FIRST ADVANTAGE CORP Q1 FY2025 earnings call

• Four key messages: Q1 results exceeded expectations, successful execution of Sterling acquisition post-close, benefits of FA 5.0 strategy, reaffirmed full-year 2025 guidance.
• Integration of Sterling: Focus on post-close priorities like customer retention, synergy actioning, and net leverage reduction. Rolled out Click.Chat.Call to Sterling customers, improved customer service. AI agents implemented in criminal records processing for faster turnaround. Annual Collaborate User Conference had record attendees.
• Synergy progress: In Q1, actioned $17 million in run rate synergies, total $37 million, exceeding 50% of target in first six months post-closing.

First Quarter revenues were $355 million pro forma, nearly flat year-over-year. Adjusted EBITDA was $92 million with a 26% margin, up approximately 200 basis points versus the prior year on a pro forma basis. Recurring Compliance Services had healthy demand, Financial Services showed stability, while retail/e-commerce had order volume slowdown. Retention was high at 96%. There were 14 enterprise bookings in Q1 with $500,000 or more of expected annual contract value, representing a record quarter in total deal value.

• Reaffirmed full-year 2025 guidance. Expect base revenues to improve sequentially, turning neutral and slightly positive later. Adjusted EBITDA margins around or above 28% in Q2. Adjusted diluted EPS expected to improve sequentially, with free cash flow forecasted at $65 million to $95 million.

• Macro-economic uncertainty, tariffs impacting customers indirectly, limited direct exposure to U.S. government hiring but vigilant, potential economic slowdown impact requiring cost reduction actions.

Q: Elaborate on cross-currents from clients, wait-and-see attitude vs. April's positive start A: Clients are in wait-and-see due to macro uncertainty, but April showed good start.

Q: Retention in combined company, especially Sterling base A: High retention due to focus on communication, rollout of Click.Chat.Call, and excited Sterling customers.

Q: RFPs, average deal size, synergies, international trends, AI agents, etc.

A: Answers provided by Scott and Steven on various aspects including RFPs, deal size growth, synergy progress, international trends, and AI agent implementation details