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First Advantage Reports Third Quarter 2022 Results

First Advantage Corporation
First Advantage Corporation

Third Quarter 2022 Highlights
(All results compared to prior-year period unless otherwise noted)

  • Revenues were $206.0 million, an increase of 6.8%, compared to $192.9 million; Constant Currency Revenues1 were $209.4 million, an increase of 8.6%

  • Net income was $17.2 million, an increase of 5.7%, compared to $16.3 million

  • Adjusted EBITDA1 was $64.2 million, an increase of 0.4%, compared to $63.9 million; Constant Currency Adjusted EBITDA1 was $65.3 million

  • Adjusted Net Income1 was $40.0 million, a decrease of 5.1%, compared to $42.2 million

  • Cash flows from operations were $46.4 million, an increase of 67.2%, compared to $27.8 million

  • Cash and cash equivalents were $390.3 million as of September 30, 2022, an increase of $97.6 million compared to $292.6 million as of December 31, 2021

  • Increased and extended share repurchase program by $100 million through December 31, 2023

ATLANTA, Nov. 08, 2022 (GLOBE NEWSWIRE) -- First Advantage Corporation (NASDAQ: FA), a leading global provider of HR technology solutions for screening, verifications, safety, and compliance, today announced financial results for the third quarter ended September 30, 2022.

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Key Financials
(Amounts in millions, except per share data and percentages)

 

Three months ended
September 30,

 

 

2022

 

 

2021

 

 

Change

 

Revenues

$

206.0

 

 

$

192.9

 

 

 

6.8

%

Income from operations

$

25.7

 

 

$

24.4

 

 

 

5.2

%

Net income

$

17.2

 

 

$

16.3

 

 

 

5.7

%

Net income margin

 

8.4

%

 

 

8.4

%

 

NA

 

Adjusted EBITDA1

$

64.2

 

 

$

63.9

 

 

 

0.4

%

Adjusted EBITDA Margin1

 

31.2

%

 

 

33.2

%

 

NA

 

Adjusted Net Income1

$

40.0

 

 

$

42.2

 

 

 

(5.1

)%

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 continued growth in the third quarter, albeit at more moderated levels, following eight consecutive quarters of extremely robust, double-digit revenue growth. We saw sustained resilience in our business, despite broad macroeconomic pressures including inflation, higher interest rates, and geopolitical volatility. Our 6.8% revenue growth and 0.4% Adjusted EBITDA growth were achieved on top of the remarkable 41.0% and 47.7% growth, respectively, we achieved in the prior-year period. This quarter, double-digit revenue growth in our Americas segment was offset in part by significant foreign currency headwinds and macro-related softness in our International segment,” said Scott Staples, Chief Executive Officer.

“Our unique ability to deliver the speed, quality, and applicant experience that helps our customers hire smarter and onboard faster fueled our continued momentum in new logo enterprise customer wins and strong customer retention rates. A resilient U.S. jobs market, driven by high levels of quits, frequent job switching, and continued demand for talent, supports the value proposition for our products and solutions. Additionally, we believe changes in how people work and apply for jobs, along with our customers' focus on managing risks, contribute to the long-term tailwinds for our business,” added Mr. Staples.

Balance Sheet and Cash Flow

During the third quarter of 2022, the Company generated $46.4 million of cash flow from operations and spent $7.0 million on purchases of property and equipment, including capitalized software development costs. At September 30, 2022, First Advantage had cash and cash equivalents of $390.3 million and total debt of $564.7 million, resulting in net debt of $174.4 million.

Share Repurchase Program

Today, First Advantage announced that its Board of Directors has expanded and extended the Company's share repurchase program announced last quarter. The Company’s Board of Directors has approved a $100 million increase to the originally authorized $50 million program and extended the program 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 November 4, 2022, the Company repurchased 1,616,551 shares of its common stock under its share repurchase program for an aggregate of $21.6 million. As of November 4, 2022, the Company had 151,929,522 shares of common stock outstanding.

“Our balance sheet strength is underpinned by our cash and liquidity position, low debt levels, and robust free cash flow generation, all of which give us tremendous flexibility in our capital allocation priorities,” commented David Gamsey, EVP and Chief Financial Officer. “We continually evaluate opportunities for executing M&A, investing in the Company for continued growth, and returning capital to shareholders, all with the goal of maximizing shareholder value.”

Full Year 2022 Guidance

First Advantage is revising full year 2022 guidance ranges downward to reflect expectations for continuing foreign currency headwinds and macro-driven demand softness, primarily in the International segment. This revised guidance equates to full year 2022 revenue growth of 14% - 15%, or 16% - 17% on a constant currency basis.

The following table summarizes our full year 2022 guidance:

 

Prior Guidance
As of August 4, 2022

Revised Guidance
As of November 8, 2022

Revenues

$823 million – $835 million

$813 million – $820 million

Adjusted EBITDA2

$254 million – $259 million

$247 million – $251 million

Adjusted Net Income2

$158 million – $161 million

$154 million – $157 million

Capital expenditures3

$28 million – $30 million

$28 million – $29 million

2 A reconciliation of the foregoing guidance for the non-GAAP metrics of Adjusted EBITDA and Adjusted Net Income to GAAP net income 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.
3 Capital expenditures consists of purchases of property and equipment and capitalized software development costs.

Actual results may differ materially from First Advantage’s full year 2022 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, November 8, 2022, at 8:30 a.m. ET.

To participate in the conference call, please dial (800) 225-9448 (domestic) or (203) 518-9783 (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 third quarter 2022 earnings call or provide the conference code FAQ322. 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/3940895/C4F5082849C94BFBEE9EA8A317D39EE3.

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:

  • the impact of COVID-19 and related continuously evolving risks on our results of operations, financial position, and/or liquidity;

  • 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;

  • our reliance on third-party data providers;

  • negative changes in external events beyond our control, including our customers’ onboarding volumes, economic drivers which are sensitive to macroeconomic cycles, such as interest rate volatility and inflation, geopolitical unrest, and the COVID-19 pandemic;

  • potential harm to our business, brand, and reputation as a result of security breaches, cyber-attacks, or the mishandling of personal data;

  • 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;

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

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

  • the timing, manner and volume of repurchases of common stock pursuant to our share repurchase program; 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, which are 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 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 HR technology solutions for screening, verifications, safety, and compliance. The Company delivers innovative solutions and insights that help customers manage risk and hire the best talent. Enabled by its proprietary technology, First Advantage’s products and solutions 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 more than 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)

(in thousands, except share and per share amounts)

 

September 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

390,262

 

 

$

292,642

 

Restricted cash

 

 

138

 

 

 

148

 

Short-term investments

 

 

 

 

 

941

 

Accounts receivable (net of allowance for doubtful accounts of $1,126 and $1,258 at September 30, 2022 and December 31, 2021, respectively)

 

 

151,197

 

 

 

155,772

 

Prepaid expenses and other current assets

 

 

27,318

 

 

 

14,365

 

Income tax receivable

 

 

2,556

 

 

 

2,292

 

Total current assets

 

 

571,471

 

 

 

466,160

 

Property and equipment, net

 

 

125,623

 

 

 

154,309

 

Goodwill

 

 

791,574

 

 

 

793,892

 

Trade name, net

 

 

72,928

 

 

 

79,585

 

Customer lists, net

 

 

340,556

 

 

 

384,766

 

Deferred tax asset, net

 

 

1,744

 

 

 

1,413

 

Other assets

 

 

18,020

 

 

 

6,456

 

TOTAL ASSETS

 

$

1,921,916

 

 

$

1,886,581

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable

 

$

52,285

 

 

$

53,977

 

Accrued compensation

 

 

23,470

 

 

 

30,054

 

Accrued liabilities

 

 

17,873

 

 

 

21,829

 

Current portion of operating lease liability

 

 

5,500

 

 

 

 

Income tax payable

 

 

1,661

 

 

 

2,573

 

Deferred revenues

 

 

847

 

 

 

873

 

Total current liabilities

 

 

101,636

 

 

 

109,306

 

Long-term debt (net of deferred financing costs of $8,532 and $9,879 at September 30, 2022 and December 31, 2021, respectively)

 

 

556,192

 

 

 

554,845

 

Deferred tax liability, net

 

 

90,842

 

 

 

84,653

 

Operating lease liability, less current portion

 

 

9,947

 

 

 

 

Other liabilities

 

 

3,316

 

 

 

5,539

 

Total liabilities

 

 

761,933

 

 

 

754,343

 

EQUITY

 

 

 

 

 

 

Common stock - $0.001 par value; 1,000,000,000 shares authorized, 153,169,055 and 152,901,040 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

 

 

153

 

 

 

153

 

Additional paid-in-capital

 

 

1,173,787

 

 

 

1,165,163

 

Accumulated earnings (deficit)

 

 

10,769

 

 

 

(31,441

)

Accumulated other comprehensive (loss)

 

 

(24,726

)

 

 

(1,637

)

Total equity

 

 

1,159,983

 

 

 

1,132,238

 

TOTAL LIABILITIES AND EQUITY

 

$

1,921,916

 

 

$

1,886,581

 



First Advantage Corporation

Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)

 

 

Three Months Ended September 30,

 

(in thousands, except share and per share amounts)

 

2022

 

 

2021

 

REVENUES

 

$

205,986

 

 

$

192,867

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

Cost of services (exclusive of depreciation and amortization below)

 

 

104,300

 

 

 

94,151

 

Product and technology expense

 

 

13,250

 

 

 

11,313

 

Selling, general, and administrative expense

 

 

28,034

 

 

 

27,203

 

Depreciation and amortization

 

 

34,744

 

 

 

35,812

 

Total operating expenses

 

 

180,328

 

 

 

168,479

 

INCOME FROM OPERATIONS

 

 

25,658

 

 

 

24,388

 

 

 

 

 

 

 

 

OTHER EXPENSE, NET:

 

 

 

 

 

 

Interest expense, net

 

 

1,740

 

 

 

4,706

 

Total other expense, net

 

 

1,740

 

 

 

4,706

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

 

23,918

 

 

 

19,682

 

Provision for income taxes

 

 

6,709

 

 

 

3,397

 

NET INCOME

 

$

17,209

 

 

$

16,285

 

 

 

 

 

 

 

 

Foreign currency translation (loss)

 

 

(10,253

)

 

 

(3,059

)

COMPREHENSIVE INCOME

 

$

6,956

 

 

$

13,226

 

 

 

 

 

 

 

 

NET INCOME

 

$

17,209

 

 

$

16,285

 

Basic net income per share

 

$

0.11

 

 

$

0.11

 

Diluted net income per share

 

$

0.11

 

 

$

0.11

 

Weighted average number of shares outstanding - basic

 

 

150,930,340

 

 

 

149,943,998

 

Weighted average number of shares outstanding - diluted

 

 

152,357,307

 

 

 

152,400,419

 



First Advantage Corporation

Condensed Consolidated Statements of Cash Flows
(Unaudited)

 

 

Nine Months Ended September 30,

 

(in thousands)

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

44,458

 

 

$

666

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

103,185

 

 

 

106,493

 

Loss on extinguishment of debt

 

 

 

 

 

13,938

 

Amortization of deferred financing costs

 

 

1,347

 

 

 

5,496

 

Bad debt (recovery)

 

 

(6

)

 

 

(163

)

Deferred taxes

 

 

5,536

 

 

 

(4,465

)

Share-based compensation

 

 

5,824

 

 

 

4,569

 

Loss (gain) on foreign currency exchange rates

 

 

115

 

 

 

(281

)

Loss on disposal of property and equipment

 

 

197

 

 

 

80

 

Change in fair value of interest rate swaps

 

 

(11,376

)

 

 

(845

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

3,063

 

 

 

(35,815

)

Prepaid expenses and other assets

 

 

700

 

 

 

(14,096

)

Accounts payable

 

 

165

 

 

 

1,547

 

Accrued compensation and accrued liabilities

 

 

(9,337

)

 

 

5,898

 

Deferred revenues

 

 

(116

)

 

 

73

 

Operating lease liabilities

 

 

(773

)

 

 

 

Other liabilities

 

 

1,055

 

 

 

509

 

Income taxes receivable and payable, net

 

 

(1,195

)

 

 

256

 

Net cash provided by operating activities

 

 

142,842

 

 

 

83,860

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Changes in short-term investments

 

 

826

 

 

 

305

 

Acquisitions of businesses, net of cash acquired

 

 

(19,044

)

 

 

(7,588

)

Purchases of property and equipment

 

 

(6,034

)

 

 

(5,743

)

Capitalized software development costs

 

 

(16,320

)

 

 

(11,966

)

Proceeds from disposal of property and equipment

 

 

46

 

 

 

 

Net cash used in investing activities

 

 

(40,526

)

 

 

(24,992

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

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

 

 

 

 

 

320,559

 

Payments of initial public offering issuance costs

 

 

 

 

 

(3,848

)

Shareholder distribution

 

 

 

 

 

(313

)

Capital contributions

 

 

 

 

 

241

 

Share repurchases

 

 

(2,248

)

 

 

 

Borrowings from Successor First Lien Credit Facility

 

 

 

 

 

261,413

 

Repayments of Successor First Lien Credit Facility

 

 

 

 

 

(363,875

)

Repayment of Successor Second Lien Credit Facility

 

 

 

 

 

(146,584

)

Payments of debt issuance costs

 

 

 

 

 

(1,257

)

Payments on capital and finance lease obligations

 

 

(673

)

 

 

(1,286

)

Payments on deferred purchase agreements

 

 

(704

)

 

 

(533

)

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

 

 

3,090

 

 

 

187

 

Net settlement of share-based compensation plan awards

 

 

(292

)

 

 

(332

)

Net cash (used in) provided by financing activities

 

 

(827

)

 

 

64,372

 

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

 

 

(3,879

)

 

 

(522

)

Increase in cash, cash equivalents, and restricted cash

 

 

97,610

 

 

 

122,718

 

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

 

 

292,790

 

 

 

152,970

 

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

 

$

390,400

 

 

$

275,688

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

Cash paid for income taxes, net of refunds received

 

$

11,321

 

 

$

6,069

 

Cash paid for interest

 

$

17,640

 

 

$

18,362

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

Offering costs included in accounts payable and accrued liabilities

 

$

 

 

$

187

 

Property and equipment acquired on account

 

$

105

 

 

$

2,796

 



Reconciliation of Consolidated Non-GAAP Financial Measures

 

 

Three Months Ended September 30, 2022

 

(in thousands)

 

Americas

 

 

International

 

 

Eliminations

 

 

Total revenues

 

Revenues, as reported (GAAP)

 

$

176,091

 

 

$

31,628

 

 

$

(1,733

)

 

$

205,986

 

Foreign currency translation impact (a)

 

 

53

 

 

 

3,312

 

 

 

92

 

 

 

3,457

 

Constant currency revenues

 

$

176,144

 

 

$

34,940

 

 

$

(1,641

)

 

$

209,443

 

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


 

 

Three Months Ended September 30,

 

(in thousands, except percentages)

 

2022

 

 

2021

 

Net income

 

$

17,209

 

 

$

16,285

 

Interest expense, net

 

 

1,740

 

 

 

4,706

 

Provision for income taxes

 

 

6,709

 

 

 

3,397

 

Depreciation and amortization

 

 

34,744

 

 

 

35,812

 

Share-based compensation

 

 

2,022

 

 

 

1,343

 

Transaction and acquisition-related charges(a)

 

 

1,908

 

 

 

2,144

 

Integration, restructuring, and other charges(b)

 

 

(144

)

 

 

257

 

Adjusted EBITDA

 

$

64,188

 

 

$

63,944

 

Revenues

 

 

205,986

 

 

 

192,867

 

Net income margin

 

 

8.4

%

 

 

8.4

%

Adjusted EBITDA Margin

 

 

31.2

%

 

 

33.2

%

Adjusted EBITDA

 

$

64,188

 

 

 

 

Foreign currency translation impact (c)

 

 

1,090

 

 

 

 

Constant currency Adjusted EBITDA

 

$

65,278

 

 

 

 

(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 September 30, 2022 includes a transaction bonus expense related to one of the Company’s 2021 acquisitions.
(b)   Represents charges from organizational restructuring and integration activities, non-cash, and other charges primarily related to legal exposures inherited from legacy acquisitions, foreign currency (gains) losses, and (gains) losses on the sale of assets.
(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)

 

 

Three Months Ended September 30,

 

(in thousands)

 

2022

 

 

2021

 

Net income

 

$

17,209

 

 

$

16,285

 

Provision for income taxes

 

 

6,709

 

 

 

3,397

 

Income before provision for income taxes

 

 

23,918

 

 

 

19,682

 

Debt-related charges(a)

 

 

(3,545

)

 

 

437

 

Acquisition-related depreciation and amortization(b)

 

 

28,927

 

 

 

31,749

 

Share-based compensation

 

 

2,022

 

 

 

1,343

 

Transaction and acquisition-related charges(c)

 

 

1,908

 

 

 

2,144

 

Integration, restructuring, and other charges(d)

 

 

(144

)

 

 

257

 

Adjusted Net Income before income tax effect

 

 

53,086

 

 

 

55,612

 

Less: Income tax effect(e)

 

 

13,083

 

 

 

13,443

 

Adjusted Net Income

 

$

40,003

 

 

$

42,169

 


 

 

Three Months Ended September 30,

 

 

 

2022

 

 

2021

 

Diluted net income per share (GAAP)

 

$

0.11

 

 

$

0.11

 

Adjusted Net Income adjustments per share

 

 

 

 

 

 

Income taxes

 

 

0.04

 

 

 

0.02

 

Debt-related charges(a)

 

 

(0.02

)

 

 

0.00

 

Acquisition-related depreciation and amortization(b)

 

 

0.19

 

 

 

0.21

 

Share-based compensation

 

 

0.01

 

 

 

0.01

 

Transaction and acquisition related charges(c)

 

 

0.01

 

 

 

0.01

 

Integration, restructuring, and other charges(d)

 

 

(0.00

)

 

 

0.00

 

Adjusted income taxes(e)

 

 

(0.09

)

 

 

(0.09

)

Adjusted Diluted Earnings Per Share (Non-GAAP)

 

$

0.26

 

 

$

0.28

 

 

 

 

 

 

 

 

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)

 

 

152,357,307

 

 

 

152,400,419

 

(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 fair value gains or losses on the interest rate swaps, was added as a result of the increased interest rate volatility observed in 2022. The Company determined that the impact to the previous year, ($0.1) million for the three months ended September 30, 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.
(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 ended September 30, 2022 includes 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 24.6% and 24.2% have been used to compute Adjusted Net Income and Adjusted Diluted Earnings Per Share for the three months ended September 30, 2022 and 2021, respectively. As of December 31, 2021, we had net operating loss carryforwards of approximately $120.1 million for federal income tax purposes available to reduce future income subject to income taxes. As a result, the amount of actual cash taxes we may pay for federal income taxes differs significantly from the effective income tax rate computed in accordance with GAAP and from the normalized rate shown above.