☐

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 May 4, 2023, the registrant had 146,259,519 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 ~~Income for the Three~~Operations and ~~Nine Months Ended September 30, 2009 and September 30, 2008 (unaudited)~~ Comprehensive Income							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 18

Item 3.					Quantitative and Qualitative Disclosures About Market Risk				42 34

Item 4.			Controls and Procedures						42

~~Part II: OTHER INFORMATION~~

~~Item 1.~~ ~~Legal Proceedings~~					42 34

~~Item 1A.~~ ~~Risk Factors~~ PART II.	OTHER INFORMATION		42 35

Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43 35

Item 3.			Defaults Upon Senior Securities			43 35
Item 4.	Mine Safety Disclosures				35
Item 4. ~~Submission of Matters to a Vote of Security Holders~~ 5.	43 Other Information	36
Item 6.	Exhibits				38
~~Item 5.~~ ~~Other Information~~Signatures				43

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

~~Signatures~~					44 39

~~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)	March 31, 2023			December 31, 2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	400,156		$	391,655
Restricted cash		140			141
Short-term investments		1,954			1,956
Accounts receivable (net of allowance for doubtful accounts of $1,344 and $1,348 at March 31, 2023 and December 31, 2022, respectively)		127,962			143,811
Prepaid expenses and other current assets		22,780			25,407
Income tax receivable		2,482			3,225
Total current assets		555,474			566,195
Property and equipment, net		103,301			113,529
Goodwill		793,293			793,080
Trade name, net		69,387			71,162
Customer lists, net		312,568			326,014
Deferred tax asset, net		2,405			2,422
Other assets		11,235			13,423
TOTAL ASSETS	$	1,847,663		$	1,885,825
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$	47,484		$	54,947
Accrued compensation		12,990			22,702
Accrued liabilities		16,782			16,400
Current portion of operating lease liability		5,640			4,957
Income tax payable		808			724
Deferred revenues		1,256			1,056
Total current liabilities		84,960			100,786
Long-term debt (net of deferred financing costs of $7,613 and $8,075 at March 31, 2023 and December 31, 2022, respectively)		557,111			556,649
Deferred tax liability, net		88,422			90,556
Operating lease liability, less current portion		6,673			7,879
Other liabilities		3,170			3,337
Total liabilities		740,336			759,207
COMMITMENTS AND CONTINGENCIES (Note 11)
EQUITY
Common stock - $0.001 par value; 1,000,000,000 shares authorized, 147,026,264 and 148,732,603 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		147			149
Additional paid-in-capital		1,179,595			1,176,163
Accumulated deficit		(50,953	)		(27,363	)
Accumulated other comprehensive loss		(21,462	)		(22,331	)
Total equity		1,107,327			1,126,618
TOTAL LIABILITIES AND EQUITY	$	1,847,663		$	1,885,825

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

(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 March 31,
(in thousands, except share and per share amounts)	2023		2022
REVENUES	$	175,520	$	189,881

OPERATING EXPENSES:
Cost of services (exclusive of depreciation and amortization below)		91,061		96,431
Product and technology expense		12,624		13,773
Selling, general, and administrative expense		28,682		28,545
Depreciation and amortization		31,866		34,034
Total operating expenses		164,233		172,783
INCOME FROM OPERATIONS		11,287		17,098

OTHER EXPENSE, NET:
Interest expense, net		8,681		(850	)
Total other expense, net		8,681		(850	)
INCOME BEFORE PROVISION FOR INCOME TAXES		2,606		17,948
Provision for income taxes		681		4,935
NET INCOME	$	1,925	$	13,013

Foreign currency translation income (loss)		869		(1,517	)
COMPREHENSIVE INCOME	$	2,794	$	11,496

NET INCOME	$	1,925	$	13,013
Basic net income per share	$	0.01	$	0.09
Diluted net income per share	$	0.01	$	0.09
Weighted average number of shares outstanding - basic		145,862,562		150,538,700
Weighted average number of shares outstanding - diluted		147,031,866		152,348,806

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


	Three Months Ended March 31,
(in thousands)	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,925		$	13,013
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		31,866			34,034
Amortization of deferred financing costs		461			445
Bad debt recovery		(40	)		(184	)
Deferred taxes		(2,144	)		1,698
Share-based compensation		2,058			1,859
Gain on foreign currency exchange rates		(10	)		(411	)
Loss on disposal of fixed assets and impairment of ROU assets		1,222			163
Change in fair value of interest rate swaps		1,879			(5,260	)
Changes in operating assets and liabilities:
Accounts receivable		15,980			8,862
Prepaid expenses and other assets		2,933			1,151
Accounts payable		(7,618	)		(1,329	)
Accrued compensation and accrued liabilities		(11,828	)		(13,215	)
Deferred revenues		209			(254	)
Operating lease liabilities		(110	)		(405	)
Other liabilities		980			(26	)
Income taxes receivable and payable, net		836			1,442
Net cash provided by operating activities		38,599			41,583
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of businesses, net of cash acquired		—			(18,920	)
Purchases of property and equipment		(42	)		(2,909	)
Capitalized software development costs		(6,056	)		(4,643	)
Other investing activities		15			—
Net cash used in investing activities		(6,083	)		(26,472	)
CASH FLOWS FROM FINANCING ACTIVITIES
Share repurchases		(25,266	)		—
Payments on finance lease obligations		(37	)		(238	)
Payments on deferred purchase agreements		(234	)		(349	)
Proceeds from issuance of common stock under share-based compensation plans		1,399			547
Net settlement of share-based compensation plan awards		(25	)		—
Net cash used in financing activities		(24,163	)		(40	)
Effect of exchange rate on cash, cash equivalents, and restricted cash		147			58
Increase in cash, cash equivalents, and restricted cash		8,500			15,129
Cash, cash equivalents, and restricted cash at beginning of period		391,796			292,790
Cash, cash equivalents, and restricted cash at end of period	$	400,296		$	307,919

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes, net of refunds received	$	2,049		$	1,713
Cash paid for interest	$	10,625		$	4,774
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired on account	$	275		$	206
Excise taxes on share repurchases incurred but not paid	$	252		$	—

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 Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
BALANCE – December 31, 2022	$	149		$	1,176,163		$	(27,363	)	$	(22,331	)	$	1,126,618
Share-based compensation		—			2,058			—			—			2,058
Repurchases of common stock		(2	)		—			(25,515	)		—			(25,517	)
Proceeds from issuance of common stock under share-based compensation plans		0			1,399			—			—			1,399
Common stock withheld for tax obligations on restricted stock unit and option settlement		0			(25	)		—			—			(25	)
Foreign currency translation		—			—			—			869			869
Net income		—			—			1,925			—			1,925
BALANCE – March 31, 2023	$	147		$	1,179,595		$	(50,953	)	$	(21,462	)	$	1,107,327


(in thousands)	Common Stock		Additional Paid-In-Capital		Accumulated 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

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 workers, tenants, and drivers. 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, more productive, and more 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~~2022.

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.

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, revenue recognition, capitalized software, 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 5.

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 March 31, 2023 (in thousands):


	Level 1		Level 2		Level 3
Assets
Interest rate collars	$	—	$	9,007	$	—
Liabilities
Interest rate swap	$	—	$	1,444	$	—

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).

~~Certain amounts~~

Impairment of Long-Lived Assets — The Company regularly evaluates whether events and circumstances have occurred that indicate the carrying amount of property and equipment, ROU assets, and finite-life intangible assets may not be recoverable or that indicate useful lives warrant revision. The Company determined that triggering events occurred for certain leases exited during the three months ended March 31, 2023 which required an impairment review of certain ROU assets. Based on the results of the analysis, the Company recorded non-cash impairment charges of $1.1 million for the three ~~and nine~~ months ended ~~September 30, 2008~~March 31, 2023, primarily related to office space exited during the year. Write down of abandoned property and ~~at December 31, 2008 have been reclassified to conform with the 2009 presentation.~~

~~Operating results~~equipment no longer in use was less than $0.2 million for the three ~~and nine~~ months ended ~~September 30, 2009~~March 31, 2023.

Concentrations of Credit Risk — Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and ~~2008~~cash equivalents and accounts receivable. Cash is deposited with major financial institutions and, at times, such balances with each financial institution may be in excess of insured limits. The Company has not experienced, and does not anticipate, any losses with respect to its cash deposits. Accounts receivable represent credit granted to customers for services provided. The Company performs ongoing credit evaluations of its customers’ financial condition and generally does not require collateral on accounts receivable. The Company did not have any customers which represented 10% or more of consolidated revenues for the three months ended March 31, 2023 and 2022. Additionally, the Company did not have any customers which represented 10% or more of consolidated accounts receivable, net for any period presented.

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 $0.9 million and $(1.5) million for the three months ended March 31, 2023 and 2022, respectively.

Gains or losses resulting from foreign currency transactions are included in the accompanying condensed consolidated statements of operations and comprehensive income, 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 (loss) income included in the accompanying condensed consolidated statements of operations and comprehensive income was approximately $(0.5) million and $1.0 million for the three months ended March 31, 2023 and 2022, respectively.

Recent Accounting Pronouncements — There were no accounting pronouncements issued during the three months ended March 31, 2023 that are expected to have a material impact on the condensed consolidated financial statements.

Recently Adopted Accounting Pronouncements — In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Prior to the issuance of this guidance, contract assets and contract liabilities were recognized by the acquirer at fair value on the acquisition date. This guidance is effective for annual reporting periods beginning after December 15, 2022 including interim periods therein. Adoption of this standard on January 1, 2023 did not have a material impact on the condensed consolidated financial statements. However, if the Company acquires material customer contracts in the future, this standard will impact the accounting for those arrangements which may have a material effect on future results.

Note 3. Property and Equipment, net

Property and equipment, net as of March 31, 2023 and December 31, 2022 consisted of the following (in thousands):


	March 31, 2023			December 31, 2022
Furniture and equipment	$	23,189		$	23,422
Capitalized software for internal use, acquired by business combination		227,405			227,405
Capitalized software for internal use, developed internally or otherwise purchased		66,369			60,187
Leasehold improvements		2,802			2,957
Total property and equipment		319,765			313,971
Less: accumulated depreciation and amortization		(216,464	)		(200,442	)
Property and equipment, net	$	103,301		$	113,529

Depreciation and amortization expense of property and equipment was approximately $16.4 million and $16.8 million for the three months ended March 31, 2023 and 2022, respectively.

Note 4. Goodwill, Trade Name, and Customer Lists

The changes in the carrying amount of goodwill for the three months ended March 31, 2023 by reportable segment were as follows (in thousands):


	Americas		International		Total
Balance – December 31, 2022	$	677,171	$	115,909	$	793,080
Foreign currency translation		37		176		213
Balance – March 31, 2023	$	677,208	$	116,085	$	793,293

The following summarizes the gross carrying value and accumulated amortization for the Company’s trade name and customer lists as of March 31, 2023 and December 31, 2022 (in thousands):


	March 31, 2023
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Useful Life (in years)
Trade name	$	94,000	$	(24,613	)	$	69,387	20 years
Customer lists		516,009		(203,441	)		312,568	13-14 years
Total	$	610,009	$	(228,054	)	$	381,955


	December 31, 2022
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Useful Life (in years)
Trade name	$	93,959	$	(22,797	)	$	71,162	20 years
Customer lists		515,762		(189,748	)		326,014	13-14 years
Total	$	609,721	$	(212,545	)	$	397,176

Amortization expense of trade name and customer lists was approximately $15.4 million and $17.2 million for the three months ended March 31, 2023 and 2022, respectively. Trade name and customer lists are amortized on an accelerated basis based upon their estimated useful life.

Note 5. Long-term Debt

The fair value of the Company’s long-term debt obligations approximated their book value as of March 31, 2023 and December 31, 2022 and consisted of the following (in thousands):


	March 31, 2023			December 31, 2022
First Lien Credit Facility	$	564,724		$	564,724
Less: Deferred financing costs		(7,613	)		(8,075	)
Long-term debt, net	$	557,111		$	556,649

The Company is a party to a Second Amended First Lien Credit Agreement with its banking group (“Credit Agreement”), which provides for a term loan of $766.6 million due January 31, 2027 carrying an interest rate of 2.75% to 3.00%, based on the first lien ratio, plus LIBOR (“First Lien Credit Facility”) and a $100.0 million revolving credit facility due July 31, 2026 (“Revolver”). The Credit Agreement is 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 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. As of March 31, 2023, there were no outstanding borrowings under the Revolver and $564.7 million outstanding under the First Lien Credit Facility. As the Company had no outstanding amounts under the Revolver, it was not subject to the consolidated first lien leverage ratio covenant and was compliant with all other covenants under the agreement as of March 31, 2023.

Note 6. Derivatives

To reduce exposure to variability in expected future cash outflows on variable rate debt attributable to the changes in one-month LIBOR, the Company has historically entered into interest rate derivative instruments to economically offset a portion of this risk and may do so in the future.

As of March 31, 2023, the Company had the following outstanding derivatives that were not designated as a hedge in qualifying hedging relationships:


Product	Effective Date	Maturity Date	Notional	Rate
Interest rate collars	February 29, 2020	February 29, 2024	$300.0 million	0.48% floor/1.50% cap
Interest rate swap	February 28, 2023	February 28, 2026	$100.0 million	4.36%

Derivatives not designated as hedges are not ~~necessarily~~speculative and are used to manage the Company’s exposure to interest rate movements; however, the Company has not elected to apply hedge accounting for these instruments.

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


		Fair Value
Derivatives not designated as hedging instruments	Balance Sheet Location	As of March 31, 2023		As of December 31, 2022
Interest rate collars	Prepaid expenses and other current assets	$	9,007	$	11,570
Interest rate swap	Accrued liabilities	$	1,444	$	—

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 March 31,
Derivatives not designated as hedging instruments	Income Statement Location	2023			2022
Interest rate collars	Interest expense, net	$	(435	)	$	5,260
Interest rate swap	Interest expense, net	$	(1,444	)	$	—

Note 7. Income Taxes

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

For the three months ended March 31, 2023, 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 months ended March 31, 2023 was 26.1%. The Company’s effective income tax rate for the three months ended March 31, 2023 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 U.S. state income taxes.

The effective income tax rate for the three months ended March 31, 2022 was 27.5%. The Company’s effective income tax rate for the three months ended March 31, 2022 was higher than the U.S. federal statutory rate of 21%, primarily due to GILTI inclusion, nondeductible share-based compensation, and U.S. state income taxes.

Note 8. Revenues

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.

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.

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. The contract asset balance was $7.2 million and $6.5 million as of March 31, 2023 and December 31, 2022, respectively, and is included in accounts receivable, net 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. The contract liability balance was $1.3 million and $1.1 million as of March 31, 2023 and December 31, 2022, 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.

For additional disclosures about the disaggregation of our revenues see Note 14, “Reportable Segments.”

Note 9. 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 as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Share-based compensation expense
Cost of services	$	275	$	274
Product and technology expense		457		204
Selling, general, and administrative expense		1,326		1,381
Total share-based compensation expense	$	2,058	$	1,859

2020 Equity Plan

Prior to the Company’s Initial Public Offering (“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 “2020 Equity Plan”). Awards issued under the 2020 Equity Plan consist of options. No awards were issued under the plan during the period from January 1, 2023 through March 31, 2023.

A summary of the option and profits interests activity for the three months ended March 31, 2023 is as follows


		Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
December 31, 2022	Grants outstanding		2,843,342		$	6.66
	Grants exercised		(85,760	)	$	6.68
	Grants cancelled/forfeited		(250,856	)	$	6.69
March 31, 2023	Grants outstanding		2,506,726		$	6.66	6.8 Years	$18.3 million
March 31, 2023	Grants vested		806,379		$	6.64	6.6 Years	$5.9 million
March 31, 2023	Grants unvested		1,700,347		$	6.67

2021 Equity Plan

The 2021 Equity Plan is intended to provide a means through 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 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 March 31, 2023, 17,204,287 shares were available for issuance under the 2021 Equity Plan.

Stock Options

A summary of the option activity for the three months ended March 31, 2023 is as follows:


		Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
December 31, 2022	Grants outstanding		4,311,662	$	15.24
	Grants issued		71,099	$	13.70
March 31, 2023	Grants outstanding		4,382,761	$	15.21	8.4 Years	$0.0 million
March 31, 2023	Grants vested		1,392,123	$	15.16	8.3 Years		—
March 31, 2023	Grants unvested		2,990,638	$	15.23

The fair value for stock options granted for the three months ended March 31, 2023 was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:


	Options
Expected stock price volatility		35.48	%
Risk-free interest rate		4.22	%
Expected term (in years)		6.25
Fair-value of the underlying unit	$	13.70

Restricted Stock Units

A summary of the restricted stock units (“RSU”) activity for the three months ended March 31, 2023 is as follows:


		Shares			Weighted Average Grant Date Fair Value
December 31, 2022	Nonvested RSUs		472,332		$	16.00
	Granted		21,202		$	13.70
	Vested		(5,077	)	$	16.33
March 31, 2023	Nonvested RSUs		488,457		$	15.90

Restricted Stock

A summary of the restricted stock activity for the three months ended March 31, 2023 is as follows:


		Shares			Weighted Average Grant Date Fair Value
December 31, 2022	Nonvested restricted stock		2,281,300		$	3.85
	Vested		(326,670	)	$	3.85
March 31, 2023	Nonvested restricted stock		1,954,630		$	3.85

As of March 31, 2023, the Company had approximately $33.2 million of unrecognized pre-tax non-cash compensation expense, comprised of approximately $7.3 million related to restricted stock, $6.1 million related to RSUs, and approximately $19.8 million related to stock options, which the Company expects to recognize over a weighted average period of 2.7 years.

2021 Employee Stock Purchase Plan

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 is one six-month purchase period. During the holding period, ESPP purchased shares are not eligible for sale or broker transfer. The Company recorded an associated expense of approximately $0.2 million and $0.1 million for the three months ended March 31, 2023 and 2022, respectively.

Note 10. Equity

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”). On November 8, 2022, the Company’s 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. In February 2023, the Company’s Board of Directors further increased the total available amount under the Repurchase Program to $200.0 million effective February 28, 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 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 March 31, 2023
Shares repurchased		1,871,691
Average price per share	$	13.50
Costs recorded to accumulated deficit
Total repurchase costs	$	25,228
Additional associated costs		289
Total costs recorded to accumulated deficit	$	25,517

As of March 31, 2023, the remaining authorized value of shares available to be repurchased under this program was approximately $114.2 million.

Repurchased shares of common stock are retired. The par value of repurchased shares is deducted from common stock and the excess repurchase price over par value is reflected as a reduction to accumulated deficit. Additional associated costs include the related brokerage commissions and excise taxes on share repurchases.

Preferred Stock

As of March 31, 2023 and December 31, 2022, 250,000,000 shares of Preferred Stock were authorized, and no Preferred Stock was issued or outstanding.

Note 11. Commitments and Contingencies

There have been no material changes to the Company’s contractual obligations as compared to December 31, 2022.

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 $4.1 million and $4.4 million at March 31, 2023 and December 31, 2022, 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.

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 12. Related Party Transactions

The Company had no material related party transactions.

Note 13. 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 March 31,
	2023		2022
Basic net income per share	$	0.01	$	0.09
Diluted net income per share	$	0.01	$	0.09
Numerator:
Net income (in thousands)	$	1,925	$	13,013
Denominator:
Weighted average number of shares outstanding - basic		145,862,562		150,538,700
Add stock options to purchase shares and restricted stock units		1,169,304		1,810,106
Weighted average number of shares outstanding - diluted		147,031,866		152,348,806

For the three months ended March 31, 2023 and 2022, 2,913,298 and 2,099,781 stock options were excluded from the calculation of diluted net income per share, respectively, because their effects were anti-dilutive.

Note 14. Reportable Segments

We have two reportable segments, Americas and International. Our chief operating decision maker (“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 ~~results~~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 ~~may be expected~~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 revenue 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, “Summary of Significant Accounting Policies” and Note 8, “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 workers, tenants, and drivers. We generally classify our service offerings into three categories: pre-onboarding, post-onboarding, and adjacent products. We deliver our solutions across multiple 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 ~~entire fiscal year.~~three months ended March 31, 2023 and 2022 is as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Adjusted EBITDA
Americas	$	44,656	$	46,819
International		3,904		6,781
Total	$	48,560	$	53,600
Adjustments to reconcile to net income:
Interest expense, net		8,681		(850	)
Provision for income taxes		681		4,935
Depreciation and amortization		31,866		34,034
Share-based compensation		2,058		1,859
Transaction and acquisition-related charges (a)		1,071		1,498
Integration, restructuring, and other charges (b)		2,278		(889	)
Net income	$	1,925	$	13,013

(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 months ended March 31, 2023 and 2022 include 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 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 (in thousands):


	Three Months Ended March 31,
	2023			2022
Revenues
Americas	$	152,056		$	160,088
International		24,848			31,741
Eliminations		(1,384	)		(1,948	)
Total revenues	$	175,520		$	189,881

The following table sets forth net long-lived assets by geographic area (in thousands):


	March 31, 2023		December 31, 2022
Long-lived assets, net
United States, country of domicile	$	1,110,915	$	1,134,201
All other countries		176,848		180,258
Total long-lived assets, net	$	1,287,763	$	1,314,459

Note 15. Subsequent ~~events have been evaluated through October 29, 2009,~~ Events

Effective as of May 10, 2023, the ~~date these~~Company’s Board of Directors approved a modification of the vesting terms of outstanding unvested and unearned performance-based options, RSUs, and restricted stock. The modification offers eligible employees incremental vesting criteria which allows the currently unvested and unearned performance-based options, RSUs, and restricted stock to vest based on time on the fourth, fifth, and sixth anniversaries of the Vesting Commencement Date, as defined in each grant agreement, subject to continued service. The related accounting will be recorded prospectively on a straight-line basis beginning in the second quarter of 2023.

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 ~~were issued.~~

Asfor the three months ended March 31, 2023, and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2022, our “Risk Factors,” and “Management’s Discussion and Analysis of ~~September 30, 2009, the Company’s significant accounting policies~~Financial Condition and ~~estimates, which are detailed~~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~~2022.

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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~~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: 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 ~~liabilities assumed, 3) changes~~inflation, geopolitical unrest, uncertainty in financial markets (including as a result of recent bank failures and events affecting financial institutions), and the accounting for acquisition related fees and restructuring costs incurred in connection with an acquisition, and 4) increases required disclosures. The Company will apply the provisions of this update prospectively to business combinations for which the acquisition date is on 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~~COVID-19 pandemic; 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; inability to identify and successfully implement our growth strategies on a timely basis or at all; potential harm to our business, brand, and reputation as a result of ~~consolidated net income specifically attributable~~security breaches, cyber-attacks, or the mishandling of personal data; operating in a penetrated and competitive market; our reliance on third-party data providers; due to the ~~noncontrolling interest~~sensitive and privacy-driven nature of our products and solutions, we could face liability and legal or regulatory proceedings, which could be ~~identified~~costly and time-consuming to defend and may not be fully covered by insurance; our international business exposes us to a number of risks; real or perceived errors, failures, or bugs in our products could adversely affect our business, results of operations, financial condition, and growth prospects; our ability to identify attractive targets or successfully complete such transactions; the ~~consolidated financial statements. It also requires consistency~~timing, manner and volume of repurchases of common stock pursuant to our share repurchase program; failure to comply with anti-corruption laws and regulations; disruptions at our Global Operating Center and other operating centers; our contracts with our customers, which do not guarantee exclusivity or contracted volumes; disruptions, outages, or other errors with our technology and network infrastructure, including our data centers, servers, and third-party cloud and internet providers and our migration to the cloud; the continued integration of our platforms and solutions with human resource providers such as applicant tracking systems and human capital management systems as well as our relationships with such human resource providers; risks relating to public opinion, which may be magnified by incidents or adverse publicity concerning our industry or operations; our reliance on third-party vendors to carry out certain portions of our operations; our dependence on the service of our key executive and other employees, and our ability to find and retain qualified employees; our ability to obtain, maintain, protect and enforce our intellectual property and other proprietary information; our ability to maintain, protect, and enforce the confidentiality of our trade secrets; the use of open-source software in our applications; the ~~manner of reporting~~indemnification provisions in our contracts with our customers and third-party data suppliers; seasonality in our operations from quarter to quarter; 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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~~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 the estimated rates~~our stockholders; and changing interpretations of tax laws.

For additional information on these and other factors that ~~similar instruments~~ could ~~be negotiated at September 30, 2009 and December 31, 2008.~~

~~The estimated fair values of the Company’s financial instruments, none of which are held~~cause First Advantage’s actual results to differ materially from expected results, please see our Annual Report on Form 10-K 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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~~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 in our Investigative and Litigation Support Services segment, and CMSI, which was included in our Credit Services segment. The results of these businesses’ operations in the prior period are presented in discontinued operations in the Company’s Consolidated Statements of Income.

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

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~~Notes 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 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 connection2022, filed 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.

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~~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 million for the three months ended September 30, 2009 and 2008, respectively, and approximately $11.0 million and $13.8 million for the nine months ended September 30, 2009 and 2008, respectively.

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

~~Estimated amortization expense relating to intangible asset balances as of 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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~~Notes to Consolidated Financial Statements~~

~~The changes in the carrying amount of identifiable intangible assets are as follows 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~~

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

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

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

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~~Notes to Consolidated Financial Statements~~

~~The following table illustrates the share-based compensation expense recognized 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 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.~~

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~~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

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~~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 million for the three months ended September 30, 2009 and 2008, respectively, and $21.4 million and $35.3 million for the nine months ended September 30, 2009 and 2008, respectively. Service revenue for international operations included in the Investigative and Litigation Support Services segment was $0.4 million and $7.6 million for the three months ended September 30, 2009 and 2008, respectively, and $1.3 million and $32.3 million for the nine months ended September 30, 2009 and 2008, respectively.

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~~Notes to Consolidated Financial Statements~~

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

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

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~~First Advantage Corporation~~

~~Notes to Consolidated Financial Statements~~

~~11.Subsequent Event~~

~~Proposed Offer to Exchange by First American~~

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

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

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

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

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

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

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

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~~First Advantage Corporation~~

~~Notes to Consolidated Financial Statements~~

~~not been satisfied or waived at the then scheduled Expiration Time, First American may, in its discretion, extend the Expiration Time in~~, as 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 andfactors 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~~updated from time to time ~~because they will contain important information. Stockholders will be able to obtain a free copy of~~in our periodic filings with the ~~Offer to Exchange and related materials and the Solicitation/Recommendation Statement at~~SEC, which are accessible on the SEC’s website at ~~www.sec.gov~~ ..www.sec.gov. The forward-looking statements included in this Quarterly Report on Form 10-Q speak only as of the 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 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 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, ~~the Solicitation/Recommendation Statement, as well as the Company’s other public SEC filings, can be obtained at~~ ~~www.fadv.com. Stockholders~~you may ~~also read and copy any reports, statements~~opt in to automatically receive email alerts and other information ~~filed~~about First Advantage when you enroll your email address by visiting the “Email Alerts” section of our investor website at https://investors.fadv.com/. The contents of our websites and social media channels are not, however, a part of this Quarterly Report on Form 10-Q.

Overview

First ~~American~~ Advantage is a leading global provider of employment background screening and verification solutions. We deliver innovative services and insights that help our customers manage risk and hire the best talent. Enabled by our proprietary technology, our products help companies protect their brands and provide safer environments for their customers and their most important resources: employees, contractors, contingent workers, tenants, and drivers.

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

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 difficult to accurately forecast due to the 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 92% of the criminal searches performed in the United States are completed the same day they are submitted.

We generated revenues of $175.5 million for the three months ended March 31, 2023, as compared to $189.9 million for the three months ended March 31, 2022. Approximately 86% of our revenues for the three months ended March 31, 2023 was generated in the Americas, predominantly in the United States, while the remaining 14% was generated in our International segment. Other than the United States, no single country accounted for 10% or more of our total revenues for the three months ended March 31, 2023. Please refer to “Results of Operations” for further details.

Segments

During the first quarter of 2022, the Company 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 ~~SEC~~Company has two reportable segments, Americas and International:

•

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 ~~SEC public reference room at 100 F Street N.E.~~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. In addition, apartment rental activity and associated screening activity typically decline in the fourth quarter heading into the holiday season. 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

Current Economic Conditions

Macroeconomic factors, including inflation, increased interest rates, significant capital market volatility, uncertainty in financial markets (including as a result of recent bank failures and events affecting financial institutions), ~~Washington, D.C. 20549. Please call~~ the ~~SEC at (800) 732-0330~~prolonged COVID-19 pandemic, global supply chain constraints, and global economic and geopolitical developments, have negatively impacted significant portions of the global economy, and created volatility in the financial markets.

While our overall productivity has not been materially adversely impacted, recently, we have started to experience, and may continue to experience, the lengthening of certain sales cycles as cyclical concerns begin to factor into customer hiring plans. If the economic uncertainty is sustained or ~~visit~~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.

Despite the ~~SEC’s website for further~~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. For additional information, ~~on its public reference room.~~

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~~Item~~ ~~2. Management’s~~see our “Risk Factors” and “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 service revenue in the Credit Services segment related to the mortgage and auto industries and the Data Services segment related to the transportation and specialty finance businesses. Management expects continued weakness in the real estate and mortgage markets to continue impacting the Company’s Credit Services segment and the transportation and specialty credit businesses in the Data Services segment. In addition, the effect of the issues in the real estate and related credit markets together with the other macroeconomic matters has resulted in higher unemployment rates negatively impacting the volumes in the Employer Services segment. Given this outlook, management is focusing on expense reductions, operating efficiencies, and increasing market share throughout the Company.

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~~Operations” 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 of $510.7 million, this represents a decrease of 6.4% over the same period in 2008. Operating income for the three and nine months ended September 30, 2009 was $18.4 million and $59.2 million, respectively. Operating income decreased $3.3 million for the three months ended September 30, 2009 in comparison 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 A 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 and 2008.~~

~~Table 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 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 of Contents~~

~~Credit Services Segment~~

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

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

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

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

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

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

~~Table of Contents~~

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

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

~~Data Services Segment~~

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

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

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

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

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

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

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

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

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

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~~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 in the credit markets, and overall economic slowdown, offset by the increase in the Data Services segment.

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

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

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

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

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

~~Credit Services Segment~~

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

Service revenue was $191.6 million for the nine months ended September 30, 2009, a decrease of $11.1 million compared to service revenue of $202.7 million for the nine months ended September 30, 2008. A decrease in revenue at the dealer services division resulted in an overall decrease in service revenue, which is partially offset by an increase in revenue from the mortgage credit and consumer credit divisions. The challenging credit markets and overall economy continues to affect our credit reporting businesses compared to the 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 in 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 in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2008.~~2022.

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 workers, tenants, and drivers. We generally classify our products and solutions into three major categories: pre-onboarding, post-onboarding, and adjacent products, each of which is enabled by our technology, proprietary internal 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, more productive, and more compliant. Adjacent products include products that complement our pre-onboarding and post-onboarding solutions such as 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 packaged 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:

•

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 fulfillment 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.

•

Depreciation and Amortization: Property and equipment consisting mainly of 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.

We have a flexible cost structure that allows our business to 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.

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 information contained below should be read in conjunction with our accompanying historical condensed consolidated financial statements and the related notes.

Comparison of Results of Operations for the three months ended March 31, 2023 compared to the three months ended March 31, 2022


	Three Months Ended March 31,
(in thousands, except percentages)	2023			2022
Revenues	$	175,520		$	189,881

Operating Expenses:
Cost of services (exclusive of depreciation and amortization below)		91,061			96,431
Product and technology expense		12,624			13,773
Selling, general, and administrative expense		28,682			28,545
Depreciation and amortization		31,866			34,034
Total operating expenses		164,233			172,783
Income from operations		11,287			17,098

Other Expense, Net:
Interest expense, net		8,681			(850	)
Total other expense, net		8,681			(850	)
Income before provision for income taxes		2,606			17,948
Provision for income taxes		681			4,935
Net income	$	1,925		$	13,013
Net income margin		1.1	%		6.9	%

Revenues


	Three Months Ended March 31,
(in thousands)	2023			2022
Revenues
Americas	$	152,056		$	160,088
International		24,848		$	31,741
Eliminations		(1,384	)	$	(1,948	)
Total revenues	$	175,520		$	189,881

Revenues were $175.5 million for the three months ended March 31, 2023, compared to $189.9 million for the three months ended March 31, 2022. Revenues for the three months ended March 31, 2023 decreased by $14.4 million, or 7.6%, compared to the three months ended March 31, 2022.

The decrease in revenues was primarily due to:

•

a net decrease of $22.0 million in existing customer revenues primarily driven by reduced demand from customers more impacted by macro-economic events, the elevated levels of growth experienced in 2022 due to the post-pandemic recovery, and the impact of lost accounts. In the Americas segment, certain industry verticals were more impacted by lower hiring activity resulting in lower revenues. In the International segment, declines were more significantly experienced in the India and APAC markets, which was offset by growth in our Europe operations. These decreases were partially offset by ongoing strength in upselling and cross-selling existing customers, contributing $9.3 million of additional revenues, and increased revenues from certain existing customers lesser impacted by the macro-economic declines.

The decrease in revenues was offset by:

•

increased revenues of $7.6 million attributable to new customers in our Americas segment.

Pricing remained relatively stable across all periods.

Cost of Services


	Three Months Ended March 31,
(in thousands, except percentages)	2023			2022
Revenues	$	175,520		$	189,881
Cost of services		91,061			96,431
Cost of services as a % of revenue		51.9	%		50.8	%

Cost of services was $91.1 million for the three months ended March 31, 2023, compared to $96.4 million for the three months ended March 31, 2022. Cost of services for the three months ended March 31, 2023 decreased by $5.4 million, or 5.6%, compared to the three months ended March 31, 2022.

The decrease in cost of services was primarily due to:

•

a $3.2 million decrease in personnel related expenses in our operations and customer service functions as a result of cost savings actions taken by the Company in late 2022 and 2023, as well as productivity efficiencies from the implementation of additional automation programs; and

•

a decrease in variable third-party data expenses of $2.9 million as a result of continued automation, decreased revenues, and variation in customer ordering mix.

Cost of services as a percentage of revenues was 51.9% for the three months ended March 31, 2023, compared to 50.8% for the three months ended March 31, 2022. The cost of services percentage of revenues in the first quarter of 2023 was impacted by increases in certain third-party data costs due to variation in customer ordering mix. This increase was partially offset by cost savings from the Company’s continued implementation of automation and other process efficiencies, as well as certain cost savings actions taken by the Company in late 2022 and 2023.

Product and Technology Expense


	Three Months Ended March 31,
(in thousands)	2023		2022
Product and technology expense	$	12,624	$	13,773

Product and technology expense was $12.6 million for the three months ended March 31, 2023, compared to $13.8 million for the three months ended March 31, 2022. Product and technology expense for the three months ended March 31, 2023 decreased by $1.1 million, or 8.3%, compared to the three months ended March 31, 2022.

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

•

a $2.2 million decrease in personnel-related expenses due to decreases in bonus-related expenses and higher capitalization of certain qualified costs related to the development of internal use software in 2023, relative to 2022, due to greater investment in our products that better align with our strategic product initiatives.

The decrease in cost of services was partially offset by:

•

a $1.1 million increase in software licensing related expenses.

Selling, General, and Administrative Expense


	Three Months Ended March 31,
(in thousands)	2023		2022
Selling, general, and administrative expense	$	28,682	$	28,545

Selling, general, and administrative expense was $28.7 million for the three months ended March 31, 2023, compared to $28.5 million for the three months ended March 31, 2022. Selling, general, and administrative expense for the three months ended March 31, 2023 increased by $0.1 million, or 0.5%, compared to the three months ended March 31, 2022.

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

•

a $1.4 million increase in expenses related to litigation activities in the ordinary course of business;

•

foreign currency exchange losses of $1.1 million due to the impact of foreign exchange rate volatility; and

•

a $1.1 million increase in expenses related to the impairment of certain operating lease assets resulting from office space exited during the quarter.

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

•

a $1.9 million decrease in commissions and bonus related expenses due to lower performance against internal targets; and

•

a $0.6 million decrease in personnel related expenses as well as certain other cost savings actions taken by the Company in late 2022 and 2023.

Depreciation and Amortization


	Three Months Ended March 31,
(in thousands)	2023		2022
Depreciation and amortization	$	31,866	$	34,034

Depreciation and amortization was $31.9 million for the three months ended March 31, 2023, compared to $34.0 million for the three months ended March 31, 2022. Depreciation and amortization for the three months ended March 31, 2023 decreased by $2.2 million, or 6.4%, compared to the three months ended March 31, 2022. This decrease was partially offset by increases in depreciation related to assets placed in service during the three months ended March 31, 2023.

Interest Expense, Net


	Three Months Ended March 31,
(in thousands)	2023		2022
Interest expense, net	$	8,681	$	(850	)

Interest expense, net was $8.7 million for the three months ended March 31, 2023, compared to $(0.9) million for the three months ended March 31, 2022. Interest expense for the three months ended March 31, 2023 increased by $9.5 million, compared to the three months ended March 31, 2022.

The increase in interest expense was primarily attributable to higher interest expense on the First Lien Credit Facility and $1.9 million of unrealized losses on the interest rate swaps as a result of rising interest rates. Increases in interest expense were offset by interest income of $3.8 million earned on cash held within interest bearing accounts.

Provision for Income Taxes


	Three Months Ended March 31,
(in thousands)	2023		2022
Provision for income taxes	$	681	$	4,935

Our provision for income taxes was $0.7 million for the three months ended March 31, 2023, compared to $4.9 million for the three months ended March 31, 2022. Our provision for income taxes for the three months ended March 31, 2023 decreased by $4.3 million, compared to the three months ended March 31, 2022.

The decrease in our provision for income taxes was primarily due to the decrease of income before income taxes during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

Net Income and Net Income Margin


	Three Months Ended March 31,
(in thousands, except percentages)	2023			2022
Net income	$	1,925		$	13,013
Net income margin		1.1	%		6.9	%

Net income was $1.9 million for the three months ended March 31, 2023, compared to $13.0 million for the three months ended March 31, 2022. Net income for the three months ended March 31, 2023 decreased by $11.1 million compared to the three months ended March 31, 2022.

Net income margin was 1.1% for the three months ended March 31, 2023 compared to 6.9% for three months ended March 31, 2022, as reduced demand from customers more impacted by macro-economic events contributed to lower revenues and profitability, particularly as the Company cycled over the growth experienced in 2022 due to the post-pandemic recovery.

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 $48.6 million for the three months ended March 31, 2023 and represented an Adjusted EBITDA Margin of 27.7%. Adjusted EBITDA was $53.6 million for the three months ended March 31, 2022 and represented an Adjusted EBITDA Margin of 28.2%. Adjusted EBITDA for the three months ended March 31, 2023 decreased by $5.0 million, or 9.4%, compared to the three months ended March 31, 2022.

Adjusted EBITDA declined as macro-economic events impacted our revenues attributed to existing customers. Decreases were further impacted by the effects of changes in foreign currencies. These decreases were partially offset by increased revenues from certain existing and new customers, including ongoing strength in upselling and cross-selling, cost structure benefits due to increased automation, operational efficiencies, and certain other cost savings actions taken by the Company in late 2022 and 2023.

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


	Three Months Ended March 31,
(in thousands)	2023		2022
Net income	$	1,925	$	13,013
Interest expense, net		8,681		(850	)
Provision for income taxes		681		4,935
Depreciation and amortization		31,866		34,034
Share-based compensation		2,058		1,859
Transaction and acquisition-related charges (a)		1,071		1,498
Integration, restructuring, and other charges (b)		2,278		(889	)
Adjusted EBITDA	$	48,560	$	53,600

(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 March 31,
(in thousands, except percentages)	2023			2022
Adjusted EBITDA	$	48,560		$	53,600
Revenues		175,520			189,881
Adjusted EBITDA Margin		27.7	%		28.2	%

The following table presents a calculation of Adjusted EBITDA by segment for the periods presented. Refer to Note 14 to the condensed consolidated financial statements for a reconciliation of Adjusted EBITDA for the periods presented by segment.


	Three Months Ended March 31,
(in thousands, except percentages)	2023			2022
Adjusted EBITDA (1):
Americas	$	44,656		$	46,819
International		3,904			6,781
Adjusted EBITDA	$	48,560		$	53,600

Revenues
Americas	$	152,056		$	160,088
International		24,848			31,741
Less: intersegment eliminations		(1,384	)		(1,948	)
Total revenues	$	175,520		$	189,881

Adjusted EBITDA Margin
Americas		29.4	%		29.2	%
International		15.7	%		21.4	%
Adjusted EBITDA Margin		27.7	%		28.2	%

(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 $28.4 million for the three months ended March 31, 2023, compared to $33.5 million for the three months ended March 31, 2022. Adjusted Net Income for the three months ended March 31, 2023 decreased by $5.1 million, or 15.3%, compared to the three months ended March 31, 2022.

Adjusted Diluted Earnings Per Share was $0.19 for the three months ended March 31, 2023 decreased by $0.03, or 13.6% compared to the three months ended March 31, 2022.

Adjusted Net Income and Adjusted Diluted Earnings Per Share declined as reduced demand from customers more impacted by macro-economic events contributed to lower revenues and profitability. Adjusted Net Income and Adjusted Diluted Earnings Per Share were further impacted by changes in acquisition-related depreciation and amortization and changes in our capital structure that are captured in interest expense. Gains or losses and actual cash payments and receipts 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 March 31,
(in thousands)	2023		2022
Net income	$	1,925	$	13,013
Provision for income taxes		681		4,935
Income before provision for income taxes		2,606		17,948
Debt-related charges(a)		4,468		(4,815	)
Acquisition-related depreciation and amortization(b)		25,485		29,115
Share-based compensation		2,058		1,859
Transaction and acquisition-related charges(c)		1,071		1,498
Integration, restructuring, and other charges (d)		2,278		(889	)
Adjusted Net Income before income tax effect		37,966		44,716
Less: Income tax effect(e)		9,602		11,219
Adjusted Net Income	$	28,364	$	33,497

The following table presents the calculation of Adjusted Diluted Earnings Per Share for the periods presented.


	Three Months Ended March 31,
	2023			2022
Diluted net income per share (GAAP)	$	0.01		$	0.09
Adjusted Net Income adjustments per share
Income taxes		0.00			0.03
Debt-related charges (a)		0.03			(0.03	)
Acquisition-related depreciation and amortization (b)		0.17			0.19
Share-based compensation		0.01			0.01
Transaction and acquisition related charges (c)		0.01			0.01
Integration, restructuring, and other charges (d)		0.02			(0.01	)
Adjusted income taxes (e)		(0.07	)		(0.07	)
Adjusted Diluted Earnings Per Share (Non-GAAP)	$	0.19		$	0.22

Weighted average number of shares outstanding used in computation of Adjusted Diluted Earnings Per Share:
Weighted average number of shares outstanding—diluted (GAAP and Non-GAAP)		147,031,866			152,348,806

(a)

Represents non-cash interest expense related to the amortization of debt issuance costs for the Company’s First Lien Credit Facility (as defined below). Beginning in 2022, this adjustment also includes the impact of the change in fair value of interest rate swaps. This adjustment, which represents the difference between the fair value gains or losses and actual cash payments and receipts on the interest rate swaps, was added as a result of the increased interest rate volatility observed in 2022.

(b)

Represents the depreciation and amortization expense related to intangible assets and developed technology assets recorded due to the application of ASC 805, Business Combinations. As a result, the purchase accounting related depreciation and amortization expense will recur in future periods until the related assets are fully depreciated or amortized, and the related purchase accounting assets may contribute to revenue generation.

(c)

(d)

(e)

Effective tax rates of approximately 25.3% and 25.1% have been used to compute Adjusted Net Income and Adjusted Diluted Earnings Per Share for the three months ended March 31, 2023 and 2022, respectively. As of December 31, 2022, we had net operating loss carryforwards of approximately $11.0 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 from the normalized rate shown above.

Liquidity and Capital Resources

~~Overview~~

Liquidity

The Company’s ~~principal sources of capital include, but~~primary liquidity requirements are not limited to, existing cash balances, operating cash flows and borrowing under its Secured Credit Facility (see Note 6 to the Consolidated Financial Statements). The Company’s short-term and long-term liquidity depends primarily upon its level of net income,for working capital, ~~management (accounts receivable, accounts payable~~continued investments in software development and ~~accrued expenses),~~other capital expenditures, and ~~bank~~other strategic investments. Income taxes are currently not a significant use of funds but after the benefits of our net operating loss carryforwards are fully recognized, in early 2023, will become a material use of funds, depending on our future profitability and future tax rates. The Company’s liquidity needs are met primarily through existing balance sheet cash, cash flows from operations, as well as funds available under our revolving credit facility and proceeds from our term loan borrowings. ~~The Company believes that, based~~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 March 31, 2023, we had $400.2 million in cash and cash equivalents and $100.0 million available under our revolving credit facility. As of March 31, 2023, we had $564.7 million of total debt outstanding. We believe our cash on ~~current forecasts~~hand, together with amounts available under our revolving credit facility, and ~~anticipated market conditions, sufficient~~cash provided by operating ~~cash flow~~activities are and will continue to be ~~generated~~adequate to meet ~~all operating~~our operational and business needs ~~to make planned capital expenditures, scheduled debt payments, and tax obligations for~~in the next twelve months. ~~Any material variance~~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 additional indebtedness, additional equity financings or a combination of these potential sources of funds. In the event that we need access to additional cash, we may not be able to access the credit markets on commercially acceptable terms or at all. Our ability to fund future operating ~~results could require us~~expenses and capital expenditures and our ability to ~~seek~~meet future debt service obligations or refinance our indebtedness will depend on our future operating performance, which will be affected by general economic, financial, and other ~~funding alternatives including raising additional capital, which~~factors that may be ~~difficult~~beyond our control, including those described under our “Risk Factors” included in the ~~current~~Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Share 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.

~~In previous years, First Advantage sought to acquire other businesses as part of~~ No shares will be purchased from SLP Fastball Aggregator, L.P. and its ~~growth strategy.~~affiliates. The Company ~~will continue~~may discontinue or modify purchases without notice at any time. The Company has used and plans to ~~evaluate acquisitions in order~~use its existing cash to ~~achieve economies of scale, expand market~~fund repurchases made under the share ~~and enter new markets.~~

~~While uncertainties within~~repurchase program.

On November 8, 2022, the Company’s ~~industry exist, management is not aware~~Board of ~~any trends or events likely~~Directors authorized an increase to ~~have~~the total available amount under its Repurchase Program to $150.0 million and extended the program through December 31, 2023. On February 28, 2023, the Company’s Board of Directors authorized an increase to the total available amount under its Repurchase Program to $200.0 million. Through May 4, 2023, the Company repurchased $97.4 million of shares under the Repurchase Program.

Long-Term Debt

In February 2020, a ~~material adverse effect on liquidity or the accompanying financial statements. Management expects continued weakness~~new financing structure was established consisting of a new First Lien Credit Agreement (“First Lien Agreement”). The First Lien Agreement provided financing in the ~~real estate~~form of a $670.0 million term loan due January 31, 2027 (“First Lien Credit Facility”) and ~~mortgage markets~~a $75.0 million new revolving credit facility due January 31, 2025 (“Revolver”).

On February 1, 2021, we amended the First Lien Agreement to ~~continue impacting~~fund $100.0 million of additional first lien term loans and reduce the ~~Company’s Credit Services segment~~applicable margins by 0.25%.

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

Borrowings under the ~~Data Services segment.~~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 applicable margins under the First Lien Agreement are subject to stepdowns based on our first lien net leverage ratio. In connection with the closing of the 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 First Lien Credit Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00% of the principal amount. The Revolver has no amortization. The 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 First Lien Credit Facility outstanding, of which $44.3 million was applied to all of the remaining quarterly amortizing principal payments due under the First Lien Agreement. The remaining $564.7 million term loan is scheduled to mature on January 31, 2027.

The 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 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 First Lien Agreement contains customary affirmative covenants, negative covenants, and ~~related credit markets and other macroeconomic matters has resulted in higher unemployment rates negatively impacting~~events of default (including upon a change of control). The First Lien Agreement also includes a “springing” first lien net leverage ratio test, applicable only to the ~~volumes in~~Revolver, 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 Revolver 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 three months ended March 31, 2023 compared to the three months ended March 31, 2022

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


	Three Months Ended March 31,
(in thousands)	2023			2022
Net cash provided by operating activities	$	38,599		$	41,583
Net cash used in investing activities		(6,083	)		(26,472	)
Net cash used in financing activities		(24,163	)		(40	)

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$38.6 million for the ~~same period in 2008. The increase in~~three months ended March 31, 2023, compared to $41.6 million for the three months ended March 31, 2022. Net cash provided by operating activities ~~was primarily due~~for the three months ended March 31, 2023 decreased by $3.0 million compared to the ~~first quarter 2008 income tax payments~~three months ended March 31, 2022. Cash flows from operating activities was impacted by the continuation of ~~$56.9 million related~~more modest hiring activity in the Americas and softness internationally resulting from the ongoing uncertainty from the economic environment that began to ~~the sale of DealerTrack shares.~~

impact hiring demand in late 2022. This was offset in part by lower accounts receivable driven by increased cash collections from customers.

Cash Flows from Investing Activities

Net cash used in investing activities ~~of continuing operations~~ was ~~$36.1 million and $78.4~~$6.1 million for the ~~nine~~three months ended ~~September 30, 2009 and 2008, respectively. In~~March 31, 2023, compared to $26.5 million for the ~~nine~~three months ended ~~September 30, 2009, net~~March 31, 2022. Net cash used in investing activities for the ~~amount of $19.5~~three months ended March 31, 2023 decreased by $20.4 million ~~was used for earnout provisions from prior year acquisitions,~~ compared to ~~$51.2 million in~~ the ~~same period of 2008. Purchases of property and equipment were $14.5 million in the nine~~three months ended ~~September 30, 2009 compared~~March 31, 2022. The cash flows used in investing activities for the three months ended March 31, 2023 were driven primarily by capitalized software development costs, which increased in 2023 as the Company continued to ~~$24.3~~make incremental investments in its technology platform. Cash flows used in investing activities for the three months ended March 31, 2022 were impacted by the $19.1 million ~~in the same period~~acquisition of ~~2008.~~

Form I-9 Compliance, net of cash acquired.

Cash Flows from Financing Activities

Net cash used in financing activities ~~of continuing operations~~ was ~~$16.5~~$24.2 million for the ~~nine~~three months ended ~~September 30, 2009,~~March 31, 2023, compared to ~~cash provided by financing activities of continuing operations of $12.4~~$0.0 million for the ~~nine~~three months ended ~~September 30, 2008. In~~March 31, 2022. Cash flows from financing activities for the ~~nine~~three months ended ~~September 30, 2009, proceeds from existing credit facilities~~March 31, 2023 were ~~$50.9 million compared~~primarily driven by share-based compensation activity. These inflows were offset by cash outflows related to ~~$100.3 million in~~payments on finance lease obligations, deferred purchase of a software platform, and shares repurchased under the ~~same period of 2008. Repayment of debt was $62.3 million in~~Company’s Repurchase Program. During the ~~nine~~three 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 million for the nine months ended September 30, 2009 and 2008, respectively. In addition, $1.1 million was distributed to noncontrolling interests in the nine months ended September 30, 2008.

~~Debt and Capital~~

~~In 2005, the Company executed a revolving credit agreement with a bank syndication (the “Credit Agreement”). Borrowings available~~March 31, 2023, 1,871,691 shares were repurchased under the ~~Credit Agreement~~program at a total ~~up to $225~~cost of $25.3 million. The Credit Agreement includes a $10 million sub-facility for the issuance of letters of credit and up to a $5 million swing loan facility. The credit facility maturity date is September 28, 2010. The Credit Agreement is collateralized by the stock and accounts receivable of the Company’s subsidiaries.

At September 30, 2009, the Company had available lines 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," 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.

~~Table of Contents~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~There have been~~

As of March 31, 2023, 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 February 28, 2023.

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 Over Financial Reporting

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 11 — 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 March 31, 2023, 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 February 28, 2023.

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 filed with the SEC on February 28, 2023.

Issuer Purchases of Equity Securities

The following information relates to the Company’s purchase of its common stock during each month within the first quarter of 2023:


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		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
1/1/2023 - 1/31/2023		641,061	$	13.15		641,061	$	131,039,602
2/1/2023 - 2/28/2023		525,603	$	13.71		525,603	$	123,833,318
3/1/2023 - 3/31/2023		705,027	$	13.66		705,027	$	114,202,781
Total		1,871,691	$	13.50		1,871,691	$	114,202,781

(1)

Average price paid per share for ~~Fiscal Year Ending~~shares purchased as part of our Repurchase Program (includes brokerage commissions).

(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 (the “Repurchase Program”). On November 8, 2022, the Company’s 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, ~~2008.~~

2023. On February 28, 2023, the Company’s Board of Directors authorized an increase to the total available amount under its Repurchase Program to $200.0 million. Through May 4, 2023, the Company repurchased $97.4 million of shares under the Repurchase Program.

~~Table~~

Stock repurchases may be effected through open market repurchases at prevailing market prices, including through the use of ~~Contents~~

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.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable

Item 5. Other Information.

Performance-Based Vesting Modification

Effective as of May 10, 2023, the Company’s Board of Directors approved a modification of the vesting terms of unvested and unearned performance-based options, restricted stock units (“RSUs”), and restricted stock (collectively, “Performance Awards”). The modification offers eligible employees incremental vesting criteria which allows the currently unvested and unearned Performance Awards to vest based on time on the fourth, fifth, and sixth anniversaries of the relevant vesting commencement date, as set forth in each grant agreement (the “Vesting Commencement Date”), while preserving the eligibility to vest upon future “Realization Events” (as that term is defined in the award agreement(s) pursuant to which the relevant Performance Award was granted).

The below table summarizes the impact of the modification (assuming performance conditions are not realized) on each of our named executive officers, as identified in our definitive proxy statement, dated April 26, 2023, filed with the SEC. Through the applicable vesting dates set forth in the table below, a number of additional Performance Awards, if any, shall vest on each such vesting date as is necessary to ensure that the number of Performance Awards that is vested on such vesting date is equal to the number set forth in the table below, such that 100% of the Performance Awards will be vested on the sixth anniversary of the Vesting Commencement Date (as set forth in the applicable award) even if no performance conditions are satisfied (i.e., no “Realization Event” occurs) prior to the sixth anniversary of such Vesting Commencement Date.


Name Award	Grant Date	Grant Price		Number of Unearned Performance-Based Options, Shares, Units or Other Rights That Have Not Vested		Fourth Anniversary of Vesting Commencement Date	Number of Awards to Vest		Fifth Anniversary of Vesting Commencement Date	Number of Awards to Vest		Sixth Anniversary of Vesting Commencement Date	Number of Awards to Vest
Scott Staples Chief Executive Officer
Nonqualified stock options	6/22/2021	$	15.00		854,861	1/31/2024		170,972	1/31/2025		341,944	1/31/2026		341,945
Restricted stock	2/9/2020	$	—		867,526	1/31/2024		173,505	1/31/2025		347,010	1/31/2026		347,011
David L. Gamsey Executive Vice President and Chief Financial Officer
Nonqualified stock options	6/22/2021	$	15.00		178,473	1/31/2024		35,694	1/31/2025		71,389	1/31/2026		71,390
Restricted stock	2/9/2020	$	—		180,736	1/31/2024		36,147	1/31/2025		72,294	1/31/2026		72,295
Joseph Jaeger President, Americas
Nonqualified stock options	6/22/2021	$	15.00		250,466	1/31/2024		50,093	1/31/2025		100,186	1/31/2026		100,187
Restricted stock	2/9/2020	$	—		253,028	1/31/2024		50,605	1/31/2025		101,211	1/31/2026		101,212
Restricted stock units	12/22/2021	$	—		19,918	6/23/2025		3,983	6/23/2026		7,967	6/23/2027		7,968
Joelle M. Smith President, Data, Technology, and Experience
Nonqualified stock options	8/24/2020	$	6.61		8,590	8/15/2024		1,718	8/15/2025		3,436	8/15/2026		3,436
Nonqualified stock options	2/9/2020	$	6.61		96,911	1/31/2024		19,382	1/31/2025		38,764	1/31/2026		38,765
Bret T. Jardine Executive Vice President, General Counsel and Corporate Secretary
Nonqualified stock options	2/9/2020	$	6.61		64,608	1/31/2024		12,921	1/31/2025		25,843	1/31/2026		25,844

Grant of Equity Award

Effective as of May 10, 2023, the Board of Directors authorized an equity grant to Mr. Bret T. Jardine, our executive Vice President, General Counsel and Corporate Secretary, having a fair value equal to $150,000, comprised of approximately two-thirds stock options and approximately one-third RSUs, with each grant vesting annually in four equal installments based on a grant date of May 11, 2023. The exact number of stock options and RSUs comprising the grant will be determined on May 11, 2023, based on the prior twenty day average closing price of the Company’s common stock in the case of the RSUs and using a Black-Scholes valuation for the stock options. The per share exercise price of the stock options will be the closing price on May 11, 2023.

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).
10.1†		Employment Offer Letter, dated March 30, 2011, between STG-Fairway Holdings, Inc. (a predecessor to First Advantage Corporation) and Bret Jardine.
10.2†		Employment Offer Letter, dated May 31, 2017, between First Advantage Corporation and Joelle Smith.
10.3		Form of Restrictive Covenant Agreement for Named Executive Officers.
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 (formatted as inline XBRL and contained in the Exhibit 101 attachments).

~~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~~

† Compensatory arrangements for director(s) and/or executive officer(s).

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: May 10, 2023		~~Name:~~ ~~Anand Nallathambi~~ By:	/s/ Scott Staples
		~~Title:~~	Scott Staples
			Chief Executive Officer	(principal executive officer)


Date: May 10, 2023		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	%