First Advantage第二季收入4.49億美元增15% 純利轉正錄1691萬美元

10-Q
 
 
 
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 

  
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
 
(Mark One)

 
 
 
 
 

 
 ☒

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 For the quarterly period ended June 30, 2026
OR

 
 
 
 
 

 
 ☐

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 For the transition period from to 
Commission File Number: 001-31666
 
First Advantage Corporation
(Exact Name of Registrant as Specified in its Charter)
 
 

 
 
 
 
 

 
 Delaware

 84-3884690

 

 
 (State or other jurisdiction of
incorporation or organization)

 (I.R.S. Employer
Identification No.)

 

 
 1 Concourse Parkway NE, Suite 200
Atlanta, GA

 30328

 

 
 (Address of principal executive offices)

 (Zip Code)

 

 (678) 868-4151
(Registrant’s telephone number, including area code)
 
 
Securities registered pursuant to Section 12(b) of the Act: 
 

 
 
 
 
 
 
 
 

 
 Title of each class

  

 Trading
Symbol(s)

  

 Name of each exchange on which registered

 

 
 Common Stock, $0.001 par value per share

  

 FA

  

 The Nasdaq Stock Market LLC

 

 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 

 
 
 
 
 
 
 
 
 
 

 
 Large accelerated filer

 

 ☒

 

 Accelerated filer

 

 ☐

 

 
 Non-accelerated filer

 

 ☐ 

 

 Smaller reporting company

 

 ☐

 

 
 Emerging growth company

  

 ☐ 

  

  

  

  

 

  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ 
As of July 31, 2026, the registrant had 171,753,691 shares of common stock, $0.001 par value per share, outstanding.
 
 
 

  

 
  

 Table of Contents
 

 
 
 
 
 
 

 
  

  

 Page

 

 
  

  

  

 

 
 PART I.

 FINANCIAL INFORMATION

 2

 

 
  

  

  

 

 
 Item 1.

 Financial Statements (Unaudited)

 2

 

 
  

 Condensed Consolidated Balance Sheets

 2

 

 
  

 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

 3

 

 
  

 Condensed Consolidated Statements of Cash Flows

 4

 

 
  

 Condensed Consolidated Statements of Changes in Stockholders’ Equity 

 5

 

 
  

 Notes to Unaudited Condensed Consolidated Financial Statements

 6

 

 
 Item 2.

 Management’s Discussion and Analysis of Financial Condition and Results of Operations

 19

 

 
 Item 3.

 Quantitative and Qualitative Disclosures About Market Risk

 34

 

 
 Item 4.

 Controls and Procedures

 34

 

 
  

  

  

 

 
 PART II.

 OTHER INFORMATION

 35

 

 
  

  

  

 

 
 Item 1.

 Legal Proceedings

 35

 

 
 Item 1A.

 Risk Factors

 35

 

 
 Item 2.

 Unregistered Sales of Equity Securities and Use of Proceeds

 35

 

 
 Item 3.

 Defaults Upon Senior Securities

 36

 

 
 Item 4.

 Mine Safety Disclosures

 36

 

 
 Item 5.

 Other Information

 36

 

 
 Item 6.

 Exhibits

 37

 

 
 Signatures

 38

 

  

 1

 
  

 PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
First Advantage Corporation
Condensed Consolidated Balance Sheets 
(Unaudited)
 

 
 
 
 
 
 
 
 
 
 
 
 

 
 (in thousands, except share and par value amounts)

  

 June 30, 2026

  

  

 December 31, 2025

  

 

 
 ASSETS

  

  

  

  

  

  

 

 
 CURRENT ASSETS

  

  

  

  

  

  

 

 
 Cash and cash equivalents

  

 $

 237,900

  

  

 $

 239,998

  

 

 
 Restricted cash

  

  

 110

  

  

  

 86

  

 

 
 Accounts receivable (net of allowance for doubtful accounts of $7,792 and $8,084 at June 30, 2026 and December 31, 2025, respectively)

  

  

 309,282

  

  

  

 297,281

  

 

 
 Prepaid expenses and other current assets

  

  

 26,472

  

  

  

 15,323

  

 

 
 Income tax receivable

  

  

 7,282

  

  

  

 9,010

  

 

 
 Total current assets

  

  

 581,046

  

  

  

 561,698

  

 

 
 Property and equipment, net

  

  

 227,267

  

  

  

 250,865

  

 

 
 Goodwill

  

  

 2,135,158

  

  

  

 2,143,604

  

 

 
 Intangible assets, net

  

  

 785,062

  

  

  

 857,111

  

 

 
 Deferred tax asset, net

  

  

 4,289

  

  

  

 4,183

  

 

 
 Other assets

  

  

 14,424

  

  

  

 16,341

  

 

 
 TOTAL ASSETS

  

 $

 3,747,246

  

  

 $

 3,833,802

  

 

 
 LIABILITIES AND EQUITY

  

  

  

  

  

  

 

 
 CURRENT LIABILITIES

  

  

  

  

  

  

 

 
 Accounts payable

  

 $

 124,250

  

  

 $

 109,888

  

 

 
 Accrued compensation

  

  

 55,432

  

  

  

 60,537

  

 

 
 Accrued liabilities

  

  

 40,564

  

  

  

 49,140

  

 

 
 Current portion of operating lease liability

  

  

 3,125

  

  

  

 3,568

  

 

 
 Income tax payable

  

  

 1,319

  

  

  

 2,298

  

 

 
 Deferred revenues

  

  

 5,251

  

  

  

 5,028

  

 

 
 Total current liabilities

  

  

 229,941

  

  

  

 230,459

  

 

 
 Long-term debt (net of deferred financing costs of $30,756 and $34,498 at June 30, 2026 and December 31, 2025, respectively)

  

  

 2,033,781

  

  

  

 2,080,039

  

 

 
 Deferred tax liability, net

  

  

 172,266

  

  

  

 190,255

  

 

 
 Operating lease liability, less current portion

  

  

 4,155

  

  

  

 5,525

  

 

 
 Other liabilities

  

  

 13,149

  

  

  

 13,972

  

 

 
 Total liabilities

  

  

 2,453,292

  

  

  

 2,520,250

  

 

 
 COMMITMENTS AND CONTINGENCIES (Note 11)

  

  

  

  

  

  

 

 
 EQUITY

  

  

  

  

  

  

 

 
 Common stock - $0.001 par value; 1,000,000,000 shares authorized, 171,571,364 and 174,190,461 shares issued and outstanding at June 30, 2026 and December 31, 2025, respectively

  

  

 172

  

  

  

 174

  

 

 
 Additional paid-in-capital

  

  

 1,541,000

  

  

  

 1,528,315

  

 

 
 Accumulated deficit

  

  

 (214,107

 )

  

  

 (194,632

 )

 

 
 Accumulated other comprehensive loss

  

  

 (33,111

 )

  

  

 (20,305

 )

 

 
 Total equity

  

  

 1,293,954

  

  

  

 1,313,552

  

 

 
 TOTAL LIABILITIES AND EQUITY

  

 $

 3,747,246

  

  

 $

 3,833,802

  

 

 The accompanying notes are an integral part of these condensed consolidated financial statements.

 2

 
  

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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
  

  

 Three Months Ended June 30,

  

  

 Six Months Ended June 30,

  

 

 
 (in thousands, except share and per share amounts)

  

 2026

  

  

 2025

  

  

 2026

  

  

 2025

  

 

 
 REVENUES

  

 $

 448,763

  

  

 $

 390,633

  

  

 $

 833,964

  

  

 $

 745,221

  

 

 
 

  

  

  

  

  

  

  

  

  

  

  

  

 

 
 OPERATING EXPENSES:

  

  

  

  

  

  

  

  

  

  

  

  

 

 
 Cost of services (exclusive of depreciation and amortization below)

  

  

 244,771

  

  

  

 207,841

  

  

  

 456,182

  

  

  

 400,406

  

 

 
 Product and technology expense

  

  

 27,265

  

  

  

 25,676

  

  

  

 51,870

  

  

  

 52,831

  

 

 
 Selling, general, and administrative expense

  

  

 57,811

  

  

  

 57,473

  

  

  

 111,286

  

  

  

 123,058

  

 

 
 Depreciation and amortization

  

  

 61,893

  

  

  

 61,906

  

  

  

 124,083

  

  

  

 123,572

  

 

 
 Total operating expenses

  

  

 391,740

  

  

  

 352,896

  

  

  

 743,421

  

  

  

 699,867

  

 

 
 INCOME FROM OPERATIONS

  

  

 57,023

  

  

  

 37,737

  

  

  

 90,543

  

  

  

 45,354

  

 

 
 

  

  

  

  

  

  

  

  

  

  

  

  

 

 
 OTHER EXPENSE, NET:

  

  

  

  

  

  

  

  

  

  

  

  

 

 
 Interest expense, net

  

  

 31,608

  

  

  

 44,785

  

  

  

 61,449

  

  

  

 91,365

  

 

 
 Loss on extinguishment of debt

  

  

 359

  

  

  

 254

  

  

  

 733

  

  

  

 254

  

 

 
 Total other expense, net

  

  

 31,967

  

  

  

 45,039

  

  

  

 62,182

  

  

  

 91,619

  

 

 
 INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES

  

  

 25,056

  

  

  

 (7,302

 )

  

  

 28,361

  

  

  

 (46,265

 )

 

 
 Provision (benefit) for income taxes

  

  

 8,142

  

  

  

 (7,610

 )

  

  

 9,279

  

  

  

 (5,379

 )

 

 
 NET INCOME (LOSS)

  

 $

 16,914

  

  

 $

 308

  

  

 $

 19,082

  

  

 $

 (40,886

 )

 

 
 

  

  

  

  

  

  

  

  

  

  

  

  

 

 
 Foreign currency translation (loss) income

  

  

 (5,886

 )

  

  

 14,384

  

  

  

 (12,806

 )

  

  

 19,837

  

 

 
 COMPREHENSIVE INCOME (LOSS)

  

 $

 11,028

  

  

 $

 14,692

  

  

 $

 6,276

  

  

 $

 (21,049

 )

 

 
 

  

  

  

  

  

  

  

  

  

  

  

  

 

 
 NET INCOME (LOSS)

  

 $

 16,914

  

  

 $

 308

  

  

 $

 19,082

  

  

 $

 (40,886

 )

 

 
 Basic net income (loss) per share

  

 $

 0.10

  

  

 $

 0.00

  

  

 $

 0.11

  

  

 $

 (0.24

 )

 

 
 Diluted net income (loss) per share

  

 $

 0.10

  

  

 $

 0.00

  

  

 $

 0.11

  

  

 $

 (0.24

 )

 

 
 Weighted average number of shares outstanding - basic

  

  

 171,747,641

  

  

  

 173,288,662

  

  

  

 172,782,144

  

  

  

 172,930,881

  

 

 
 Weighted average number of shares outstanding - diluted

  

  

 173,225,170

  

  

  

 175,069,451

  

  

  

 173,911,739

  

  

  

 172,930,881

  

 

 The accompanying notes are an integral part of these condensed consolidated financial statements.

 3

 
  

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

 
 
 
 
 
 
 
 
 
 
 
 

 
  

  

 Six Months Ended June 30,

  

 

 
 (in thousands)

  

 2026

  

  

 2025

  

 

 
 CASH FLOWS FROM OPERATING ACTIVITIES

  

  

  

  

  

  

 

 
 Net income (loss)

  

 $

 19,082

  

  

 $

 (40,886

 )

 

 
 Adjustments to reconcile net income (loss) to net cash provided by operating activities:

  

  

  

  

  

  

 

 
 Depreciation and amortization

  

  

 124,083

  

  

  

 123,572

  

 

 
 Loss on extinguishment of debt

  

  

 733

  

  

  

 254

  

 

 
 Amortization of deferred financing costs

  

  

 3,009

  

  

  

 3,205

  

 

 
 Bad debt expense (recovery)

  

  

 792

  

  

  

 (1,495

 )

 

 
 Deferred taxes

  

  

 (18,124

 )

  

  

 (26,965

 )

 

 
 Share-based compensation

  

  

 9,670

  

  

  

 13,709

  

 

 
 Loss on disposal and impairment of long-lived assets

  

  

 6,864

  

  

  

 527

  

 

 
 Change in fair value of interest rate swaps

  

  

 (8,172

 )

  

  

 6,419

  

 

 
 Changes in operating assets and liabilities:

  

  

  

  

  

  

 

 
 Accounts receivable

  

  

 (13,486

 )

  

  

 (13,033

 )

 

 
 Prepaid expenses and other assets

  

  

 (9,854

 )

  

  

 1,878

  

 

 
 Accounts payable

  

  

 16,470

  

  

  

 (12,049

 )

 

 
 Accrued compensation and accrued liabilities

  

  

 (7,452

 )

  

  

 2,585

  

 

 
 Deferred revenues

  

  

 241

  

  

  

 501

  

 

 
 Operating lease liabilities

  

  

 149

  

  

  

 (155

 )

 

 
 Other liabilities

  

  

 (1,835

 )

  

  

 (308

 )

 

 
 Income taxes receivable and payable, net

  

  

 857

  

  

  

 (943

 )

 

 
 Net cash provided by operating activities

  

  

 123,027

  

  

  

 56,816

  

 

 
 CASH FLOWS FROM INVESTING ACTIVITIES

  

  

  

  

  

  

 

 
 Capitalized software development costs

  

  

 (28,075

 )

  

  

 (22,180

 )

 

 
 Purchases of property and equipment

  

  

 (7,464

 )

  

  

 (1,718

 )

 

 
 Other investing activities

  

  

 2,028

  

  

  

 82

  

 

 
 Net cash used in investing activities

  

  

 (33,511

 )

  

  

 (23,816

 )

 

 
 CASH FLOWS FROM FINANCING ACTIVITIES

  

  

  

  

  

  

 

 
 Repayments of First Lien Credit Facility

  

  

 (50,000

 )

  

  

 (20,462

 )

 

 
 Share repurchases

  

  

 (38,179

 )

  

  

 —

  

 

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

  

  

 4,334

  

  

  

 2,219

  

 

 
 Net settlement of share-based compensation plan awards

  

  

 (1,318

 )

  

  

 (2,761

 )

 

 
 Cash dividends paid

  

  

 (79

 )

  

  

 (103

 )

 

 
 Net cash used in financing activities

  

  

 (85,242

 )

  

  

 (21,107

 )

 

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

  

  

 (6,348

 )

  

  

 2,969

  

 

 
 (Decrease) increase in cash, cash equivalents, and restricted cash

  

  

 (2,074

 )

  

  

 14,862

  

 

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

  

  

 240,084

  

  

  

 169,483

  

 

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

  

 $

 238,010

  

  

 $

 184,345

  

 

 
  

  

  

  

  

  

  

 

 
 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

  

  

  

  

  

  

 

 
 Cash paid for income taxes, net of refunds received

  

 $

 26,457

  

  

 $

 24,273

  

 

 
 Cash paid for interest

  

 $

 69,327

  

  

 $

 84,140

  

 

 
 NON-CASH INVESTING AND FINANCING ACTIVITIES:

  

  

  

  

  

  

 

 
 Property and equipment acquired on account

  

 $

 1,177

  

  

 $

 426

  

 

 
 Excise taxes on share repurchases incurred but not paid

  

 $

 381

  

  

 $

 —

  

 

 The accompanying notes are an integral part of these condensed consolidated financial statements.

 4

 
  

 First Advantage Corporation
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 (in thousands)

  

 Common Stock

  

  

 Additional
Paid-In-Capital

  

  

 Accumulated
Deficit

  

  

 Accumulated Other
Comprehensive
Loss

  

  

 Total Stockholders’
Equity

  

 

 
 BALANCE – December 31, 2025

  

 $

 174

  

  

 $

 1,528,315

  

  

 $

 (194,632

 )

  

 $

 (20,305

 )

  

 $

 1,313,552

  

 

 
 Share-based compensation

  

  

 —

  

  

  

 4,430

  

  

  

 —

  

  

  

 —

  

  

  

 4,430

  

 

 
 Repurchases of common stock

  

  

 (2

 )

  

  

 —

  

  

  

 (19,685

 )

  

  

 —

  

  

  

 (19,687

 )

 

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

  

  

 1

  

  

  

 1,151

  

  

  

 —

  

  

  

 —

  

  

  

 1,152

  

 

 
 Common stock withheld for tax obligations on restricted stock unit and option settlement

  

 (0)

  

  

  

 (911

 )

  

  

 —

  

  

  

 —

  

  

  

 (911

 )

 

 
 Foreign currency translation

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 (6,920

 )

  

  

 (6,920

 )

 

 
 Net income

  

  

 —

  

  

  

 —

  

  

  

 2,168

  

  

  

 —

  

  

  

 2,168

  

 

 
 BALANCE – March 31, 2026

  

 $

 173

  

  

 $

 1,532,985

  

  

 $

 (212,149

 )

  

 $

 (27,225

 )

  

 $

 1,293,784

  

 

 
 Share-based compensation

  

  

 —

  

  

  

 5,240

  

  

  

 —

  

  

  

 —

  

  

  

 5,240

  

 

 
 Repurchases of common stock

  

  

 (1

 )

  

  

 —

  

  

  

 (18,872

 )

  

  

 —

  

  

  

 (18,873

 )

 

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

  

  

 0

  

  

  

 3,182

  

  

  

 —

  

  

  

 —

  

  

  

 3,182

  

 

 
 Common stock withheld for tax obligations on restricted stock unit and option settlement

  

 (0)

  

  

  

 (407

 )

  

  

 —

  

  

  

 —

  

  

  

 (407

 )

 

 
 Foreign currency translation

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 (5,886

 )

  

  

 (5,886

 )

 

 
 Net income

  

  

 —

  

  

  

 —

  

  

  

 16,914

  

  

  

 —

  

  

  

 16,914

  

 

 
 BALANCE – June 30, 2026

  

 $

 172

  

  

 $

 1,541,000

  

  

 $

 (214,107

 )

  

 $

 (33,111

 )

  

 $

 1,293,954

  

 

  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 (in thousands)

  

 Common Stock

  

  

 Additional
Paid-In-Capital

  

  

 Accumulated
Deficit

  

  

 Accumulated Other
Comprehensive
Loss

  

  

 Total Stockholders’
Equity

  

 

 
 BALANCE – December 31, 2024

  

 $

 173

  

  

 $

 1,504,007

  

  

 $

 (159,808

 )

  

 $

 (37,333

 )

  

 $

 1,307,039

  

 

 
 Share-based compensation

  

  

 —

  

  

  

 7,967

  

  

  

 —

  

  

  

 —

  

  

  

 7,967

  

 

 
 Forfeitures of previously declared cash dividends

  

  

 —

  

  

  

 5

  

  

  

 —

  

  

  

 —

  

  

  

 5

  

 

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

  

  

 2

  

  

  

 1,688

  

  

  

 —

  

  

  

 —

  

  

  

 1,690

  

 

 
 Common stock withheld for tax obligations on restricted stock unit and option settlement

  

  

 (1

 )

  

  

 (2,204

 )

  

  

 —

  

  

  

 —

  

  

  

 (2,205

 )

 

 
 Foreign currency translation

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 5,453

  

  

  

 5,453

  

 

 
 Net loss

  

  

 —

  

  

  

 —

  

  

  

 (41,194

 )

  

  

 —

  

  

  

 (41,194

 )

 

 
 BALANCE – March 31, 2025

  

 $

 174

  

  

 $

 1,511,463

  

  

 $

 (201,002

 )

  

 $

 (31,880

 )

  

 $

 1,278,755

  

 

 
 Share-based compensation

  

  

 —

  

  

  

 5,742

  

  

  

 —

  

  

  

 —

  

  

  

 5,742

  

 

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

  

  

 0

  

  

  

 531

  

  

  

 —

  

  

  

 —

  

  

  

 531

  

 

 
 Common stock withheld for tax obligations on restricted stock unit and option settlement

  

 (0)

  

  

  

 (557

 )

  

  

 —

  

  

  

 —

  

  

  

 (557

 )

 

 
 Foreign currency translation

  

  

 —

  

  

  

 —

  

  

  

 —

  

  

  

 14,384

  

  

  

 14,384

  

 

 
 Net income

  

  

 —

  

  

  

 —

  

  

  

 308

  

  

  

 —

  

  

  

 308

  

 

 
 BALANCE – June 30, 2025

  

 $

 174

  

  

 $

 1,517,179

  

  

 $

 (200,694

 )

  

 $

 (17,496

 )

  

 $

 1,299,163

  

 

 The accompanying notes are an integral part of these condensed consolidated financial statements.

 5

 
  

 First Advantage Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1. Organization, Nature of Business, and Basis of Presentation
First Advantage Corporation, a Delaware corporation, was formed on November 15, 2019. Hereafter, First Advantage Corporation and its subsidiaries will collectively be referred to as the “Company.” 
The Company derives its revenues from a variety of background check, identity, and compliance services performed across all phases of the employee lifecycle from pre-onboarding services to post-onboarding and ongoing monitoring services, covering employees, contractors, contingent workers, and drivers. We generally classify our service offerings into three categories: pre-onboarding, post-onboarding, and adjacent products. 
Pre-onboarding services are comprised of an extensive array of products and solutions that customers typically utilize to enhance their evaluation process and support compliance from the time a job or other application is submitted to a successful applicant’s onboarding date. This includes searches such as criminal background checks, drug / health screenings, extended workforce screening, biometrics and identity checks, education / workforce verification, driver records and compliance, healthcare credentials, and executive screening. 
Post-onboarding services are comprised of continuous monitoring and re-screening solutions, which are important tools to help our customers keep their end customers, workforces, and other stakeholders safer, more productive, and more compliant. Our post-monitoring solutions include criminal records, healthcare sanctions, motor vehicle records, social media, and global sanctions screening continuously or at regular intervals selected by our customers. 
Adjacent products include products that complement our pre-onboarding and post-onboarding products and solutions. This includes fleet and vehicle compliance, hiring tax credits and incentives, employment eligibility, and investigative research.
Basis of Presentation —The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated. The Company includes the results of operations of acquired companies prospectively from the date of acquisition. 
The condensed consolidated financial statements included herein are unaudited, but in the opinion of management, such financial statements include all adjustments, consisting of normal recurring adjustments, necessary to summarize fairly the Company’s financial position, results of operations, and cash flows for the interim periods presented. The interim results reported in these condensed consolidated financial statements should not be taken as indicative of results that may be expected for future interim periods or the full year. For a more comprehensive understanding of the Company and its condensed consolidated financial statements, these interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
The Company has historically experienced seasonality with respect to certain customer industries as a result of fluctuations in hiring volumes and other economic activities. Certain customers across various industries historically increase their hiring throughout the second quarter of the year as winter concludes, and the school year ends, giving rise to student and graduate hiring, and increased commercial activity tied to other activities. This is generally followed by elevated pre-holiday season hiring volumes later in the summer and through October and November of each year. As a result, the Company has a mostly balanced revenue distribution across the second, third, and fourth quarters each year and a seasonal low in the first quarter.

Use of Estimates — The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Changes in these estimates and assumptions may have a material impact on the condensed consolidated financial statements and accompanying notes.
Significant estimates, judgments, and assumptions, include, but are not limited to, the determination of the fair value and useful lives of assets acquired and liabilities assumed through business combinations, goodwill impairment, impairment of long-lived assets, revenue recognition, capitalized software, assumptions used for purposes of determining share-based compensation, and income tax liabilities and assets. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.

 6

 
  

 Note 2. Summary of Significant Accounting Policies
Fair Value of Financial Instruments — Certain financial assets and liabilities are reported at fair value in the accompanying consolidated balance sheets in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurement. ASC 820 establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 defines fair value as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation techniques required by ASC 820 are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:
Level 1 — Quoted prices for identical instruments in active markets.
Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 — Significant inputs to the valuation model are unobservable (supported by little or no market activities). These inputs may be used with internally developed methodologies that reflect the Company’s best estimate of fair value from a market participant.
The carrying amounts of cash and cash equivalents, receivables, and accounts payable approximate fair value due to the short-term maturities of these financial instruments (Level 1). The fair values and carrying values of the Company’s debt are disclosed in Note 5, “Debt”.
The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of June 30, 2026 (in thousands):

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
  

  

 Level 1

  

  

 Level 2

  

  

 Level 3

  

 

 
 Assets

  

  

  

  

  

  

  

  

  

 

 
 Interest rate swaps

  

 $

 —

  

  

 $

 2,069

  

  

 $

 —

  

 

 
 Liabilities

  

  

  

  

  

  

  

  

  

 

 
 Interest rate swaps

  

 $

 —

  

  

 $

 18

  

  

 $

 —

  

 

 

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Other intangible assets are subject to nonrecurring fair value measurement as the result of business acquisitions. The fair values of these assets were estimated using the present value of expected future cash flows through unobservable inputs (Level 3). 

Business Combinations — The Company records business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Under the acquisition method of accounting, identifiable assets acquired and liabilities assumed are recorded at their acquisition-date fair values. The excess of the purchase price over the estimated fair value is recorded as goodwill. Changes in the estimated fair values of net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will adjust the amount of the purchase price allocable to goodwill. Measurement period adjustments are reflected in the period in which they occur.
In valuing trade names, customer lists, software developed for internal use, and other intangible assets, the Company utilizes variations of the income approach, which relies on historical financial and qualitative information, as well as assumptions and estimates for projected financial information. The Company considers the income approach the most appropriate valuation technique because the inherent value of these assets is their ability to generate current and future income. Projected financial information is subject to risk if estimates are incorrect. The most significant estimate relates to projected revenues and profitability. If the projected revenues and profitability used in the valuation calculations are not met, then the asset could be impaired.

Concentrations of Credit Risk — Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. Cash is deposited with major financial institutions and, at times, such balances with each financial institution may be in excess of insured limits. The Company has not experienced, and does not anticipate, any losses with respect to its cash deposits. Accounts receivable represent credit granted to customers for services provided. The Company performs ongoing credit evaluations of its customers’ financial condition and generally does not require collateral on accounts receivable. The Company did not have any customers which represented 10% or more of its consolidated revenues in any segment during the three and six months ended June 30, 2026 and 2025. Additionally, the Company did not have any customers which represented 10% or more of its consolidated accounts receivable, net for any period presented.
The Company has entered into interest rate derivative agreements with a counterparty bank to reduce its exposure to interest rate volatility. The Company has determined the counterparty bank to be a high credit quality institution. The Company does not enter into financial instruments for trading or speculative purposes.

 7

 
  

 Foreign Currency — The functional currency of all of the Company’s foreign subsidiaries is the applicable local currency. The translation of the applicable foreign currencies into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenues and expense accounts using average exchange rates prevailing during the fiscal year. Adjustments resulting from the translation of foreign currency financial statements are accumulated net of tax in a separate component of equity. Foreign currency translation (loss) income included in accumulated other comprehensive income (loss) was approximately $(5.9) million and $14.4 million for the three months ended June 30, 2026 and 2025, respectively. Foreign currency translation (loss) income included in accumulated other comprehensive income (loss) was approximately $(12.8) million and $19.8 million for the six months ended June 30, 2026 and 2025, respectively.

Gains or losses resulting from foreign currency transactions are included in the accompanying condensed consolidated statements of operations and comprehensive income (loss), except for those relating to intercompany transactions of a long-term investment nature, which are captured in a separate component of equity as accumulated other comprehensive loss. Foreign currency transaction income (loss) included in the accompanying condensed consolidated statements of operations and comprehensive income (loss) was approximately $0.2 million and $(0.6) million for the three months ended June 30, 2026 and 2025, respectively. Foreign currency transaction income (loss) included in the accompanying condensed consolidated statements of operations and comprehensive income (loss) was approximately $4.2 million and $(0.8) million for the six months ended June 30, 2026 and 2025, respectively. 
Recent Accounting Pronouncements — There were no accounting pronouncements issued during the six months ended June 30, 2026 that are expected to have a material impact on the condensed consolidated financial statements.

Note 3. Property and Equipment, net
Property and equipment, net as of June 30, 2026 and December 31, 2025 consisted of the following (in thousands):

 
 
 
 
 
 
 
 
 
 
 
 

 
  

  

 June 30, 2026

  

  

 December 31, 2025

  

 

 
 Furniture and equipment

  

 $

 40,942

  

  

 $

 36,460

  

 

 
 Capitalized software for internal use, acquired by business combination

  

  

 468,222

  

  

  

 467,477

  

 

 
 Capitalized software for internal use, developed internally or otherwise purchased

  

  

 192,017

  

  

  

 163,266

  

 

 
 Leasehold improvements

  

  

 1,279

  

  

  

 1,284

  

 

 
 Total property and equipment

  

  

 702,460

  

  

  

 668,487

  

 

 
 Less: accumulated depreciation and amortization

  

  

 (475,193

 )

  

  

 (417,622

 )

 

 
 Property and equipment, net

  

 $

 227,267

  

  

 $

 250,865

  

 

 
Depreciation and amortization expense of property and equipment was approximately $27.5 million and $27.7 million for the three months ended June 30, 2026 and 2