FA Q2 Deep Dive: Integration Synergies, International Momentum, and Cautious Macro Outlook

Background screening provider First Advantage (NASDAQ:FA) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 112% year on year to $390.6 million. The company’s full-year revenue guidance of $1.55 billion at the midpoint came in 1.5% above analysts’ estimates. Its non-GAAP profit of $0.27 per share was 13.8% above analysts’ consensus estimates.

Is now the time to buy FA? Find out in our full research report (it’s free).

StockStory’s Take

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.

Looking forward, management’s reaffirmed guidance is underpinned by ongoing integration benefits, a healthy pipeline of enterprise deals, and continued productivity in upsell and cross-sell channels. The company anticipates incremental margin expansion through further synergy realization and disciplined cost management, despite a more cautious outlook for base hiring volumes due to macroeconomic uncertainty. CFO Steven Marks noted, “We expect to achieve full year adjusted EBITDA margins of 28%,” adding that new product rollouts and international growth should help offset any softness in hiring demand.

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to accelerated synergy realization from the Sterling acquisition, ongoing strength in customer retention, and expanding international contributions.

• Synergy capture ahead of plan: Accelerated integration efforts following the Sterling acquisition enabled the company to realize $47 million in cost synergies to date, with $10 million actioned in Q2 alone, supporting margin expansion and profitability.
• Upsell and cross-sell momentum: Combined upsell, cross-sell, and new logo wins continued to perform in line with long-term targets, driving 9% growth in Q2, as the company leverages its expanded product suite and salesforce integration.
• International growth outpaces Americas: Management reported international revenue growth of 7.2% in the quarter, with particular strength in Australia and the U.K., reflecting stabilization and successful targeting of high-volume hiring segments.
• Transportation vertical resilience: Despite macro-related slowing in base volumes, transportation posted positive growth, benefiting from a diversified product mix—including compliance and registration services less sensitive to hiring trends.
• Digital Identity traction: Client engagement around Digital Identity solutions intensified, with management stating that half of customer conversations now involve identity fraud risk, positioning First Advantage as a market leader in this rapidly growing segment.

Drivers of Future Performance

First Advantage’s outlook is shaped by ongoing synergy realization, international expansion, and a cautious approach due to macroeconomic uncertainties affecting hiring volumes.

• Continued synergy realization: Management expects additional cost and revenue synergies from the Sterling integration, with more best-in-breed product offerings driving incremental cross-sell opportunities through 2025 and into 2026.
• Macro uncertainty and base volumes: The company adjusted its base hiring growth expectations for the second half of the year to slightly negative, citing policy changes such as tariffs and immigration as key factors influencing customer hiring plans. However, management believes diversified vertical exposure and strong upsell/cross-sell pipelines can help offset these pressures.
• Expansion of Digital Identity and international markets: First Advantage is investing in Digital Identity solutions and international go-to-market strategies, aiming to deepen customer relationships and capture faster-growing segments within the broader background screening and HR technology landscape.

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 $16.86, 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).

Now Could Be The Perfect Time To Invest In These Stocks

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.