FA

First Advantage is mid-integration of its October 2024 Sterling acquisition, and the financials reflect that transition rather than steady-state economics. The headline +83% revenue growth to $1.57B is almost entirely inorganic — Sterling is now a separate reportable segment and the MD&A explicitly attributes the jump to the deal, not underlying demand. Strip the optics away and the operating engine is genuinely improving: operating income tripled to $132M (8.4% margin) and operating cash flow exploded to $195M against just $6.6M of capex, implying roughly $188M of free cash flow. The company stays GAAP-unprofitable (-$34.8M net, -$0.20 EPS) chiefly because of $112M of D&A — largely non-cash amortization of acquired Sterling intangibles — so the net loss overstates economic deterioration. The loss narrowed sharply from -$110M in FY2024.

The balance sheet is the swing factor. Long-term debt sits at $2.08B against $1.31B of equity (liabilities/equity 1.92x) and only $240M of cash, leaving ~$1.84B of net debt. Against an EBITDA proxy of ~$244M (operating income plus D&A), that is roughly 7.5x net leverage — high, and a real constraint if the labor market softens. The accumulated deficit deepened to -$195M. This is a private-equity-style capital structure (Silver Lake-backed) that depends on continued strong cash conversion to de-lever; the strong OCF makes that plausible but leaves little margin for error.