First Advantage Corp. said second-quarter base growth reached 7%, more than doubling its historical guidance range, as the background-check and digital-identity provider pointed to accelerating demand and operating leverage.
Joel Smith, First Advantage's president, told analysts at Citi's 2026 Global TMT Conference on Sept. 9 that 3.5 percentage points of the growth came from core base operations — well above the company's prior 2%-3% range — with another 3.5 points driven by episodic, customer-specific initiatives.
"We're seeing strong momentum across multiple verticals," Smith said. Retail, transportation, industrials, staffing and aerospace/defense all posted solid results, driven in part by continued blue-collar hiring and shifts in government funding. Financial services remained flat to slightly positive as large institutions consolidated vendors. Healthcare showed a slight decline, weighed by Medicare and Medicaid pressures in acute care, though healthcare staffing improved on nursing shortages.
The company said customer retention remained above 96%, and enterprise-level new-logo, upsell and cross-sell bookings totaled 20 deals, up from 17 in prior quarters. New-logo, upsell and cross-sell growth combined to 12%-13% in 2024, following 17% growth in the fourth quarter of 2023.
First Advantage also highlighted its international business, which has now posted growth for eight straight quarters. The company noted limited or no headcount growth alongside the revenue expansion, pointing to operating leverage in its international operations.
On the balance sheet, First Advantage reported leverage at 3.7 times and said it had made a $45 million debt prepayment. The company expects leverage to fall below 3x at some point in 2027. On its long-term financial targets for the 2024-2028 period, First Advantage guided for revenue compound annual growth of 4%-7%, adjusted EBITDA growth of 9%-12%, and an adjusted EBITDA margin of 31%-32% by 2028.
The firm described digital identity as having transitioned from a "nice-to-have" add-on to a core product automatically bundled into every background check. The service combines biometric data — including facial recognition and driver's license or passport information — with biographic data. First Advantage cited a total addressable market of $10 billion in incremental opportunity across digital identity and fraud prevention. A survey of 5,000 customers in the company's Global Trends Report found that 89% plan to increase package density over the next two years.
First Advantage also provided an update on its artificial-intelligence rollout. The company brought its customer-care chat function in-house from a third-party AI provider, improving satisfaction and deflection rates while lowering costs. AI applications are being expanded into fulfillment, cost of sales, product development and SG&A. However, Smith cautioned that deployment pacing remains deliberate, citing state laws that restrict the use of AI in hiring decisions and Fair Credit Reporting Act requirements that certain decision-making checkpoints involve human review. Some technology implementations may extend into 2027 due to regulatory and compliance reviews.
First Advantage trades at approximately $20.60, down 3.67%, with a P/E ratio of 141. Analyst price targets imply about 33% upside from current levels. The company joined the S&P SmallCap 600 in June 2024 and manages more than 1 billion proprietary data records.
