• Pro Forma Full Year Revenue: Approximately $1.5 billion.
• Pro Forma Adjusted EBITDA: $397 million, or $458 million on a synergized basis.
• Fourth Quarter Pro Forma Revenue: $375 million, up 0.9% year over year.
• Legacy First Advantage America's Segment Revenue: $172 million, down 5.5% from the prior year.
• Legacy First Advantage International Segment Revenue: $24 million, up 8.9% on a constant currency basis.
• Legacy Sterling Segment Pro Forma Revenue: $181 million, up 7% year over year.
• Pro Forma Adjusted EBITDA Margin: 26.7% for the fourth quarter, down approximately 300 basis points year over year.
• Full Year Pro Forma Adjusted EBITDA Margin: 26.3%, down approximately 220 basis points year over year.
• Adjusted Net Income: $124 million for full year 2024.
• Adjusted Diluted EPS: $0.02 for full year 2024.
• Adjusted Operating Cash Flow: $165 million, a 1% increase year over year.
• Cash Balance at Year End: $169 million.
• Net Leverage Ratio: 4.4 times synergized pro forma adjusted EBITDA at year end.
• 2025 Revenue Guidance: $1.5 billion to $1.6 billion.
• 2025 Adjusted EBITDA Guidance: $410 million to $450 million.
• 2025 Adjusted Diluted EPS Guidance: $0.86 to $1.03.
• Synergy Target Range: Updated to $60 million to $70 million, with $20 million already actioned by end of 2024.

• Warning! GuruFocus has detected 5 Warning Signs with EIFZF.

Release Date: February 27, 2025

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

Positive Points

• First Advantage Corp (NASDAQ:FA) generated solid results for the fourth quarter and full year 2024, maintaining cost discipline and robust margins.
• The company successfully closed a $2.2 billion strategic acquisition of Sterling, enhancing its scale and capabilities.
• FA is on track with its synergy execution, increasing its net cost synergy target range to $60 million to $70 million.
• The company has a strong sales pipeline, with significant wins in the healthcare and retail sectors, including a large international contract in Australia.
• FA's commitment to innovation and integration of AI capabilities is enhancing efficiency and customer service, providing a competitive advantage.

Negative Points

• The legacy First Advantage America's segment saw a 5.5% revenue decline due to uncertainty affecting retail and transportation hiring levels.
• Pro forma adjusted EBITDA margin decreased by approximately 300 basis points year-over-year, impacted by Sterling's lower margin services.
• The company faces headwinds from base revenue declines, expected to remain a challenge through mid-2025.
• Sterling's historical operating methodology results in a more fixed cost approach, impacting margins negatively.
• The macroeconomic environment remains uncertain, leading to a cautiously optimistic outlook for 2025.

Q & A Highlights

Q: Could you provide more detail about the weakness in seasonal hiring in retail and transportation? A: Scott Staples, CEO, explained that the trend of less pronounced peaks and valleys in seasonal hiring has been observed over the last couple of years. Hiring tends to slow down around mid-November, continues through December, and picks back up in January. This pattern has been factored into their 2025 guidance.

Q: Does the win in the healthcare space using the Sterling platform mean you'll indefinitely support Sterling's back end? A: Scott Staples, CEO, noted that the integration aims for no customer disruption, leveraging the best of both platforms without requiring client migrations. This approach allows for maintaining both platforms with reduced overhead, driving synergies without impacting the original plan.

Q: Are you tracking a net promoter score post-merger, and how is the verified database contributing to revenues or savings? A: Scott Staples, CEO, confirmed that they continue to measure net promoter scores and customer satisfaction. The verified database has grown to 120 million records, with a total of 900 million proprietary records, though Sterling's data has not yet been integrated.

Q: Does the low end of the guidance range account for a slower recovery in base growth? A: Steven Marks, CFO, explained that the guidance range considers potential scenarios, with base growth expected to remain a headwind through mid-2025. The guidance reflects a prudent posture, anticipating slight to modest full-year base revenue declines.

Q: Can you confirm where the bulk of synergy realizations are coming from, and have target areas changed? A: Steven Marks, CFO, stated that synergy realizations have accelerated across all functions, with a focus on reducing duplicative costs and redundancies. The integration plan aims to action 50% of target synergies within the first six months post-closing.

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