First Advantage Q2 2026 earnings: Revenue grows 14.9% as guidance rises

First Advantage (NASDAQ: FA) reported second-quarter 2026 revenue of $448.8 million, up 14.9% from $390.6 million a year earlier, while diluted EPS rose to $0.10 from $0.00. Adjusted diluted EPS increased 29.6% to $0.35, but adjusted EBITDA margin slipped 60 basis points to 28.6%. Stronger operating income and lower interest expense drove a substantial improvement in GAAP net income.

Core earnings data

Revenue growth outpaced the 12.8% increase in adjusted EBITDA, resulting in modest adjusted margin compression. GAAP profitability improved more sharply: operating income rose 51.1%, and net income reached $16.9 million compared with $0.3 million in the prior-year quarter.

The results were released on August 6 and cover the three months ended June 30, 2026.

Adjusted EBITDA, adjusted net income, and adjusted diluted EPS are non-GAAP measures. The difference between GAAP net income and adjusted net income primarily reflects acquisition-related depreciation and amortization, interest and debt items, share-based compensation, and integration and restructuring costs.

Business and demand performance

Management attributed revenue growth to recent large contract wins, improving base revenue, stronger upsell and cross-sell activity, new customer additions, and healthy retention. First Advantage recorded 20 enterprise bookings during the quarter.

Demand increased across transportation and logistics, retail and e-commerce, industrials and manufacturing, and general staffing. Management also highlighted Digital Identity within its product suite, although the earnings release did not disclose revenue by vertical or product.

Lower interest expense lifted GAAP profit despite a softer adjusted margin

The quarter presented two different margin trends. Cost of services increased approximately 17.8%, faster than revenue, helping explain why adjusted EBITDA margin declined from 29.2% to 28.6%. The company did not identify a single item as the cause of this adjusted margin pressure.

At the same time, product and technology expense rose only about 6.2%, selling, general and administrative expense was nearly flat, and depreciation and amortization was essentially unchanged. Total operating expenses therefore increased approximately 11.0%, slower than revenue, lifting operating margin to about 12.7% from 9.7%.

Below the operating line, net interest expense fell to $31.6 million from $44.8 million. Combined with higher operating income, that moved pretax results to income of $25.1 million from a loss of $7.3 million. The prior-year period included a $7.6 million tax benefit, while Q2 2026 included an $8.1 million tax provision, limiting rather than driving the improvement in net income.

Cash flow and balance sheet

Second-quarter operating cash flow was $73.6 million. For the first six months of 2026, operating cash flow reached $123.0 million, up from $56.8 million in the comparable 2025 period. This year-to-date figure should not be compared directly with the quarterly amount.

Cash and cash equivalents stood at $237.9 million on June 30, compared with $240.0 million at the end of 2025. Long-term debt, net of deferred financing costs, declined to $2.034 billion from $2.080 billion over the same period.

First Advantage prepaid $25 million of debt on May 6 and made another $45 million voluntary prepayment on August 4, after the quarter ended. It also repurchased $18.7 million of shares during Q2 under its $100 million authorization. Total repurchases through July 31 were $38.2 million, representing approximately 1.9% of outstanding shares.

Full-year 2026 guidance

First Advantage raised every disclosed full-year guidance range. The increases were most pronounced at the lower ends, reducing the downside implied by the previous outlook while also lifting each upper bound.

Management based the increase on year-to-date performance, current labor market trends, and its outlook for the rest of the year. The adjusted guidance measures are non-GAAP, and the company did not provide corresponding GAAP guidance because it could not forecast the necessary adjusting items without unreasonable effort.

Recent insider transactions

According to the supplied insider dataset, insiders purchased 120,653 shares across 14 transactions and sold 55,627 shares across five transactions during the preceding six months. That represented net purchases of 65,026 shares, while total insider holdings were reported at 4.38 million shares.

Eight of the latest ten listed transactions contained a clear transaction type and value. Two entries dated May 11 lacked those details and are therefore omitted.

Stock awards and derivative exercises are not equivalent to open-market purchases. These transactions alone do not establish insiders’ views about the company’s future performance.

Risks investors should monitor

• Customer volume and labor-market sensitivity: First Advantage’s revenue depends partly on customer hiring and onboarding volumes. Its contracts do not necessarily provide exclusivity or guaranteed volumes, making the raised guidance sensitive to labor-market changes.
• Adjusted margin conversion: Adjusted EBITDA grew more slowly than revenue in Q2, and the related margin declined by 60 basis points. Investors should monitor whether higher volumes produce better adjusted operating leverage in subsequent quarters.
• Debt and interest burden: Long-term debt remained above $2.0 billion, and quarterly net interest expense was $31.6 million despite its year-over-year decline. Debt service and capital allocation could continue to affect GAAP earnings and cash availability.
• Sterling integration: The quarter included approximately $2.2 million of Sterling-related integration expenses and $0.3 million of Sterling-related transaction and acquisition costs. Failure to achieve the acquisition’s expected benefits remains a disclosed risk.
• Data and AI regulation: First Advantage operates with sensitive personal information and AI-driven technology. Changes in privacy, data-security, and AI rules could raise compliance costs or create operational and legal exposure.

Summary

First Advantage’s second-quarter revenue growth was supported by contract wins, improving base activity, enterprise bookings, and demand across several hiring-related verticals. Adjusted EBITDA margin narrowed modestly, but disciplined operating expenses and lower interest costs produced a much larger improvement in GAAP profitability. The raised full-year guidance shifts attention to whether the company can sustain demand, improve adjusted margin conversion, and continue reducing debt while funding share repurchases.