First Advantage’s second quarter was marked by strong revenue growth and positive market reaction, driven primarily by the successful integration of the Sterling acquisition and robust performance in upsell and cross-sell initiatives. Management credited high customer retention, efficient synergy realization, and resilience in key verticals—especially transportation and international markets—for supporting top and bottom-line results. CEO Scott Staples highlighted that the company’s “sales engine and increased scale” helped offset macro-related headwinds and that customer retention stayed above 96%, a testament to the company’s focus on customer-centric solutions and platform enhancements.
Is now the time to buy FA? Find out in our full research report (it’s free).
First Advantage (FA) Q2 CY2025 Highlights:
- Revenue: $390.6 million vs analyst estimates of $380.2 million (112% year-on-year growth, 2.7% beat)
- Adjusted EPS: $0.27 vs analyst estimates of $0.24 (13.8% beat)
- Adjusted EBITDA: $113.9 million vs analyst estimates of $107.5 million (29.2% margin, 6% beat)
- The company reconfirmed its revenue guidance for the full year of $1.55 billion at the midpoint
- Management reiterated its full-year Adjusted EPS guidance of $0.95 at the midpoint
- EBITDA guidance for the full year is $430 million at the midpoint, above analyst estimates of $422.6 million
- Operating Margin: 9.7%, up from 5.4% in the same quarter last year
- Market Capitalization: $3 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From First Advantage’s Q2 Earnings Call
- Ashish Sabadra (RBC Capital Markets) asked about the breadth of base growth declines and the role of tariff and policy uncertainty; CFO Steven Marks explained that the cautious outlook was broad-based, not specific to any vertical, and reflected overall market sentiment.
- Shlomo H. Rosenbaum (Stifel) questioned whether management’s cautious guidance was driven by client actions or conversations; CEO Scott Staples clarified that conversations—not actions—led to a more conservative outlook, with July data remaining strong.
- Andrew Owen Nicholas (William Blair) requested detail on international segment performance; Staples and Marks confirmed international outperformed Americas, with improved regional and vertical diversification and a strong sales engine driving growth.
- Jeffrey Marc Silber (BMO Capital Markets) sought specifics on Digital Identity momentum and the impact of recent tax legislation; Staples described Digital Identity as the “hottest topic,” with substantial client engagement, while Marks noted tax law benefits would mainly boost free cash flow and deleveraging.
- Harold Antor (Jefferies) queried whether weaker base volumes would lead to salesforce reductions; Staples and Marks stated there are no planned cutbacks and that the company is investing in both sales and product leadership to support future growth.
Catalysts in Upcoming Quarters
In the coming quarters, key catalysts will include the pace of synergy capture from the Sterling acquisition and the translation of these benefits into margin expansion, the adoption and revenue contribution of Digital Identity solutions, and sustained growth in international markets—particularly Australia and the U.K. Execution on cross-sell initiatives and large enterprise wins will also be critical indicators of ongoing business momentum.
First Advantage currently trades at $17.24, up from $16.22 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).
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