0001193125-25-269602
SEC filingFirst Advantage generated net income of $2.6 million in Q3 2025, reversing a prior-year net loss, driven primarily by the Sterling acquisition which more than doubled revenue.
First Advantage reported substantial revenue growth in Q3 2025, with total revenues reaching $409.2 million, a 105.5% increase compared to $199.1 million in the same quarter last year. The acquisition of Sterling Check Corp. on October 31, 2024 was the primary driver, contributing $199.4 million of the increase. Legacy First Advantage (Americas and International) grew organically by approximately $10.6 million, driven by new customer additions.
Gross profit improved 90.5% to $187.1 million, but gross margin contracted to 45.7% from 49.3% due to Sterling's higher cost structure. Operating income surged to $42.2 million from $9.1 million, resulting in an operating margin of 10.3% (up from 4.6%). Net income turned positive at $2.6 million versus a net loss of $8.9 million, benefiting from higher revenue and operating leverage. Diluted EPS was $0.01, compared to ($0.06) in the prior year.
For the nine months, revenue was $1,154.4 million (up 108.7%), but net loss widened to $38.3 million from $9.9 million, reflecting higher interest costs ($131.4 million vs $28.1 million) and increased depreciation and amortization from the Sterling acquisition.
As of September 30, 2025, total assets were $3.86 billion, down from $3.92 billion at year-end 2024. Cash and cash equivalents stood at $216.8 million, up from $168.7 million. The company had no outstanding borrowings under its $250.0 million revolving credit facility. Total debt (net of deferred financing costs) was $2,103.1 million, compared to $2,121.3 million at December 31, 2024. The current portion of long-term debt was eliminated ($0 vs $21.9 million) due to voluntary prepayments.
Liquidity remained strong, with cash and available revolver capacity totaling $466.8 million. The company was in compliance with all debt covenants.
Operating cash flow for the nine months was $129.2 million, up from $113.9 million in the prior year, driven by higher earnings before non-cash charges. Capital expenditures (including capitalized software) totaled $37.3 million, increasing from $21.7 million, largely due to software development investments. Free cash flow (operating cash flow less capex) was approximately $91.9 million, though not explicitly stated as a metric. The company used cash to repay $45.5 million of term loan principal.
Management attributed revenue growth to the Sterling acquisition and organic customer wins. They noted that macroeconomic conditions—including elevated interest rates, inflation, and geopolitical tensions continue to impact hiring activity. The company is focused on integrating Sterling, capturing cost synergies, and investing in technology. A partial U.S. government shutdown effective October 1, 2025 could create near-term uncertainty. The One Big Beautiful Bill Act enacted in July 2025 introduced tax changes expected to positively affect deferred tax balances and future effective tax rates.
No forward guidance was provided in the filing.
Segment performance: First Advantage Americas external revenue grew 4.6% to $182.3 million, First Advantage International grew 14.1% to $28.2 million, and Sterling contributed $198.6 million. Corporate costs and intersegment eliminations totaled $(2.8) million. Adjusted EBITDA totaled $118.5 million (29.0% margin), down from 32.2% due to Sterling's higher cost mix.
Share-based compensation expense was $5.7 million in Q3 2025 ($9.5 million in Q3 2024). Transaction, integration, and restructuring charges totaled $8.3 million, including $1.6 million in acquisition-related costs and $6.7 million in integration charges (including $1.2 million software impairment and $1.5 million debt refinancing costs). Loss on extinguishment of debt was $0.4 million.
Geographically, U.S. revenue accounted for 85.4% of total in Q3 2025. Long-lived assets in the U.S. were $2.86 billion as of September 30, 2025.
Goodwill increased to $2.14 billion from $2.12 billion at year-end, primarily due to $6.4 million in purchase accounting adjustments and $9.4 million in foreign currency translation. Intangible assets, net decreased to $889.9 million from $987.9 million due to amortization.
Interest rate swaps had a notional value of $1.085 billion (six swaps) as of September 30, 2025, with a liability fair value of $6.3 million. The company does not apply hedge accounting for these instruments.
The company recorded a $0.8 million income tax benefit in Q3 2025, versus a $0.8 million provision in the prior year, reflecting the jurisdictional mix of earnings.