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First Advantage Reports Full Year and Fourth Quarter 2022 Results

First Advantage Corporation
First Advantage Corporation

Reports Record Full Year Revenues, Adjusted EBITDA, and Cash Flows from Operations; Introduces 2023 Guidance

Full Year 2022 Highlights
(All results compared to prior-year period unless otherwise noted)

  • Generated record Revenues of $810.0 million, an increase of 13.7%; Constant Currency Revenues¹ were $820.3 million, an increase of 15.2%

  • Delivered Net Income of $64.6 million, an increase of 302.5%

  • Produced Adjusted EBITDA¹ of $248.9 million, an increase of 10.0%; Constant Currency Adjusted EBITDA¹ was $252.3 million, an increase of 11.5%

  • Realized Adjusted Net Income¹ of $156.5 million, an increase of 9.9%

  • Achieved record Cash Flows from Operations of $212.8 million, an increase of 43.1%

  • Ended the year with Cash and Cash Equivalents of $391.7 million as of December 31, 2022, an increase of $99.0 million, after $60.5 million in share repurchases

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Fourth Quarter 2022 Highlights

  • Generated Revenues of $212.6 million; Constant Currency Revenues¹ were $216.3 million

  • Delivered Net Income of $20.1 million

  • Produced Adjusted EBITDA¹ of $70.3 million; Constant Currency Adjusted EBITDA¹ was $71.5 million

  • Realized Adjusted Net Income¹ of $45.0 million

  • Achieved Cash Flows from Operations of $70.0 million

2023 Full Year Guidance

  • Introducing full year 2023 guidance ranges for Revenues of $770 million to $810 million, Adjusted EBITDA of $240 million to $255 million, Adjusted Net Income of $145 million to $155 million, and Adjusted Diluted Earnings Per Share of $1.00 to $1.07²

ATLANTA, Feb. 28, 2023 (GLOBE NEWSWIRE) -- First Advantage Corporation (NASDAQ: FA), a leading global provider of employment background screening and verification solutions, today announced financial results for the full year and fourth quarter ended December 31, 2022.

Key Financials
(Amounts in millions, except percentages)

 

Three Months Ended
December 31,

 

 

Year Ended
December 31,

 

 

2022

 

 

2021

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

Revenues

$

212.6

 

 

$

212.5

 

 

 

0.0

%

 

$

810.0

 

 

$

712.3

 

 

 

13.7

%

Income from operations

$

28.7

 

 

$

25.3

 

 

 

13.5

%

 

$

94.3

 

 

$

63.8

 

 

 

47.7

%

Net income

$

20.1

 

 

$

15.4

 

 

 

30.9

%

 

$

64.6

 

 

$

16.1

 

 

 

302.5

%

Net income margin

 

9.5

%

 

 

7.2

%

 

NA

 

 

 

8.0

%

 

 

2.3

%

 

NA

 

Adjusted EBITDA¹

$

70.3

 

 

$

69.4

 

 

 

1.2

%

 

$

248.9

 

 

$

226.3

 

 

 

10.0

%

Adjusted EBITDA Margin¹

 

33.1

%

 

 

32.7

%

 

NA

 

 

 

30.7

%

 

 

31.8

%

 

NA

 

Adjusted Net Income¹

$

45.0

 

 

$

46.5

 

 

 

(3.4

)%

 

$

156.5

 

 

$

142.4

 

 

 

9.9

%

¹ Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Constant Currency Revenues, and Constant Currency Adjusted EBITDA are non-GAAP measures. Please see the schedules accompanying this earnings release for a reconciliation of these measures to their most directly comparable respective GAAP measures.
Note: "NA" indicates not applicable information.

“We delivered full year 2022 revenue growth of 13.7%, reflecting resilience throughout the year in the U.S. jobs market driven by frequent job switching and continued demand for talent,” said Scott Staples, Chief Executive Officer. “Following nine consecutive quarters of robust year-over-year top line growth, fourth quarter revenues were flat, though up 1.8% on a constant currency basis, as we cycled over a very strong fourth quarter in 2021 which saw 36% year-over-year growth. Beginning in late November, we saw a slowdown in hiring activity due to customer reactions to the current macroeconomic environment.”

“In the fourth quarter, we achieved a 40 basis-point increase in Adjusted EBITDA Margin versus the prior-year quarter and our highest-ever operating cash flow amidst macroeconomic pressures. Our operating efficiencies and advanced automation initiatives have resulted in an efficient and flexible cost structure, enabling us to effectively manage costs and drive year-over-year improvement.”

“First Advantage’s unique technologies, proprietary databases, and ability to deliver the speed, quality, and applicant experience that help our customers hire smarter and onboard faster have enabled our business to continue to win in the marketplace, as evidenced by our 24% increase in the number of enterprise customers we serve and our over 97% customer retention rate in 2022. We believe that fundamental shifts in how people work and apply for jobs create long-term opportunities for our business. I am highly confident in our team’s ability to execute against our strategy and successfully navigate through the ongoing macroeconomic uncertainty in the near-term, as demonstrated by our historical track record,” added Mr. Staples.

Balance Sheet and Cash Flow

During the fourth quarter of 2022, the Company generated $70.0 million of cash flow from operations and spent $6.2 million on purchases of property and equipment, including capitalized software development costs. As of December 31, 2022, First Advantage had cash and cash equivalents of $391.7 million and total debt of $564.7 million, resulting in net debt of $173.0 million.

Share Repurchase Program

Today, First Advantage announced that its Board of Directors has approved a $50 million increase to the existing $150 million share repurchase authorization through December 31, 2023. No shares will be purchased from Silver Lake or its affiliates.

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. 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. The Company may discontinue or modify purchases without notice at any time. The Company plans to use its existing cash to fund repurchases made under the share repurchase program.

Through December 31, 2022, the Company repurchased 4,670,975 shares of its common stock under its share repurchase program for an aggregate of $60.5 million. As of December 31, 2022, the Company had 148,732,603 shares of common stock outstanding. Through February 23, 2023, the Company repurchased 5,805,011 shares for an aggregate of $75.7 million.

“Our record cash flow from operations and low debt levels enabled us to return nearly $61 million to our shareholders under our share repurchase program in 2022 and still grow our cash balance by nearly $100 million. We finished the year with a very strong balance sheet, allowing continued flexibility for our allocation of capital,” commented David Gamsey, EVP and Chief Financial Officer. “Our priorities include repurchasing shares, evaluating acquisitions, and investing in the Company for continued growth, all with the goal of maximizing shareholder value.”

Full Year 2023 Guidance

The following table summarizes our full-year 2023 guidance:

 

As of February 28, 2023

Revenues

$770 million – $810 million

Adjusted EBITDA2

$240 million – $255 million

Adjusted Net Income2

$145 million – $155 million

Adjusted Diluted Earnings Per Share2

$1.00 – $1.07

² A reconciliation of the foregoing guidance for the non-GAAP metrics of Adjusted EBITDA and Adjusted Net Income to GAAP net income and Adjusted Diluted Earnings Per Share to GAAP diluted earnings per share cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. For the same reasons, the Company is unable to assess the probable significance of the unavailable information, which could have a material impact on its future GAAP financial results.

The Company’s full-year 2023 guidance ranges reflect expectations that existing macroeconomic conditions, foreign currency headwinds, and current hiring trends will continue through most of 2023, with modest improvement in the second half of the year. This guidance equates to full year 2023 revenue growth of (-5)% to 0%, or (-4)% to 0.5% on a constant currency basis.

Actual results may differ materially from First Advantage’s full-year 2023 guidance as a result of, among other things, the factors described under “Forward-Looking Statements” below.

Conference Call and Webcast Information

First Advantage will host a conference call to review its results today, February 28, 2023, at 8:30 a.m. ET.

To participate in the conference call, please dial (800) 225-9448 (domestic) or (203) 518-9708 (international) approximately ten minutes before the 8:30 a.m. ET start. Please mention to the operator that you are dialing in for the First Advantage fourth quarter 2022 earnings call or provide the conference code FAQ422. The call will also be webcast live on the Company’s investor relations website at https://investors.fadv.com under the “News & Events” and then “Events & Presentations” section, where related presentation materials will be posted prior to the conference call.

Following the conference call, a replay of the webcast will be available on the Company’s investor relations website, https://investors.fadv.com. Alternatively, the live webcast and subsequent replay will be available at https://event.on24.com/wcc/r/4062869/20CCBD3B1F34B551C9D43861B5A709E5.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, our operations and financial performance. Forward-looking statements include all statements that are not historical facts. These forward-looking statements relate to matters such as our industry, business strategy, goals, and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources, and other financial and operating information. In some cases, you can identify these forward-looking statements by the use of words such as “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “future,” “will,” “seek,” “foreseeable,” "target," “guidance,” the negative version of these words, or similar terms and phrases.

These forward-looking statements are subject to 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 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 inflation, geopolitical unrest, and the COVID-19 pandemic;

  • our operations in a highly regulated industry and the 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 security breaches, cyber-attacks, or the mishandling of personal data;

  • our reliance on third-party data providers;

  • due to the sensitive and privacy-driven nature of our products and solutions, we could face liability and legal or regulatory proceedings, which could be costly and time-consuming to defend and may not be fully covered by insurance;

  • our international business exposes us to a number of risks;

  • the timing, manner and volume of repurchases of common stock pursuant to our share repurchase program;

  • 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;

  • our ability to obtain, maintain, protect and enforce our intellectual property and other proprietary information;

  • 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;

  • our indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and prevent us from meeting our obligations; and

  • control by our Sponsor, "Silver Lake", (Silver Lake Group, L.L.C., together with its affiliates, successors, and assignees) and its interests may conflict with ours or those of our stockholders.

For additional information on these and other factors that could cause First Advantage’s actual results to differ materially from expected results, please see our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”), as such factors may be updated from time to time in our filings with the SEC, including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which is expected to be filed after this press release, which are or will be accessible on the SEC’s website at www.sec.gov. The forward-looking statements included in this press release are made only as of the date of this press release, 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.

Non-GAAP Financial Information

This press release contains “non-GAAP financial measures” that are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”). Specifically, we make use of the non-GAAP financial measures “Adjusted EBITDA,” “Adjusted EBITDA Margin,” “Adjusted Net Income,” “Adjusted Diluted Earnings Per Share,” “Constant Currency Revenues,” and “Constant Currency Adjusted EBITDA.”

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted Earnings Per Share, Constant Currency Revenues, and Constant Currency Adjusted EBITDA have been presented in this press release as supplemental measures of financial performance that are not required by or presented in accordance with GAAP because we believe they assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core 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, Adjusted Diluted Earnings Per Share, Constant Currency Revenues, and Constant Currency Adjusted EBITDA 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.

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Diluted Earnings Per Share, Constant Currency Revenues, and Constant Currency Adjusted EBITDA are not recognized terms under GAAP and should not be considered as an alternative to net income (loss) as a measure of financial performance or cash provided by (used in) operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. 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.

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 define Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenues. 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. We define Constant Currency Revenues as current period revenues translated using prior-year period exchange rates. We define Constant Currency Adjusted EBITDA as current period Adjusted EBITDA translated using prior-year period exchange rates. For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures, see the reconciliations included at the end of this press release. Numerical figures included in the reconciliations have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.

About First Advantage

First Advantage (NASDAQ: FA) is a leading global provider of employment background screening and verification solutions. The Company delivers innovative services and insights that help customers manage risk and hire the best talent. Enabled by its proprietary technology, First Advantage’s 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. Headquartered in Atlanta, Georgia, First Advantage performs screens in over 200 countries and territories on behalf of its approximately 33,000 customers. For more information about First Advantage, visit the Company’s website at https://fadv.com/.

Investor Contact

Stephanie Gorman
Vice President, Investor Relations
Investors@fadv.com
(888) 314-9761


Condensed Financial Statements

First Advantage Corporation
Condensed Consolidated Balance Sheets
(Unaudited)

 

 

December 31,

 

 

December 31,

 

(in thousands, except share and per share amounts)

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

391,655

 

 

$

292,642

 

Restricted cash

 

 

141

 

 

 

148

 

Short-term investments

 

 

1,956

 

 

 

941

 

Accounts receivable (net of allowance for doubtful accounts of $1,348 and $1,258 at December 31, 2022 and 2021, respectively)

 

 

143,811

 

 

 

155,772

 

Prepaid expenses and other current assets

 

 

25,407

 

 

 

14,365

 

Income tax receivable

 

 

3,225

 

 

 

2,292

 

Total current assets

 

 

566,195

 

 

 

466,160

 

Property and equipment, net

 

 

113,529

 

 

 

154,309

 

Goodwill

 

 

793,080

 

 

 

793,892

 

Trade name, net

 

 

71,162

 

 

 

79,585

 

Customer lists, net

 

 

326,014

 

 

 

384,766

 

Deferred tax asset, net

 

 

2,422

 

 

 

1,413

 

Other assets

 

 

13,423

 

 

 

6,456

 

TOTAL ASSETS

 

$

1,885,825

 

 

$

1,886,581

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable

 

$

54,947

 

 

$

53,977

 

Accrued compensation

 

 

22,702

 

 

 

30,054

 

Accrued liabilities

 

 

16,400

 

 

 

21,829

 

Current portion of operating lease liability

 

 

4,957

 

 

 

 

Income tax payable

 

 

724

 

 

 

2,573

 

Deferred revenues

 

 

1,056

 

 

 

873

 

Total current liabilities

 

 

100,786

 

 

 

109,306

 

Long-term debt (net of deferred financing costs of $8,075 and $9,879 at December 31, 2022 and 2021, respectively)

 

 

556,649

 

 

 

554,845

 

Deferred tax liability, net

 

 

90,556

 

 

 

84,653

 

Operating lease liability, less current portion

 

 

7,879

 

 

 

 

Other liabilities

 

 

3,337

 

 

 

5,539

 

Total liabilities

 

 

759,207

 

 

 

754,343

 

EQUITY

 

 

 

 

 

 

Common stock - $0.001 par value; 1,000,000,000 shares authorized, 148,732,603 and 152,901,040 shares issued and outstanding as of December 31, 2022 and 2021, respectively

 

 

149

 

 

 

153

 

Additional paid-in-capital

 

 

1,176,163

 

 

 

1,165,163

 

Accumulated deficit

 

 

(27,363

)

 

 

(31,441

)

Accumulated other comprehensive (loss)

 

 

(22,331

)

 

 

(1,637

)

Total equity

 

 

1,126,618

 

 

 

1,132,238

 

TOTAL LIABILITIES AND EQUITY

 

$

1,885,825

 

 

$

1,886,581

 


First Advantage Corporation
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)

 

 

Interim Periods

 

 

Annual Periods

 

(in thousands, except share and per share amounts)

 

Three Months Ended December 31, 2022

 

 

Three Months Ended December 31, 2021

 

 

Year Ended December 31, 2022

 

 

Year Ended December 31, 2021

 

REVENUES

 

$

212,595

 

 

$

212,532

 

 

$

810,023

 

 

$

712,295

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services (exclusive of depreciation and amortization below)

 

 

107,905

 

 

 

107,206

 

 

 

408,928

 

 

 

352,170

 

Product and technology expense

 

 

11,962

 

 

 

11,961

 

 

 

51,931

 

 

 

45,507

 

Selling, general, and administrative expense

 

 

28,925

 

 

 

31,724

 

 

 

116,640

 

 

 

107,980

 

Depreciation and amortization

 

 

35,061

 

 

 

36,322

 

 

 

138,246

 

 

 

142,815

 

Total operating expenses

 

 

183,853

 

 

 

187,213

 

 

 

715,745

 

 

 

648,472

 

INCOME FROM OPERATIONS

 

 

28,742

 

 

 

25,319

 

 

 

94,278

 

 

 

63,823

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER EXPENSE, NET:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

5,197

 

 

 

3,097

 

 

 

9,199

 

 

 

24,972

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

13,938

 

Total other expense, net

 

 

5,197

 

 

 

3,097

 

 

 

9,199

 

 

 

38,910

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

 

23,545

 

 

 

22,222

 

 

 

85,079

 

 

 

24,913

 

Provision for income taxes

 

 

3,399

 

 

 

6,837

 

 

 

20,475

 

 

 

8,862

 

NET INCOME

 

$

20,146

 

 

$

15,385

 

 

$

64,604

 

 

$

16,051

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation income (loss)

 

 

2,395

 

 

 

(2,527

)

 

 

(20,694

)

 

 

(4,121

)

COMPREHENSIVE INCOME

 

$

22,541

 

 

$

12,858

 

 

$

43,910

 

 

$

11,930

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

20,146

 

 

$

15,385

 

 

$

64,604

 

 

$

16,051

 

Basic net income per share

 

$

0.14

 

 

$

0.10

 

 

$

0.43

 

 

$

0.11

 

Diluted net income per share

 

$

0.13

 

 

$

0.10

 

 

$

0.43

 

 

$

0.11

 

Weighted average number of shares outstanding - basic

 

 

148,704,033

 

 

 

150,119,568

 

 

 

150,227,213

 

 

 

140,480,590

 

Weighted average number of shares outstanding - diluted

 

 

150,055,595

 

 

 

152,284,628

 

 

 

151,807,139

 

 

 

141,687,384

 


First Advantage Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)

(in thousands)

 

Year Ended
December 31, 2022

 

 

Year Ended
December 31, 2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

64,604

 

 

$

16,051

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

138,246

 

 

 

142,815

 

Loss on extinguishment of debt

 

 

 

 

 

13,938

 

Amortization of deferred financing costs

 

 

1,804

 

 

 

5,936

 

Bad debt expense (recovery)

 

 

207

 

 

 

(17

)

Deferred taxes

 

 

4,597

 

 

 

(2,924

)

Share-based compensation

 

 

7,856

 

 

 

9,530

 

Loss (gain) on foreign currency exchange rates

 

 

91

 

 

 

(575

)

Loss on disposal of fixed assets and impairment of ROU assets

 

 

1,263

 

 

 

76

 

Change in fair value of interest rate swaps

 

 

(12,429

)

 

 

(2,284

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

9,149

 

 

 

(40,842

)

Prepaid expenses and other assets

 

 

4,892

 

 

 

(10,502

)

Accounts payable

 

 

2,983

 

 

 

7,516

 

Accrued compensation and accrued liabilities

 

 

(11,365

)

 

 

8,541

 

Deferred revenues

 

 

91

 

 

 

196

 

Operating lease liabilities

 

 

(898

)

 

 

 

Other liabilities

 

 

4,724

 

 

 

(87

)

Income taxes receivable and payable, net

 

 

(3,045

)

 

 

1,309

 

Net cash provided by operating activities

 

 

212,770

 

 

 

148,677

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Changes in short-term investments

 

 

(1,106

)

 

 

305

 

Acquisitions of businesses, net of cash acquired

 

 

(19,052

)

 

 

(48,934

)

Purchases of property and equipment

 

 

(6,165

)

 

 

(7,313

)

Capitalized software development costs

 

 

(22,363

)

 

 

(16,485

)

Proceeds from disposal of property and equipment

 

 

90

 

 

 

 

Net cash used in investing activities

 

 

(48,596

)

 

 

(72,427

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Proceeds from issuance of common stock in initial public offering, net of underwriting discounts and commissions

 

 

 

 

 

320,559

 

Payments of initial public offering issuance costs

 

 

 

 

 

(4,034

)

Shareholder distribution

 

 

 

 

 

(313

)

Capital contributions

 

 

 

 

 

241

 

Share repurchases

 

 

(60,530

)

 

 

 

Borrowings from Successor First Lien Credit Facility

 

 

 

 

 

261,413

 

Repayments of Successor First Lien Credit Facility

 

 

 

 

 

(363,875

)

Repayment of Successor Second Lien Credit Facility

 

 

 

 

 

(146,584

)

Payments of debt issuance costs

 

 

 

 

 

(1,257

)

Payments on capital and finance lease obligations

 

 

(884

)

 

 

(1,652

)

Payments on deferred purchase agreements

 

 

(884

)

 

 

(705

)

Proceeds from issuance of common stock under share-based compensation plans

 

 

3,522

 

 

 

387

 

Net settlement of share-based compensation plan awards

 

 

(378

)

 

 

(332

)

Net cash (used in) provided by financing activities

 

 

(59,154

)

 

 

63,848

 

Effect of exchange rate on cash, cash equivalents, and restricted cash

 

 

(6,014

)

 

 

(278

)

Increase in cash, cash equivalents, and restricted cash

 

 

99,006

 

 

 

139,820

 

Cash, cash equivalents, and restricted cash at beginning of period

 

 

292,790

 

 

 

152,970

 

Cash, cash equivalents, and restricted cash at end of period

 

$

391,796

 

 

$

292,790

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid for income taxes, net of refunds received

 

$

17,475

 

 

$

10,361

 

Cash paid for interest

 

$

27,042

 

 

$

23,029

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

Property and equipment acquired on account

 

$

105

 

 

$

3,643

 


Reconciliation of Consolidated Non-GAAP Financial Measures

 

 

Three Months Ended December 31, 2022

 

(in thousands)

 

Americas

 

 

International

 

 

Eliminations

 

 

Total revenues

 

Revenues, as reported (GAAP)

 

$

188,095

 

 

$

26,187

 

 

$

(1,687

)

 

$

212,595

 

Foreign currency translation impact(a)

 

 

77

 

 

 

3,475

 

 

 

109

 

 

 

3,661

 

Constant currency revenues

 

$

188,172

 

 

$

29,662

 

 

$

(1,578

)

 

$

216,256

 


 

 

Year Ended December 31, 2022

 

(in thousands)

 

Americas

 

 

International

 

 

Eliminations

 

 

Total revenues

 

Revenues, as reported (GAAP)

 

$

694,865

 

 

$

122,599

 

 

$

(7,441

)

 

$

810,023

 

Foreign currency translation impact(a)

 

 

199

 

 

 

9,774

 

 

 

324

 

 

 

10,297

 

Constant currency revenues

 

$

695,064

 

 

$

132,373

 

 

$

(7,117

)

 

$

820,320

 

(a) Constant currency revenues is calculated by translating current period amounts using prior-year period exchange rates.


 

 

Interim Periods

 

 

Annual Periods

 

(in thousands)

 

Three Months Ended December 31, 2022

 

 

Three Months Ended December 31, 2021

 

 

Year Ended December 31, 2022

 

 

Year Ended December 31, 2021

 

Net income

 

$

20,146

 

 

$

15,385

 

 

$

64,604

 

 

$

16,051

 

Interest expense, net

 

 

5,197

 

 

 

3,097

 

 

 

9,199

 

 

 

24,972

 

Provision for income taxes

 

 

3,399

 

 

 

6,837

 

 

 

20,475

 

 

 

8,862

 

Depreciation and amortization

 

 

35,061

 

 

 

36,322

 

 

 

138,246

 

 

 

142,815

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

13,938

 

Share-based compensation

 

 

2,032

 

 

 

4,961

 

 

 

7,856

 

 

 

9,530

 

Transaction and acquisition-related charges(a)

 

 

1,433

 

 

 

2,804

 

 

 

6,018

 

 

 

9,314

 

Integration, restructuring, and other charges(b)

 

 

3,020

 

 

 

32

 

 

 

2,512

 

 

 

812

 

Adjusted EBITDA

 

$

70,288

 

 

$

69,438

 

 

$

248,910

 

 

$

226,294

 

Revenues

 

 

212,595

 

 

 

212,532

 

 

 

810,023

 

 

 

712,295

 

Net income margin

 

 

9.5

%

 

 

7.2

%

 

 

8.0

%

 

 

2.3

%

Adjusted EBITDA Margin

 

 

33.1

%

 

 

32.7

%

 

 

30.7

%

 

 

31.8

%

Adjusted EBITDA

 

 

70,288

 

 

 

 

 

 

248,910

 

 

 

 

Foreign currency translation impact(c)

 

 

1,200

 

 

 

 

 

 

3,412

 

 

 

 

Constant currency Adjusted EBITDA

 

$

71,488

 

 

 

 

 

$

252,322

 

 

 

 

(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, subsequent one-time compliance efforts, and the registered common stock offering by certain selling stockholders in November 2021. The three months and years ended December 31, 2021 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.
(c) Constant currency Adjusted EBITDA is calculated by translating current period amounts using prior-year period exchange rates.


Reconciliation of Consolidated Non-GAAP Financial Measures (continued)

 

 

Interim Periods

 

 

Annual Periods

 

(in thousands)

 

Three Months Ended December 31, 2022

 

 

Three Months Ended December 31, 2021

 

 

Year Ended December 31, 2022

 

 

Year Ended December 31, 2021

 

Net income

 

$

20,146

 

 

$

15,385

 

 

$

64,604

 

 

$

16,051

 

Provision for income taxes

 

 

3,399

 

 

 

6,837

 

 

 

20,475

 

 

 

8,862

 

Income before provision for income taxes

 

 

23,545

 

 

 

22,222

 

 

 

85,079

 

 

 

24,913

 

Debt-related costs(a)

 

 

460

 

 

 

440

 

 

 

(9,569

)

 

 

20,143

 

Acquisition-related depreciation and amortization(b)

 

 

28,873

 

 

 

31,818

 

 

 

115,944

 

 

 

126,865

 

Share-based compensation

 

 

2,032

 

 

 

4,961

 

 

 

7,856

 

 

 

9,530

 

Transaction and acquisition-related charges(c)

 

 

1,433

 

 

 

2,804

 

 

 

6,018

 

 

 

9,314

 

Integration, restructuring, and other charges(d)

 

 

3,020

 

 

 

32

 

 

 

2,512

 

 

 

812

 

Adjusted Net Income before income tax effect

 

 

59,363

 

 

 

62,277

 

 

 

207,840

 

 

 

191,577

 

Less: Income tax effect(e)

 

 

14,407

 

 

 

15,747

 

 

 

51,378

 

 

 

49,178

 

Adjusted Net Income

 

$

44,956

 

 

$

46,530

 

 

$

156,462

 

 

$

142,399

 


 

 

Interim Periods

 

 

Annual Periods

 

 

 

Three Months Ended December 31, 2022

 

 

Three Months Ended December 31, 2021

 

 

Year Ended December 31, 2022

 

 

Year Ended December 31, 2021

 

Diluted net income per share (GAAP)

 

$

0.13

 

 

$

0.10

 

 

$

0.43

 

 

$

0.11

 

Adjusted Net Income adjustments per share

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

0.02

 

 

 

0.04

 

 

 

0.13

 

 

 

0.06

 

Debt-related costs(a)

 

 

0.00

 

 

 

0.00

 

 

 

(0.06

)

 

 

0.14

 

Acquisition-related depreciation and amortization(b)

 

 

0.19

 

 

 

0.21

 

 

 

0.76

 

 

 

0.90

 

Share-based compensation

 

 

0.01

 

 

 

0.03

 

 

 

0.05

 

 

 

0.07

 

Transaction and acquisition-related charges(c)

 

 

0.01

 

 

 

0.02

 

 

 

0.04

 

 

 

0.07

 

Integration, restructuring, and other charges(d)

 

 

0.02

 

 

 

0.00

 

 

 

0.02

 

 

 

0.01

 

Adjusted income tax effect(e)

 

 

(0.10

)

 

 

(0.10

)

 

 

(0.34

)

 

 

(0.35

)

Adjusted Diluted Earnings Per Share (Non-GAAP)

 

$

0.30

 

 

$

0.31

 

 

$

1.03

 

 

$

1.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding used in computation of Adjusted Diluted Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding—diluted (GAAP)

 

 

150,055,595

 

 

 

152,284,628

 

 

 

151,807,139

 

 

 

141,687,384

 

Options and restricted stock not included in weighted average number of shares outstanding—diluted (GAAP) (using treasury stock method)

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted weighted average number of shares outstanding—diluted (Non-GAAP)

 

 

150,055,595

 

 

 

152,284,628

 

 

 

151,807,139

 

 

 

141,687,384

 

(a) Represents the loss on extinguishment of debt and non-cash interest expense related to the amortization of debt issuance costs for the 2021 February refinancing and repayment of the Company’s Successor First Lien Credit Facility and Successor Second Lien Credit Facility, respectively. Beginning in 2022, this adjustment also includes the impact of the change in fair value of interest rate swaps. This adjustment, which represents the 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. The Company determined that the impact to the previous year, for the three months and year ended December 31, 2021, was not significant and therefore, the previously reported amounts will not be recast.
(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) 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 and years ended December 31, 2021 and 2022 include a transaction bonus expense related to one of the Company’s 2021 acquisitions.
(d) 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.
(e) Effective tax rates of approximately 24.3% and 25.3% have been used to compute Adjusted Net Income and Adjusted Diluted Earnings Per Share for the three months ended December 31, 2022 and 2021, respectively. Effective tax rates of approximately 24.7%, and 25.7% have been used to compute Adjusted Net Income and Adjusted Diluted Earnings Per Share for the years ended December 31, 2022 and 2021, 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.