First Advantage Corp (FA) Q2 2024 Earnings Call Highlights: Steady Performance Amid Market ...

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  • Revenue: $184.5 million, flat compared to the prior year.

  • Adjusted EBITDA: $55.8 million, flat compared to the prior year.

  • Adjusted EBITDA Margin: 30.2%, a 270-basis-point improvement over Q1.

  • Adjusted Net Income: $30.8 million for the quarter.

  • Adjusted Diluted Earnings Per Share: $0.21.

  • Operating Cash Flow: $40.7 million after adjusting for acquisition-related costs.

  • Americas Segment Revenue: $162.4 million, flat to the prior year.

  • International Segment Revenue: $24.2 million, flat to the prior year.

  • Upsell/Cross-Sell Contribution: $8.6 million or 4.7% in Q2.

  • New Customer Logos Contribution: $7.8 million or 4.2% in Q2.

  • Base Revenue Decline: $13 million or 7% in Q2.

  • Attrition Rate: 4% in Q2.

  • 2024 Revenue Guidance: $750 million to $800 million.

  • 2024 Adjusted EBITDA Guidance: $228 million to $248 million.

  • Net Debt to Adjusted EBITDA Leverage at Close: Expected to be within 4.2 to 4.4 times.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • First Advantage Corp (NASDAQ:FA) delivered solid financial results with revenues of $185 million and an adjusted EBITDA margin of 30.2%, reaffirming their full-year 2024 guidance.

  • The company successfully executed large upsell bookings worth $13.5 million in the second quarter, indicating strong sales performance.

  • The Sterling acquisition is progressing well, with anticipated cost synergies expanded to a range of $50 million to $70 million.

  • First Advantage Corp (NASDAQ:FA) is leveraging AI technology, such as SmartHub and Profile Advantage, to enhance customer value and operational efficiency.

  • The company has a flexible cost structure, allowing it to adjust to changing market conditions and maintain strong operating discipline.

Negative Points

  • Base growth remained negative, although it showed improvement from the first quarter.

  • The international segment, particularly in APAC, has been a drag on the business, although signs of stabilization are emerging.

  • The macroeconomic environment remains uncertain, with cautious optimism from customers regarding hiring plans.

  • The company is incurring ongoing transaction costs related to the Sterling acquisition, impacting financials.

  • The SMB business, which is more volatile to macro swings, experienced a significant decline of 25%.

Q & A Highlights

Q: What are you hearing from your customers regarding hiring plans in the current macroeconomic environment? A: Scott Staples, CEO, mentioned that customers are expressing cautious optimism. They are not hiring ahead of the curve but are engaging in just-in-time hiring and backfilling positions. The environment is stabilizing, which is easier for First Advantage to manage, especially given their focus on enterprise customers who are resilient in the current market.