First Advantage (FA 6.48%), a provider of technology-driven background screening and identity solutions, reported results for Q2 2025 on August 7, 2025. The company announced GAAP revenue of $390.6 million, which exceeded analyst GAAP estimates of $381.8 million. Adjusted diluted earnings per share (Non-GAAP) reached $0.27, surpassing the expected $0.24 (Non-GAAP Adjusted Diluted Earnings Per Share). The results reflected strong operational performance, especially in adjusted metrics, though GAAP net income declined to $0.3 million compared to $1.9 million in Q2 2024 due to ongoing costs from the Sterling acquisition. Overall, the company delivered a solid quarter, meeting and beating expectations on several key financial measures.
| Metric | Q2 2025(Three Months Ended June 30, 2025) | Q2 2025 Estimate | Q2 2024(Three Months Ended June 30, 2024) | Y/Y Change |
|---|---|---|---|---|
| Adjusted Diluted EPS (Non-GAAP) | $0.27 | $0.24 | $0.21 | 28.6 % |
| Revenue (GAAP) | $390.6 million | $381.8 million | $184.5 million | 111.7 % |
| Adjusted EBITDA | $113.9 million | $55.8 million | 104.2 % | |
| Adjusted Net Income | $47.0 million | $30.8 million | 52.6 % | |
| Adjusted Operating Cash Flow | $47.7 million | $40.7 million | 17.2% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
About the Business and Recent Focus Areas
First Advantage (FA 6.48%) delivers background screening and identity solutions that help companies hire smarter and onboard faster. Its technology platform connects employers with comprehensive background checks, verification, and risk management services. The company integrates proprietary technology, artificial intelligence, and large data sets to process information for more than 80,000 customers worldwide.
Recent strategic priorities revolve around five core areas: accelerating the integration of the Sterling acquisition, maintaining a leading technological edge, expanding into new and existing markets, ensuring regulatory compliance, and sustaining customer retention. Achieving lasting success hinges on the smooth combination of First Advantage and Sterling services, broad use of artificial intelligence, growing internationally, and offering solutions that help clients manage risk, speed, and compliance in hiring.
Quarter Review: Financials, Integration, and Product Advances
The quarter was marked by performance above market expectations. Revenue (GAAP) increased 111.7% year-over-year to $390.6 million and solid performance in international markets. Adjusted earnings metrics, including EBITDA and net income (non-GAAP), both posted strong double-digit gains year-over-year. Adjusted EBITDA (non-GAAP) grew over 100% year-over-year. Adjusted EBITDA reached $113.9 million, while adjusted net income (non-GAAP) hit $47.0 million. These results show tangible benefits from the Sterling combination and efficiency gains in core operations.
The GAAP net income result, however, was muted at only $0.3 million (GAAP), down from $1.9 million (GAAP) in Q2 2024, along with $41.3 million in Sterling-related depreciation and amortization. Such impacts are typical for large integrations, but they weigh on reported net margins in the near term. The net income margin (GAAP) dropped to 0.1%. Interest expense (GAAP) also increased sharply, rising to $44.8 million from $7.4 million in Q2 2024, reflecting the higher debt load from the acquisition.
Operationally, Sterling’s integration is a major theme. The company reports strong momentum in extracting synergies, having actioned $37 million in annualized run-rate synergies within six months since closing the deal. Management continues to target $60–70 million in annualized cost synergies within two years. Customer feedback on the integration is positive, with upgrades such as the Click.Chat.Call support platform and new product cross-sells reaching Sterling legacy clients. Retention rates remain high at 96%, a notable achievement for an integration of this scale.
Technology and innovation continue to underpin First Advantage’s business model. AI-powered automation has sped up criminal records processing, reducing manual touchpoints and cycle times. The company’s Digital Identity solutions are also seeing solid customer uptake, enabling better detection of fake identities—an issue management highlighted as a growing concern in the labor market. These efforts help First Advantage preserve its edge in a data-driven sector where accuracy and speed are at a premium.
Looking Ahead: Outlook, Guidance, and Areas to Watch
Management reaffirmed full year 2025 guidance following this quarter’s results. The company is targeting revenue between $1.5 billion and $1.6 billion for FY2025, adjusted EBITDA of $410–450 million for FY2025, and adjusted diluted earnings per share (non-GAAP) between $0.86 and $1.03. Guidance assumes stable macroeconomic conditions, continued synergy capture, and maintained customer retention. The leadership team noted its healthy sales pipeline and cross-sell potential as reasons for maintaining confidence in the annual outlook despite macro uncertainty. No new guidance was provided for dividends or share repurchases.
Key areas for investors to watch over the coming quarters include progress on further integration of the Sterling platform, realization of synergy targets, and trends in both U.S. and international revenue. With base revenue growth still facing headwinds, the company expects stabilization late in 2025, with a positive inflection not likely until 2026. Management will also be focusing on reducing leverage, having repaid more than $45 million in debt year to date and recently securing a lower borrowing rate. The effectiveness of these initiatives, along with further adoption of new technology and expansion into additional markets, will be central to First Advantage’s trajectory during the remainder of the fiscal year and into 2026.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
