related charges (c)		0.01			0.01			0.03			0.05
Integration, restructuring, and other charges (d)		(0.00	)		0.00			(0.00	)		0.01
Adjusted income taxes (e)		(0.09	)		(0.09	)		(0.24	)		(0.24	)
Adjusted Diluted Earnings Per Share (Non-GAAP)	$	0.26		$	0.28		$	0.73		$	0.69

Weighted average number of shares outstanding used in computation of Adjusted Diluted Earnings Per Share:
Weighted average number of shares outstanding—diluted (GAAP)		152,357,307			152,400,419			152,375,212			138,170,488
Options and restricted stock not included in weighted average number of shares outstanding—diluted (GAAP) (using treasury stock method)		—			—			—			—
Adjusted weighted average number of shares outstanding—diluted (Non-GAAP)		152,357,307			152,400,419			152,375,212			138,170,488

(a)

Represents the loss on extinguishment of debt and non-cash interest expense related to the amortization of debt issuance costs for the 2021 February refinancing and repayment of the Company’s Successor First Lien Credit Facility (as defined below) and Successor Second Lien Credit Facility (as defined below), respectively. Beginning in 2022, this adjustment also includes the impact of the change in fair value of interest rate swaps. This adjustment, which represents the fair value gains or losses on the interest rate swaps, was added as a result of the increased interest rate volatility observed in 2022. The Company determined that the impact to the previous year, ($0.1) million and $0.8 million for the three and nine months ended September 30, ~~2009~~2021, respectively, was not significant 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

~~Table of Contents~~

~~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~~therefore, 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~~previously reported amounts will not be ~~waived in~~recast.

(b)

Represents the ~~Offer. The Merger Condition is waivable in First American’s sole discretion. In the event that all of the conditions~~depreciation and amortization expense related to intangible assets and developed technology assets recorded due to the ~~Offer have~~

application of ASC 805, Business Combinations.

(c)

~~Table~~Represents charges incurred related to acquisitions and similar transactions, primarily consisting of ~~Contents~~

~~First Advantage Corporation~~

~~Notes to Consolidated Financial Statements~~

~~not been satisfied or waived at the then scheduled Expiration Time, First American may,~~change 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 ~~Shares~~not 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

~~Table of Contents~~

~~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~~control-related costs, professional service fees, 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.

~~Table of Contents~~

~~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”. 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, 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.

~~Table of Contents~~

~~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 3,800 employees in offices throughout the United States and abroad.

~~The current economic downturn has caused decreased~~third-party costs. Additionally includes incremental professional service ~~revenue in the Credit Services segment~~fees incurred related to the ~~mortgage~~initial public offering and ~~auto industries~~subsequent one-time compliance efforts. The three 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.

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 connection with the Company’s next annual impairment testing in the fourth quarter of 2009 or in 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.

Operating results for the three months ended September 30, 2009 included total service revenue of $156.0 million, this represents a decrease of 10.7% over the same period in 2008. Operating results for the nine months ended September 30, ~~2009 included total service revenue~~2022 includes a transaction bonus expense related to one of ~~$510.7 million, this represents a decrease~~the Company’s 2021 acquisitions.

(d)

(e)

Effective tax rates of approximately 24.6% and 24.9% have been used to compute Adjusted Net Income and Adjusted Diluted Earnings Per Share for the three and nine months ended September 30, ~~2009 was $18.4 million~~2022, respectively. Effective tax rates of approximately 24.2% and ~~$59.2 million, respectively. Operating income decreased $3.3 million for the three months ended September 30, 2009 in comparison~~25.9% have been used to ~~the same period in 2008. Operating income decreased $13.7 million for the nine months ended September 30, 2009 in comparison to the same period in 2008.~~

On October 8, 2009, First American issued a press release announcing its intention to commence 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 Acompute Adjusted Net Income and Adjusted Diluted Earnings Per Share (~~See Note 11 – Subsequent Event)~~. On October 9, 2009, First American filed a Registration Statement on Form S-4 with the Securities and Exchange Commission (the “SEC”), which contains the Offer to Exchange and related materials. On that same day, the Company filed with the 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 currently estimated to be approximately $3.0 million.

~~Table of Contents~~

~~The following is a summary of the operating results by the Company’s business segments~~ for the three and nine months ended September 30, ~~2009~~2021, respectively. As of December 31, 2021, we had net operating loss carryforwards of approximately $120.1 million for federal income tax purposes available to reduce future income subject to income taxes. As a result, the amount of actual cash taxes we may pay for federal income taxes differs significantly from the effective income tax rate computed in accordance with GAAP and ~~2008.~~

from the normalized rate shown above.

~~Table~~

Liquidity and Capital Resources

Liquidity

The Company’s primary liquidity requirements are for working capital, continued investments in software development and other capital expenditures, and other strategic investments. Income taxes are currently not a significant use of ~~Contents~~

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

Service revenue $ 59,443 $ 25,514 $ 41,731 $ 19,879 $ 9,804 $ (391 ) $ 155,980
Reimbursed government fee revenue 223 11,987 2,138 - - (762 ) 13,586
  Total revenue 59,666 37,501 43,869 19,879 9,804 (1,153 ) 169,566

Cost of service revenue 26,691 12,419 10,651 1,790 495 (617 ) 51,429
Government fees paid 223 11,987 2,138 - - (762 ) 13,586
  Total cost of service 26,914 24,406 12,789 1,790 495 (1,379 ) 65,015

Gross margin 32,752 13,095 31,080 18,089 9,309 226 104,551

Salaries and benefits 12,238 4,839 16,142 6,110 5,303 5,288 49,920
Facilities and telecommunications 1,771 551 2,036 754 675 954 6,741
Other operating expenses 4,721 1,680 5,202 2,415 1,270 3,165 18,453
Depreciation and amortization 1,533 2,435 3,771 1,542 724 988 10,993
Income (loss) from operations $ 12,489 $ 3,590 $ 3,929 $ 7,268 $ 1,337 $ (10,169 ) $ 18,444
Operating margin percentage 21.0 % 14.1 % 9.4 % 36.6 % 13.6 % N/A 11.8 %

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

Service revenue $ 60,837 $ 21,922 $ 54,199 $ 19,702 $ 18,600 $ (596 ) $ 174,664
Reimbursed government fee revenue - 11,743 2,828 - - (938 ) 13,633
  Total revenue 60,837 33,665 57,027 19,702 18,600 (1,534 ) 188,297

Cost of service revenue 28,985 8,628 14,234 1,915 503 (745 ) 53,520
Government fees paid - 11,743 2,828 - - (938 ) 13,633
  Total cost of service 28,985 20,371 17,062 1,915 503 (1,683 ) 67,153

Gross margin 31,852 13,294 39,965 17,787 18,097 149 121,144

Salaries and benefits 14,294 4,755 18,511 6,320 7,622 7,611 59,113
Facilities and telecommunications 2,203 643 2,280 836 722 1,105 7,789
Other operating expenses 4,844 1,646 9,275 2,533 2,569 (968 ) 19,899
Depreciation and amortization 1,728 2,570 3,255 1,444 837 1,064 10,898
Impairment loss 1,720 - - - - - 1,720
Income (loss) from operations $ 7,063 $ 3,680 $ 6,644 $ 6,654 $ 6,347 $ (8,663 ) $ 21,725
Operating margin percentage 11.6 % 16.8 % 12.3 % 33.8 % 34.1 % N/A 12.4 %

~~Table~~funds but after the benefits of ~~Contents~~

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 %

~~Table~~our net operating loss carryforwards are fully recognized, could become a material use of ~~Contents~~

~~Credit Services Segment~~

~~Three Months Ended~~funds, depending on our future profitability and future tax rates. The Company’s liquidity needs are met primarily through cash flows from operations, as well as funds available under our revolving credit facility and proceeds from our term loan borrowings. Our cash flows from operations include cash received from customers, less cash costs to provide services to our customers, which includes general and administrative costs and interest payments.

As of September 30, ~~2009 Compared to Three Months Ended~~2022, we had $390.3 million in cash and cash equivalents and $100.0 million available under our revolving credit facility. As of September 30, ~~2008~~

~~Service revenue was $59.4~~2022, we had $564.7 million ~~for the three months ended September 30, 2009, a decrease~~ of ~~$1.4 million compared~~total debt outstanding. We believe our cash on hand, together with amounts available under our revolving credit facility, and cash provided by operating activities are and will continue to ~~service revenue of $60.8 million for the three months ended September 30, 2008. The decrease is due~~be adequate to ~~a $6.9 million decrease in revenue related to vehicle financing, reflecting an overall decline in auto~~meet our operational 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~~needs in the ~~same period~~next twelve months. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of ~~2008. The impact~~additional indebtedness, additional equity financings, or a combination of these potential sources of funds. In 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~~event that we need access 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~~additional cash, we may not be able 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.

~~Table of Contents~~

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.

~~Table of Contents~~

~~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 inaccess 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 dueon commercially acceptable terms or at all. Our ability 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~~fund future operating expenses ~~decreased~~and capital expenditures and our ability to meet future debt service obligations or refinance our indebtedness will depend on our future operating performance, which will be affected by ~~$1.4 million compared to the same period in 2008. Other operating expenses were 11.8%~~general economic, financial, 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 affectother factors that may be beyond our ~~credit reporting businesses compared to the nine months ended September 30, 2008.~~

~~Table of Contents~~

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

Salaries and benefits decreased by $8.5 million. Salaries and benefits were 19.0% of service revenue in the nine months ended September 30, 2009 compared to 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 $1.4 million. Facilities and telecommunication expense were 2.7% and 3.2% of service revenue in the 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 8.6% for the same period of 2008. The decrease is due to a decline in 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 was flat when compared to the nine months ended 2008. Depreciation and amortization was 2.3% of service revenue in the third quarter of 2009 compared to 2.2% in the same period of 2008.

Income from operations was $44.8 million for the nine months ended September 30, 2009 compared to $35.4 million in the same period of 2008. The operating margin percentage increased from 17.4% to 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.

~~Data Services Segment~~

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

Total service revenue was $113.5 million for the nine months ended September 30, 2009, an increase of $53.1 million compared to service revenue of $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 $44.7 million for the nine months ended September 30, 2009, an increase of $3.7 million compared to gross margin of $41.0 million in the same period of 2008. Gross margin as a percentage of service revenue was 39.4% for the nine months ended September 30, 2009 as compared to 67.8% for the nine 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 decreased by $0.3 million. Salaries and benefits were 12.9% of service revenue in the nine months ended September 30, 2009 compared to 24.6% of service revenue in the same period of 2008. The decrease in expense is related to the reduction in staffing as compared to the same period in 2008.

~~Table of Contents~~

Facilities and telecommunication expenses decreased $0.2 million. Facilities and telecommunication expenses were 1.5% of service revenue in the nine months ended September 30, 2009 compared to 3.2% of service revenue in the same period of 2008.

Other operating expenses increased by $4.2 million. Other operating expenses were 8.4% of service revenue for the nine months ended September 30, 2009 and 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 decreased by $0.2 million. Depreciation and amortization was 6.5% of service revenue in the nine months ended September 30, 2009 compared to 12.6% in the same period of 2008.

~~The operating margin percentage decreased from 18.6% to 10.0% primarily due to the revenue mix of the businesses in the nine months ended September 30, 2009 compared to the same period in 2008.~~

Income from operations was $11.4 million for the nine months ended September 30, 2009, an increase of $0.2 million compared to $11.2 million in the nine months ended 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~~

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

Total service revenue was $119.4 million for the nine months ended September 30, 2009, a decrease of $44.0 million compared to service revenue of $163.4 million in the same period of 2008. The decrease was a result of 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 $10.2 million. Salaries and benefits were 41.0% of service revenue in the nine months ended September 30, 2009 compared to 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 $1.1 million. Facilities and telecommunication expenses were 5.2% and 4.5% of service revenue in the nine months ended September 30, 2009 and 2008, respectively. The expense decrease is a direct effect of office consolidations.

Other operating expenses decreased by $13.2 million. Other operating expenses were 13.1% and 17.7% of service revenue in the nine months ended 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 $1.4 million. Depreciation and amortization was 9.3% of service revenue in the nine months ended September 30, 2009 compared to 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 certain services incontrol, including those described under our ~~drug screening division.~~

~~Table of Contents~~

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

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

~~Multifamily Services Segment~~

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

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

Salaries and benefits cost decreased $1.7 million. Salaries and benefits were 31.7% of service revenue for the nine months ended September 30, 2009 compared to 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 $0.4 million. Facilities and telecommunication expenses were 3.9% of service revenue in the nine months ended September 30, 2009 and 4.6% in the same period of 2008. The expense decrease is a direct effect of office consolidations.

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

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

The operating margin percentage increased from 31.0% to 35.7% primarily due to management’s cost containment initiatives. Income from operations was $20.5 million in the nine months ended September 30, 2009 compared to income from operations of $18.0 million in the same period of 2008.

~~Investigative and Litigation Services Segment~~

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

Total service revenue was $30.2 million for the nine months ended September 30, 2009, a decrease of $33.1 million compared to service revenue of $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 $8.3 million. Salaries and benefits were 56.3% of service revenue in the nine months ended September 30, 2009 compared to 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 6.6% of service revenue in the nine months ended September 30, 2009 and 3.5% in the first quarter of 2008.

~~Table of Contents~~

Other operating expenses decreased by $3.4 million. Other operating expenses were 16.3% of service revenue in the nine months September 30, 2009 and 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 $0.3 million. Depreciation and amortization was 7.2% of service revenue in the nine months ended September 30, 2009 compared to 3.9% in the same period of 2008.

The operating margin percentage decreased from 37.0% to 9.1%. Income from operations was $2.8 million for the nine months ended September 30, 2009 compared to $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~~

~~Nine Months Ended September 30, 2009 Compared to Nine 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 $26.4 million in the nine months ended September 30, 2009 compared to expenses of $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.

~~Consolidated Results~~

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

Consolidated service revenue for the nine months ended September 30, 2009 was $510.7 million, a decrease of $34.6 million compared to service revenue of $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 $37.3 million. Salaries and benefits were 29.6% of service revenue for the nine months ended September 30, 2009 and 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 $3.8 million compared to the same period in 2008. Facilities and telecommunication expenses were 4.0% of service revenue in the nine months ended September 30, 2009 and 4.4% in the same period of 2008. The decrease is primarily due to savings related to office consolidations.

Other operating expenses decreased by $9.2 million compared to the same period in 2008. Other operating expenses were 11.0% and 12.0% of service revenue for the nine months ended 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 and $1.6 million in legal expenses recorded related to the Offer and related litigation.

Depreciation and amortization increased by $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.

~~Table of Contents~~

The consolidated operating margin was 11.6% for the nine months ended September 30, 2009, compared to 13.4% for the same period in 2008. Income from operations was $59.2 million for the nine months ended September 30, 2009 compared to $72.9 million for the same period in 2008. The decrease of $13.7 million is comprised of a decrease in operating income of $20.6 million in Investigative and Litigation Support Services, and $7.0 million at Employer Services offset by increases in operating income of $9.4 million in Credit Services, $0.2 million in Data Services, $2.5 million in Multifamily Services and a decrease of Corporate expenses of $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“Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2008.~~

~~Liquidity~~2021.

Share Repurchase Program

~~Overview~~

trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, privately-negotiated transactions, through other transactions in accordance with applicable securities laws, or a combination of these methods on such terms and in such amounts as the Company deems appropriate. The Company is not obligated to repurchase any specific number of shares, and the timing, manner, value, and actual number of shares repurchased will depend on a variety of factors, including the Company’s ~~principal sources of capital include, but are not limited~~stock price and liquidity requirements, other business considerations and general market and economic conditions. No shares will be purchased from SLP Fastball Aggregator, L.P. and its affiliates. The Company may discontinue or modify purchases without notice at any time. The Company plans to use its existing cash ~~balances, operating cash flows and borrowing~~to fund repurchases made under the share repurchase program.

On November 8, 2022, the Company' Board of Directors authorized an increase to the total available amount under its ~~Secured~~Repurchase Program to $150.0 million and extended the program through December 31, 2023. Through November 4, 2022, the Company had made $21.6 million of purchases under the Repurchase Program.

Long-Term Debt

In February 2020, a new financing structure was established consisting of a new First Lien Credit ~~Facility (see Note 6 to~~Agreement (“Successor First Lien Agreement”) and a new Second Lien Credit Agreement (“Successor Second Lien Agreement”) (collectively, the ~~Consolidated Financial Statements)~~“Successor Credit Agreements”). The ~~Company’s short-term~~Successor First Lien Agreement provided financing in the form of a $670.0 million term loan due January 31, 2027 (“Successor First Lien Credit Facility”) and ~~long-term liquidity depends primarily upon its level~~a $75.0 million new revolving credit facility due January 31, 2025 (“Successor Revolver”). The Successor Second Lien Agreement provided financing in the form of ~~net income, working capital management (accounts receivable, accounts payable~~a $145.0 million term loan due January 31, 2028 (“Successor Second Lien Credit Facility”).

On February 1, 2021, we amended the Successor First Lien Agreement to fund $100.0 million of additional first lien term loans and reduce the applicable margins by 0.25%. The refinancing resulted in a loss on extinguishment of debt of $5.1 million, composed of the write-off of $4.5 million of unamortized deferred financing costs and $0.6 million of accrued ~~expenses), capital expenditures~~interest and ~~bank borrowings.~~miscellaneous fees. In addition, we fully repaid the outstanding Successor Second Lien Agreement and recorded a loss on extinguishment of debt of $8.9 million, composed of the write-off of $7.3 million of unamortized deferred financing costs plus a $1.5 million prepayment premium, and $0.1 million of accrued interest and other miscellaneous fees.

In connection with the IPO, the Company entered into an amendment to increase the borrowing capacity under the Successor Revolver from $75.0 million to $100.0 million and extend the maturity date from January 31, 2025 to July 31, 2026.

Borrowings under the Successor First Lien Agreement bear interest at a rate per annum equal to an applicable margin plus, at our option, either (a) a base rate or (b) LIBOR, which is subject to a floor of 0.00% per annum. The ~~Company believes that,~~applicable margins under the Successor First Lien Agreement are subject to stepdowns 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 forour first lien net leverage ratio. In connection with the ~~next twelve months. Any material variance~~closing 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.IPO, each applicable margin was reduced further by 0.25%. In addition, the ~~effect~~borrower, First Advantage Holdings, LLC, which is an indirect wholly-owned subsidiary of the ~~issues~~Company, is required to pay a commitment fee on any unutilized commitments under the revolving credit facility. The commitment fee rate ranges between 0.25% and 0.50% per annum based on our first lien net leverage ratio. The borrower is also required to pay customary letter of credit fees.

The Successor First Lien Credit Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00% of the principal amount. The Successor Revolver has no amortization. The Successor First Lien Credit Facility requires the borrower to prepay outstanding term loans, subject to certain exceptions, with certain proceeds from non-ordinary course asset sales, issuance of debt not permitted by the credit agreement to be incurred and annual excess cash flows. In addition, any voluntary prepayment of term loans in connection with certain repricing transactions on or prior to August 1, 2021 were subject to a 1.00% prepayment premium. Otherwise, the borrower may voluntarily repay outstanding loans without premium or penalty, other than customary “breakage” costs.

In connection with the closing of the IPO, on June 30, 2021, the Company repaid $200.0 million of the Successor First Lien Credit Facility outstanding, of which $44.3 million was applied to all of the remaining quarterly amortizing principal payments due under the Successor First Lien Agreement. The remaining $564.7 million term loan is scheduled to mature on January 31, 2027. As a result of the prepayment, the Company recorded additional interest expense of $3.7 million associated with the accelerated amortization of the related deferred financing costs.

The Successor First Lien Agreement is unconditionally guaranteed by Fastball Parent, Inc., a wholly-owned subsidiary of the Company and the direct parent of the borrower, and material wholly owned domestic restricted subsidiaries of Fastball Parent, Inc. The Successor First Lien Agreement and the guarantees of such obligations, are secured, subject to permitted liens and other exceptions, by (1) a first priority security interest in certain tangible and intangible assets of the borrower and the guarantors and (2) a first-priority pledge of 100% of the capital stock of the borrower and of each wholly-owned material restricted subsidiary of the borrower and the guarantors (which pledge, in the ~~real estate~~case of any non-U.S. subsidiary of a U.S. subsidiary, does not include more than 65% of the voting stock of such non-U.S. subsidiary).

The credit agreement contains customary affirmative covenants, negative covenants, and ~~related~~events of default (including upon a change of control). The credit ~~markets and other macroeconomic matters has resulted in higher unemployment rates negatively impacting~~agreement also includes a “springing” first lien net leverage ratio test, applicable only to the ~~volumes in~~revolving credit facility, that requires such ratio to be no greater than 7.75:1.00 on the ~~Employer Services segment. Given this outlook, management~~last day of any fiscal quarter if more than 35.0% of the revolving credit facility is ~~focusing~~utilized on ~~expense reductions, operating efficiencies, and increasing market share throughout the Company.~~

~~Statements~~such date.

Cash Flow Analysis

Comparison of Cash Flows

for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

The ~~Company’s primary source~~following table is a summary of ~~liquidity is~~our cash flow activity for the periods presented:


	Nine Months Ended September 30,
(in thousands)	2022			2021
Net cash provided by operating activities	$	142,842		$	83,860
Net cash used in investing activities		(40,526	)		(24,992	)
Net cash (used in) provided by financing activities		(827	)		64,372

Cash Flows from ~~operations and amounts available under credit lines the Company has established with a bank. As of September 30, 2009, cash and cash equivalents were $57.8 million.~~

~~Table of Contents~~

Operating Activities

Net cash provided by operating activities ~~of continuing operations~~ was $57.0 million and $33.0 million in the nine months ended September 30, 2009 and 2008, respectively. Cash provided by operating activities of continuing operations increased by $24.0 million when comparing the nine months ended September 30, 2009 and the same period in 2008. Income from continuing operations was $34.8 million in the nine months ended September 30, 2009 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 related to the sale of DealerTrack shares.

~~Cash used in investing activities of continuing operations was $36.1 million and $78.4~~$142.8 million for the nine months ended September 30, ~~2009 and 2008, respectively. In the nine months ended September 30, 2009, net cash in the amount of $19.5 million was used for earnout provisions from prior year acquisitions,~~2022, compared to ~~$51.2 million in the same period of 2008. Purchases of property and equipment were $14.5 million in the nine months ended September 30, 2009 compared to $24.3 million in the same period of 2008.~~

~~Cash used in financing activities of continuing operations was $16.5~~$83.9 million for the nine months ended September 30, ~~2009, compared to~~2021. Net cash provided by ~~financing~~operating activities ~~of continuing operations of $12.4~~for the nine months ended September 30, 2022 increased by $59.0 million compared to the nine months ended September 30, 2021. Cash flows from operating activities was positively impacted by the Company’s revenues growth from existing customers, new customer go-lives, recent acquisitions, and lower accounts receivable driven by increased cash collections from customers.

Cash Flows from Investing Activities

Net cash used in investing activities was $40.5 million for the nine months ended September 30, ~~2008. In the nine months ended September 30, 2009, proceeds from existing credit facilities were $50.9 million~~2022, compared to $100.3 million in the same period of 2008. Repayment of debt was $62.3 million in the nine months ended September 30, 2009 and $85.5 million in the same period of 2008. Cash used to acquire noncontrolling interest in a consolidated subsidiary was $5.9 million and $8.0$25.0 million for the nine months ended September 30, ~~2009 and 2008, respectively. In addition, $1.1 million was distributed to noncontrolling interests~~2021. Net cash used in investing activities for the nine months ended September 30, ~~2008.~~

~~Debt~~2022 increased by $15.5 million compared to the nine months ended September 30, 2021. The cash flows used in investing activities for the nine months ended September 30, 2022 were impacted by the $19.1 million acquisition of Form I-9 Compliance, net of cash acquired. The remaining investing cash flows are driven primarily by capitalized software development costs and ~~Capital~~

~~In 2005,~~purchases of property and equipment, which increased in 2022 as the Company ~~executed~~continued to make incremental investments in its technology platform.

Cash Flows from Financing Activities

Net cash (used in) provided by financing activities was $(0.8) million for the nine months ended September 30, 2022, compared to $64.4 million for the nine months ended September 30, 2021. Cash flows from financing activities for the nine months ended September 30, 2022 were primarily driven by share-based compensation activity. These inflows were offset by cash outflows related to payments on capital lease obligations, deferred purchase of a ~~revolving credit agreement with a bank syndication (the “Credit Agreement”). Borrowings available~~software platform, and shares repurchased under the ~~Credit Agreement~~Company’s Repurchase Program. During the nine months ended September 30, 2022, 155,697 shares were repurchased under the program at a total ~~up to $225~~cost of $2.2 million. ~~The Credit Agreement includes a $10 million sub-facility~~

Net cash provided by financing activities for the ~~issuance of letters of credit and up to a $5 million swing loan facility. The credit facility maturity date is~~nine months ended September ~~28, 2010. The Credit Agreement is collateralized~~30, 2021 was primarily driven by the ~~stock and accounts receivable~~Company's completion of its IPO on June 25, 2021. Cash inflows related to the IPO were $320.6 million, partially offset by the use of proceeds which consisted of a $200.0 million repayment of the Company’s ~~subsidiaries.~~

AtSuccessor First Lien Credit Facility and $1.0 million of offering cost payments.

Net cash provided by financing activities for the six months ended September 30, ~~2009,~~2021 was incrementally driven by the Company’s February 2021 debt refinancing which consisted of a refinancing of the Successor First Lien Credit Facility and the full repayment of the Successor Second Lien Credit Facility. Cash outflows related to this refinancing were $308.5 million, partially offset by cash inflows of $261.4 million. As part of the refinancing, the Company ~~had available lines~~paid $1.3 million related to new debt issuance costs. The remaining outflows primarily consisted of credit of $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,"amortizing principal payments due 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 September 30, 2009.

~~Contractual Obligations and Commercial Commitments~~

~~The following is a schedule of long-term contractual commitments, as of 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.

first lien term loan facility.

~~Table of Contents~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~There have been~~

As of September 30, 2022, no material ~~changes~~change had occurred in our market risks, compared with the ~~Company’s risk since filing its~~disclosure in our Annual Report on Form 10-K ~~for~~filed with the ~~year ended December 31, 2008.~~

SEC on March 23, 2022.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

~~The Company’s~~

Our management, with the participation of our Chief Executive Officer ~~(“CEO”)~~(principal executive officer) and Chief Financial Officer ~~(“CFO”)~~(principal financial officer), ~~after evaluating~~has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. The term “disclosure controls and procedures” as defined in ~~Rule~~Rules 13a-15(e) ofand 15d-15(e) under 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~~(the “Exchange Act”) means controls and other procedures ~~were effective~~of a company that are designed to ~~provide reasonable~~ ~~assurances~~ensure that information required to be disclosed by a company in the reports ~~filed~~that it files or ~~submitted~~submits under ~~such~~the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the ~~Securities and Exchange Commission’s~~SEC’s rules and forms and that such information is accumulated and communicated to management including the ~~CEO~~Chief Executive Officer and ~~CFO,~~Chief Financial Officer, as appropriate, to allow timely ~~decisions~~discussions regarding required disclosures.

~~There was~~

Management recognizes that any controls and procedures, no ~~change~~matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving their desired control objectives. Based on the evaluation of management’s disclosure controls and procedures as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, the disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control

During the ~~Company’s~~quarter covered by this report, there were no changes in our internal control over financial reporting ~~during the quarter ended September 30, 2009~~ that ~~has~~ materially affected, or isare reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

PART ~~II.~~ II—OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings~~

Item 1. Legal Proceedings.

Information in response to this Item is included in “Part I — Item 1. — Note 12 — Commitments and Contingencies” and is incorporated by reference into Part II of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors.

As of September 30, 2022, no material changes had occurred in our risk factors, compared with the disclosure in our Annual Report on Form 10-K filed with the SEC on March 23, 2022.

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

Use of Proceeds

On ~~July 2, 2009, Norfolk County Retirement System filed~~June 25, 2021, we completed our IPO. All shares sold were registered pursuant to a ~~Verified Class Action Complaint in~~registration statement on Form S-1 (File No. 333-256622), declared effective by 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~~SEC on 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~~

22, 2021.

There ~~have~~has been no material ~~changes from the risk factors previously disclosed~~change in the ~~Company’s~~expected use of the net proceeds from our IPO as described in our Annual Report on Form 10-K ~~for Fiscal Year Ending~~filed with the SEC on March 23, 2022.

Issuer Purchases of Equity Securities

The following information relates to the Company’s purchase of its common stock during each month within the third quarter of 2022:


Period	Total Number of Shares Purchased		Average Price Paid Per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
7/1/2022 - 7/31/2022		—	$	—		—	$	—
8/1/2022 - 8/31/2022		—	$	—		—	$	—
9/1/2022 - 9/30/2022		155,697	$	14.42		155,697	$	47,752,436
Total		155,697	$	14.42		155,697	$	47,752,436

(1) Does not include commissions paid to repurchase shares.

(2) On August 2, 2022, the Company’s Board of Directors authorized the repurchase of up to $50.0 million of the Company’s common stock over the 12-month period ending August 2, 2023.

Stock repurchases may be effected through open market repurchases at prevailing market prices, including through the use of block trades and trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, privately-negotiated transactions, through other transactions in accordance with applicable securities laws, or a combination of these methods on such terms and in such amounts as the Company deems appropriate. The Company is not obligated to repurchase any specific number of shares, and the timing, manner, value, and actual number of shares repurchased will depend on a variety of factors, including the Company’s stock price and liquidity requirements, other business considerations and general market and economic conditions. No shares will be purchased from SLP Fastball Aggregator, L.P. and its affiliates. The Company may discontinue or modify purchases without notice at any time. The Company plans to use its existing cash to fund repurchases made under the share repurchase program.

~~Table~~2023. Through November 4, 2022, the Company had made $21.6 million of ~~Contents~~

purchases under the Repurchase Program.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable

Item 5. Other Information.

None

Item 6. Exhibits.

~~Item 2.~~	~~Unregistered Sales~~
Exhibit Number		Description
3.1		Amended and Restated Certificate of ~~Equity~~Incorporation of First Advantage Corporation (incorporated herein by reference to Exhibit 3.1 of First Advantage’s Form 8-K filed on June 25, 2021).
3.2		Amended and Restated Bylaws of First Advantage Corporation (incorporated herein by reference to Exhibit 3.2 of First Advantage’s Form 8-K filed on June 25, 2021).
31.1		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and ~~Use~~15d-14(a) under the Securities Exchange Act of ~~Proceeds~~1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

~~None~~

~~Item 3.~~

~~Defaults Upon Senior Securities~~

~~None~~

It~~em 4.~~

~~Submission of Matters to a Vote of Security Holders~~

~~None~~

It~~em 5.~~

~~Other Information~~

~~None~~

~~Item~~ 6.

~~Exhibits~~

~~See Exhibit Index.~~

~~Table~~

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of ~~Contents~~

SI~~GNATURES~~

the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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)~~


				FIRST ADVANTAGE CORPORATION
~~Date:~~ ~~October 29, 2009~~	~~By:~~	~~/s/~~ ~~ANAND NALLATHAMBI~~
Date: November 8, 2022		~~Name:~~ ~~Anand Nallathambi~~ By:	/s/ Scott Staples
		~~Title:~~	Scott Staples
			Chief Executive Officer	(principal executive officer)


Date: November 8, 2022		By:	/s/ David L. Gamsey
~~Date:~~ ~~October 29, 2009~~	~~By:~~	~~/s/~~ ~~JOHN LAMSON~~	David L. Gamsey
		~~Name:~~ ~~John Lamson~~
		~~Title:~~ Executive Vice President & Chief Financial Officer
			(principal financial officer)

~~Table of Contents~~

~~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~~

~~Incorporated in Delaware~~	~~61-1437565~~
~~(State~~ Delaware	84-3884690
(State or other jurisdiction of incorporation or organization)	~~(I.R.S.~~ (I.R.S. Employer Identification ~~Number)~~No.)
1 Concourse Parkway NE, Suite 200 Atlanta, GA	30328
(Address of principal executive offices)	(Zip Code)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(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

(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

	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

										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

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

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

(in thousands)
Remainder of 2009	$	3,609
2010		13,956
2011		11,323
2012		10,231
2013		8,831
Thereafter		12,245
	$	60,195

	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

(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

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


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

		Options Outstanding						Options Exercisable
				Weighted Avg		Weighted				Weighted
				Remaining Contractual		Average				Average
Range of Exercise Prices		Shares		Life in Years		Exercise Price		Shares		Exercise Price
$	7.00 - $ 12.50		9		1.9	$	11.13		9	$	11.13
$	12.51 - $ 25.00		2,075		4.6	$	20.90		2,018	$	20.91
$	25.01 - $ 50.00		1,084		6.1	$	26.97		925	$	27.01
$	50.01 - $242.25		4		1.8	$	50.25		4	$	50.25
			3,172						2,956

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

Service revenue	$	59,443		$	25,514		$	41,731		$	19,879		$	9,804		$	(391	)	$	155,980
Reimbursed government fee revenue		223			11,987			2,138			-			-			(762	)		13,586
Total revenue		59,666			37,501			43,869			19,879			9,804			(1,153	)		169,566

Cost of service revenue		26,691			12,419			10,651			1,790			495			(617	)		51,429
Government fees paid		223			11,987			2,138			-			-			(762	)		13,586
Total cost of service		26,914			24,406			12,789			1,790			495			(1,379	)		65,015

Gross margin		32,752			13,095			31,080			18,089			9,309			226			104,551

Salaries and benefits		12,238			4,839			16,142			6,110			5,303			5,288			49,920
Facilities and telecommunications		1,771			551			2,036			754			675			954			6,741
Other operating expenses		4,721			1,680			5,202			2,415			1,270			3,165			18,453
Depreciation and amortization		1,533			2,435			3,771			1,542			724			988			10,993
Income (loss) from operations	$	12,489		$	3,590		$	3,929		$	7,268		$	1,337		$	(10,169	)	$	18,444
Operating margin percentage		21.0	%		14.1	%		9.4	%		36.6	%		13.6	%		N/A			11.8	%

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

Service revenue	$	60,837		$	21,922		$	54,199		$	19,702		$	18,600		$	(596	)	$	174,664
Reimbursed government fee revenue		-			11,743			2,828			-			-			(938	)		13,633
Total revenue		60,837			33,665			57,027			19,702			18,600			(1,534	)		188,297

Cost of service revenue		28,985			8,628			14,234			1,915			503			(745	)		53,520
Government fees paid		-			11,743			2,828			-			-			(938	)		13,633
Total cost of service		28,985			20,371			17,062			1,915			503			(1,683	)		67,153

Gross margin		31,852			13,294			39,965			17,787			18,097			149			121,144

Salaries and benefits		14,294			4,755			18,511			6,320			7,622			7,611			59,113
Facilities and telecommunications		2,203			643			2,280			836			722			1,105			7,789
Other operating expenses		4,844			1,646			9,275			2,533			2,569			(968	)		19,899
Depreciation and amortization		1,728			2,570			3,255			1,444			837			1,064			10,898
Impairment loss		1,720			-			-			-			-			-			1,720
Income (loss) from operations	$	7,063		$	3,680		$	6,644		$	6,654		$	6,347		$	(8,663	)	$	21,725
Operating margin percentage		11.6	%		16.8	%		12.3	%		33.8	%		34.1	%		N/A			12.4	%