What changed in this filing

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Item 1. Financial Statements

2022-05-10 compared with 2021-11-09 · 304 added, 605 removed, 711 unchanged (56% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

(in thousands, except share and per share data)

9 unchanged sentences

Investments in unconsolidated affiliates

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDERS’

Current liabilities

3 unchanged sentences

Other accrued expenses

Deferred revenue

Deferred revenues

Total current liabilities

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Total liabilities

Commitments and contingencies (Note 9)

Redeemable noncontrolling interest

Equity attributable to stockholders of Advantage Solutions Inc.

Preferred stock, no par value, 10,000,000 shares authorized;

and outstanding as of September 30, 2021 and December 31, 2020,

Common stock, $ 0.0001 par value, 3,290,000,000 shares authorized;

318,393,829 and 316,963,552 shares issued and outstanding as of

September 30, 2021 and December 31, 2020, respectively

March 31, 2022 and December 31, 2021, respectively

Additional paid in capital

1 unchanged sentence

Loans to Karman Topco L.P.

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Treasury stock, at cost;

1,610,014 shares as of March 31, 2022

and December 31, 2021

Total equity attributable to stockholders of Advantage Solutions Inc.

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except share and per share data)

2 unchanged sentences

Selling, general, and administrative expenses

Recovery from Take 5

Depreciation and amortization

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Interest expense, net

Total other expenses

Income (loss) before income taxes

Provision for (benefit from) income taxes

Total other (income) expenses

Income before income taxes

Provision for income taxes

Net income (loss)

net income attributable to noncontrolling

net loss attributable to noncontrolling

Net income (loss) attributable to stockholders of

Advantage Solutions Inc.

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments

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CONDENSED CONSOL IDATED STATEMENTS OF STOCKHOLDERS’

Treasury Stock

Solutions Inc.

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(in thousands, except share data)

Balance at July 1, 2021

Balance at January 1, 2022

Comprehensive income (loss)

Net income (loss)

Foreign currency translation adjustments

Total comprehensive income (loss)

Loans to Karman Topco L.P.

Redemption of noncontrolling interest

Equity-based compensation

Shares issued upon exercise of

Shares issued under Employee Stock Purchase

Interest on loans to Karman Topco L.P.

Equity-based compensation of Topco

Shares issued under 2020 Employee Stock

Purchase Plan

Shares issued under 2020 Incentive

Stock-based compensation expense

Balance at September 30, 2021

Solutions Inc.

Nonredeemable

Comprehensive

Stockholders'

Noncontrolling

Stockholders'

Income (Loss)

(in thousands, except share data)

Balance at July 1, 2020

Comprehensive income

Foreign currency translation adjustments

Total comprehensive income

Loans to Karman Topco L.P.

Balance at September 30, 2020

Balance at March 31, 2022

Solutions Inc.

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Comprehensive loss

Net income (loss)

Foreign currency translation adjustments

Total comprehensive loss

Loans to Karman Topco L.P.

Redemption of noncontrolling interest

Equity-based compensation

Vesting of stock-based compensation awards

Shares issued upon vesting of restricted stock

Shares issued under Employee Stock Purchase

Shares issued upon exercise of warrants

Interest on loans to Karman Topco L.P.

Equity-based compensation of Topco

Shares issued under 2020 Incentive

Stock-based compensation expense

Balance at September 30, 2021

Solutions Inc.

Nonredeemable

Comprehensive

Stockholders'

Noncontrolling

Stockholders'

Income (Loss)

(in thousands, except share data)

Balance at January 1, 2020

Comprehensive loss

Net income (loss)

Foreign currency translation adjustments

Total comprehensive loss

Loans to Karman Topco L.P.

Equity-based compensation

Balance at September 30, 2020

Balance at March 31, 2021

See Notes to the Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

1 unchanged sentence

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by

Adjustments to reconcile net income (loss) to net cash (used in) provided by

operating activities

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Distribution received from unconsolidated affiliates

Noncash losses (gains) related to lease abandonments

Loss on disposal of property and equipment

Loss on divestiture

Changes in operating assets and liabilities, net of effects from

purchases of businesses:

Accounts receivable

Accounts receivable, net

Prepaid expenses and other assets

3 unchanged sentences

Other accrued expenses and other liabilities

Net cash provided by operating activities

Net cash (used in) provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of businesses, net of cash acquired

Purchase of investment in unconsolidated affiliates

Purchase of property and equipment

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Payments on lines of credit

Proceeds from accounts receivable securitization facility

Proceeds from government loans for COVID-19 relief

Principal payments on long-term debt

Proceeds from issuance of common stock

Contingent consideration payments

Holdback payments

Redemption of noncontrolling interest

Net cash (used in) provided by financing activities

Net effect of foreign currency fluctuations on cash

Net cash used in financing activities

Net effect of foreign currency changes on cash

Net change in cash, cash equivalents and restricted cash

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and accrued expenses

Note payable related to settlement of contingent consideration

See Notes to the Condensed Consolidated Financial Statements.

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or the “Company”) is a provider of outsourced solutions to consumer goods companies and retailers.

On September 7, 2020, ASI Intermediate Corp., then known as Advantage Solutions Inc.

(“ASI”), entered into an agreement and plan of merger (as amended, modified, supplemented or waived, the “Merger Agreement”), with Conyers Park II Acquisition Corp., a Delaware corporation (“Conyers Park”), now known as Advantage Solutions Inc., CP II Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Conyers Park (“Merger Sub”), and Karman Topco L.P., then the parent company of ASI (“Topco”).

Conyers Park neither engaged in any operations nor generated any revenue.

Based on Conyers Park’s business activities, it was a “shell company”

as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

On October 28, 2020 (the “Closing Date”), Conyers Park consummated the merger pursuant to the Merger Agreement, and Merger Sub was merged with and into ASI with ASI surviving the merger as a wholly owned subsidiary of Conyers Park (the “Merger”

and, together with the other transactions contemplated by the Merger Agreement, the “Transactions”).

On the Closing Date, and in connection with the closing of the Transactions (the “Closing”), Conyers Park changed its name to Advantage Solutions Inc.

and ASI changed its name to ASI Intermediate Corp.

The Company’s Class A common stock is listed on the Nasdaq Global Select Market under the symbol “ADV”

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The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries.

The unaudited condensed consolidated financial statements do not include all of the information required by accounting principles generally accepted in the United States (“U.S.

GAAP”).

The Condensed Consolidated Balance Sheet at December 31, 2020 was derived from the audited Consolidated Balance Sheet at that date and does not include all the disclosures required by U.S.

In the opinion of management, all adjustments which are of a normal recurring nature and necessary for a fair statement of the results as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020 have been reflected in the condensed consolidated financial statements.

The unaudited condensed consolidated financial statements do not include all of the information required by accounting principles generally accepted in the United States (“GAAP”).

The Condensed Consolidated Balance Sheet at December 31, 2021 was derived from the audited Consolidated Balance Sheet at that date and does not include all the disclosures required by GAAP.

In the opinion of management, all adjustments which are of a normal recurring nature and necessary for a fair statement of the results as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 have been reflected in the condensed consolidated financial statements.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2021 and the related footnotes thereto.

Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.

Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.

COVID-19 Pandemic

COVID-19 continues to spread throughout the United States and other countries across the world, and the duration and severity of the effects are currently unknown.

The COVID-19 pandemic has impacted the Company and could materially impact the Company’s financial results in the future.

The condensed consolidated financial statements presented herein reflect estimates and assumptions made by management at September 30, 2021.

Such estimates and assumptions affect, among other things, the Company’s goodwill, long-lived asset and indefinite-lived intangible asset valuation, assessment of the annual effective tax rate and the allowance for expected credit losses.

Events and changes in circumstances, including those resulting from the impacts of COVID-19, will be reflected in management’s estimates for future periods.

Beginning in March 2020 and continuing through the first quarter of 2021, the Company's services experienced the effects from reductions in client spending due to the economic impact related to the COVID-19 pandemic.

While mixed by services and geography, the spending reductions impacted all of the Company's services and markets.

Globally, the most impacted services were the Company's experiential services.

Most services began to recover in April 2021, and the recovery has continued through the first quarter of 2022.

Impact of the War in Ukraine

The Company has a minority interest in a European company that has majority-ownership interests in local agencies in Russia.

During the first quarter of 2022, the war in Ukraine resulted in the imposition of sanctions by the United States, the United Kingdom, and the European Union, that affect the cross-border operations of businesses operating in Russia.

In addition, Russian regulators have imposed currency restrictions and regulations that created uncertainty regarding the Company's ability to recover its investment in operations in Russia, as well as the Company's ability to exercise control or influence involving operations by the local agencies in Russia.

As a result, the Company intends to use its influence to cause the European company to dispose of its ownership interests in the local agencies in Russia.

Accordingly, the Company recorded pretax charges of $ 2.8 million in the first quarter of 2022, primarily consisting of its proportionate share of the net investment in its Russian interest in “Selling, general, and administrative expenses”

in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) .

Recent Accounting Standards

Recent Accounting Standards Adopted by the Company

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2020.

The Company adopted ASU 2019-12 on January 1, 2021 and the adoption of this accounting standard did not have a material impact on the Company’s condensed consolidated financial statements.

On January 1, 2022, the Company adopted Accounting Standards Update ("ASU") No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own

Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) , which simplifies accounting for convertible instruments by removing major separation models required under current GAAP, simplifies the contract settlement assessment for equity classification, requires the use of the if-converted method for all convertible instruments in the diluted earnings per share calculation and expands disclosure requirements.

The adoption of this accounting standard, under the full retrospective method, did not have a material impact on the Company's condensed consolidated financial statements and use of the if-converted method did not have an impact on the Company's overall earnings per share calculation.

On January 1, 2022, the Company adopted ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force) .

The guidance clarifies certain aspects of the current guidance to promote consistency among reporting of an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange.

The guidance is applied prospectively to all modifications or exchanges that occur on or after the date of adoption and the adoption of this accounting standard did not have a material impact on the Company's condensed consolidated financial statements.

On January 1, 2022, the Company adopted ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance .

This update requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy.

The amendments should be applied either (1) prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or (2) retrospectively to those transactions.

The adoption of this accounting standard did not have a material impact on the Company's condensed consolidated financial statements.

Accounting Standards Recently Issued but Not Yet Adopted by the Company

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Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This guidance provides optional expedients and exceptions for U.S.

GAAP to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate if certain criteria are met.

The amendments in this update are effective for reporting periods that include or are subsequent to March 12, 2020.

Once adopted, the amendments in this update must be applied prospectively to contract modifications and hedging relationships through December 31, 2022.

The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

In August 2020, the FASB issued ASU No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

ASU 2020-06 also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas.

This update is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted for all entities, including adoption in an interim period.

The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force).

The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted for all entities, including adoption in an interim period.

The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

This guidance provides optional expedients and exceptions for GAAP to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate if certain criteria are met.

The amendments in this update are effective for reporting periods that include or are subsequent to March 12, 2020 and must be applied prospectively to contract modifications and hedging relationships through December 31, 2022.

The Company continues to evaluate the impact of this guidance and may apply other applicable elections as additional changes in the market occur.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 606):

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Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements, if the acquiree prepared financial statements in accordance with GAAP.

amendment in this update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The amendment in this update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted, including adoption in an interim period.

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Disaggregated revenues were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

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Deferred revenues are recognized as revenues when the related services are performed for the client.

Revenues recognized during t he three and nine months ended September 30, 2021 that were included in Deferred revenues as of December 31, 2020 were $ 2.7 million and $ 34.6 m illion, respectively.

Revenues recognized during the three and nine months ended September 30, 2020 that were included in Deferred revenues as of December 31, 2019 were $ 3.8 million and $ 31.0 million, respectively.

2021 Acquisitions

During the nine months ended September 30, 2021, the Company acquired six businesses.

The acquisitions were accounted for under the acquisition method of accounting.

As such, the purchase consideration for each acquired business was allocated to the acquired tangible and intangible assets and liabilities assumed based upon their respective fair values.

Assets acquired and liabilities assumed in the business combination were recorded on the Company’s financial statements as of the acquisition date based upon the estimated fair value at such date.

The excess of the purchase consideration over the estimated fair value of the net tangible and identifiable intangible assets acquired was recorded as goodwill.

The allocation of the excess purchase price was based upon preliminary estimates and assumptions and is subject to revision when the Company receives final information.

Accordingly, the measurement period for such purchase price allocations will end when the information, or the facts and circumstances, becomes available, but will not exceed twelve months.

The results of operations of each acquired business has been included in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) since its respective date of acquisition.

The aggregate purchase price for the acquisitions referenced above was $ 73.5 million, which includes $ 40.0 million paid in cash, $ 19.9 million recorded as contingent consideration liabilities, and $ 13.6 million recorded as holdback amounts.

Contingent consideration payments are determined based on future financial performance and payment obligations (as defined in the applicable purchase agreement) and are recorded at fair value.

The maximum potential payment outcome related to the acquisitions is $ 71.3 million.

Holdback amounts are used to withhold a portion of the initial purchase price payment until certain post-closing conditions are satisfied and are typically settled within 24 months of the acquisition.

The goodwill related to the acquisitions represented the value paid for the assembled workforce, geographic presence, and expertise.

Of the resulting goodwill relating to these acquisitions, $ 14.3 million is deductible for tax purposes.

The preliminary fair values of the identifiable assets and liabilities of the acquisitions completed during the nine months ended September 30, 2021, as of the applicable acquisition dates, are as follows:

(in thousands)

Consideration:

Fair value of contingent consideration

Total consideration

Recognized amounts of identifiable assets acquired and liabilities assumed:

Accounts receivable

Property and equipment

Identifiable intangible assets

Total liabilities

Redeemable noncontrolling interest

Total identifiable net assets

Goodwill arising from acquisitions

The identifiable intangible assets are amortized on a straight-line basis over their estimated useful lives.

The preliminary fair value and estimated useful lives of the intangible assets acquired are as follows:

(in thousands)

Weighted Average Useful

Client relationships

Developed technology

Total identifiable intangible assets

The operating results of the businesses acquired during the nine months ended September 30, 2021 contributed total revenues of $ 23.0 million and $ 28.2 million in the three and nine months ended September 30, 2021, respectively.

The Company has determined that the presentation of net income from the date of acquisition is impracticable due to the integration of the operations upon acquisition.

During the three and nine months ended September 30, 2021, the Company incurred $ 0.3 mil lion and $ 0.8 million, respectively, in transaction costs related to the acquisitions described above.

These costs have been included in “Selling, general, and administrative expenses”

in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

2020 Acquisitions

The Company acquired three businesses during the nine months ended September 30, 2020, of which two were sales agencies and one was a marketing agency.

The acquisitions were accounted for under the acquisition method of accounting.

As such, the purchase consideration for each acquired business was allocated to the acquired tangible and intangible assets and liabilities assumed based upon their respective fair values.

Assets acquired and liabilities assumed in the business combination were recorded on the Company’s financial statements as of the acquisition date based upon the estimated fair value at such date.

The excess of the purchase consideration over the estimated fair value of the net tangible and identifiable intangible assets acquired was recorded as goodwill.

allocation of the excess purchase price was based upon preliminary estimates and assumptions and is subject to revision when the Company receives final information.

Accordingly, the measurement period for such purchase price allocations will end when the information, or the facts and circumstances, becomes available, but will not exceed twelve months.

The results of operations of the business acquired by the Company have been included in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) since the date of acquisition.

The aggregate purchase price for the acquisitions referenced above was $ 72.1 million, which includes $ 51.4 million paid in cash, $ 17.2 million recorded as contingent consideration liabilities, and $ 3.5 million recorded as holdback amounts.

Contingent consideration payments are determined based on future financial performance and payment obligations (as defined in the applicable purchase agreement) and recorded at fair value.

The maximum potential payment outcome related to the acquisitions is $ 45.8 million.

The goodwill related to the acquisitions represented the value paid for the assembled workforce, geographic presence, and expertise.

Of the resulting goodwill relating to these acquisitions, $ 19.8 million is deductible for tax purposes.

The fair values of the identifiable assets and liabilities of the acquisitions completed during the nine months ended September 30, 2020, at the respective acquisition dates, are as follows:

(in thousands)

Consideration

Fair value of contingent consideration

Total consideration

Recognized amounts of identifiable assets acquired and liabilities assumed:

Accounts receivable

Property and equipment

Identifiable intangible assets

Total liabilities

Total identifiable net assets

Goodwill arising from acquisitions

The identifiable intangible assets are amortized on a straight-line basis over their estimated useful lives.

The fair value and estimated useful lives of the intangible assets acquired are as follows:

(in thousands)

Weighted Average

Client relationships

The operating results of the businesses acquired during the nine months ended September 30, 2020 contributed total revenues of $ 17.8 million and $ 44.7 million in the three months and nine months ended September 30, 2020, respectively.

The Company has determined that the presentation of net income from the date of acquisition is impracticable due to the integration of the operations upon acquisition.

During the three months and nine months ended September 30, 2020, the Company incurred zero and $ 0.2 million, respectively, in transaction costs related to the acquisitions described above.

These costs have been included in “Selling, general, and administrative expenses”

in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Supplemental Pro Forma Information

Supplemental information on a pro forma basis, presented as if the acquisitions executed during the period from January 1, 2021 to November 9, 2021 and for the year ended December 31, 2020, had been consummated as of the beginning of the comparative prior period, is as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except per share data)

Net income (loss) attributable to stockholders of Advantage Solutions Inc.

Basic net income (loss) per common share

Diluted net income (loss) per common share

The unaudited pro forma supplemental information is based on estimates and assumptions that the Company believes are reasonable and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets, the pro forma impact of acquisition costs which consisted of legal, advisory and due diligence fees and expenses, and the pro forma tax effect of the pro forma adjustments for the three and nine months ended September 30, 2021 and 2020.

This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been consummated during the periods for which pro forma information is presented.

Revenues recognized during t he three months ended March 31, 2022 that were included in Deferred revenues as of December 31, 2021 were $ 21.6 million .

Revenues recognized during the three months ended March 31, 2021 that were included in Deferred revenues as of December 31, 2020 were $ 26.1 million.

Goodwill and Intangible Assets

Changes in goodwill for the nine months ended September 30, 2021 are as follows:

Changes in goodwill for the three months ended March 31, 2022 are as follows:

(in thousands)

Gross carrying amount as of December 31, 2020

Accumulated impairment charge (1)

Balance at January 1, 2021

Measurement period adjustments

Foreign exchange translation effects

Balance at December 31, 2021

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Foreign exchange translation effects

Balance at September 30, 2021

(1) During the fiscal year ended December 31, 2018, the Company recognized a non-cash goodwill impairment charge of $ 652.0 million related to the Company’s sales reporting unit as a result of the Company’s annual evaluation of goodwill impairment test.

Balance at March 31, 2022

Accumulated impairment losses related to goodwill were $ 652.0 million as of March 31, 2022 and 2021.

The following tables set forth information for intangible assets:

September 30, 2021

(in thousands)

March 31, 2022

(amounts in thousands)

Weighted Average Useful Life

Gross Carrying

Impairment Charges (1)

Finite-lived intangible assets:

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Total other intangible assets

(1) During the fiscal year ended December 31, 2018, the Company recognized a non-cash intangible asset impairment charge of $ 580.0 million related to the Company’s sales trade name as a result of the Company’s annual impairment test for indefinite-lived intangible assets.

December 31, 2021

(in thousands)

(amounts in thousands)

Weighted Average Useful Life

Gross Carrying

Impairment Charges

Finite-lived intangible assets:

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Total other intangible assets

Amortization expenses during the three and nine months ended September 30, 2021 were $ 49.8 million, and $ 148.4 million, respectively.

Amortization expenses during the three and nine months ended September 30, 2020 were $ 47.8 million, and $ 143.3 million, respectively.

As of September 30, 2021, estimated future amortization expenses of the Company’s existing intangible assets are as follows:

Accumulated impairment losses related to indefinite-lived intangibles assets were $ 580.0 million as of March 31, 2022 and December 31, 2021.

Amortization expense was $ 50.3 million and $ 49.4 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, estimated future amortization expenses of the Company’s existing intangible assets are as follows:

(in thousands)

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Total amortization expense

September 30,

(in thousands)

Term Loan Facility

Revolving Credit Facility

Notes payable and deferred obligations

Government loans for COVID-19 relief

Total long-term debt

current portion

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Long-term debt, net of current portion

As of September 30, 2021, the Company had $ 1.3 billion of debt outstanding under the Term Loan Facility and $ 775.0 million of debt outstanding under the Notes with maturity dates of October 28, 2027 and November 15, 2028 , respectively.

The Company was in compliance with all of its affirmative and negative covenants under the Term Loan Facility and Notes as of September 30, 2021.

In addition, the Company was required to repay the principal under the Term Loan Facility (as such term was defined in the Term Loan Facility Agreement) in the greater amount of its excess cash flow, as defined in the Term Loan Facility Agreement, or $ 13.3 million, per annum, in quarterly payments.

The Company made the minimum quarterly principal payments of $ 3.3 million during the three months ended September 30, 2021 and no payments under the excess cash flow calculation were required.

During the three months ended September 30, 2020, the Company made the minimum quarterly principal payments of $ 6.5 million pursuant to its then outstanding first lien term loans that existed prior to consummation of the Transactions.

As of March 31, 2022, the Company had $ 1.3 billion of debt outstanding under the Term Loan Facility (as defined below in this Quarterly Report) and $ 775.0 million of debt outstanding under the Notes (as defined below in this Quarterly Report) with maturity dates of October 28, 2027 and November 15, 2028 , respectively.

The Company was in compliance with all of its affirmative and negative covenants under the Term Loan Facility and Notes as of March 31, 2022.

In addition, the Company is required to repay the principal under the Term Loan Facility in the greater amount of its excess cash flow, as such term is defined in the agreement governing the Term Loan Facility, or $ 13.3 million, per annum, in quarterly payments.

The Company made the minimum quarterly principal payments of $ 3.3 million during the three months ended March 31, 2022 and 2021, respectively.

No payments under the excess cash flow calculation were required in such periods.

Fair Value of Financial Instruments

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The following table sets forth the Company’s financial assets and liabilities measured on a recurring basis at fair value, categorized by input level within the fair value hierarchy.

September 30, 2021

March 31, 2022

(in thousands)

Assets measured at fair value

Cash and cash equivalents

Derivative financial instruments

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Liabilities measured at fair value

Derivative financial instruments

Warrant liability

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Assets measured at fair value

Cash and cash equivalents

Derivative financial instruments

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Interest Rate Cap Agreements

The Company had interest rate cap contracts with an aggregate notional value of principal of $ 2.2 billion as of each of September 30, 2021 and December 31, 2020, from various financial institutions to manage the Company’s exposure to interest rate movements on variable rate credit facilities.

As of September 30, 2021, the aggregate fair value of the Company’s outstanding interest rate caps represented an outstanding net asset of $ 5.9 million and an outstanding net liability of $ 0.8 million.

The Company had interest rate cap contracts with an aggregate notional value of principal of $ 650.0 million and $ 2.2 billion as of March 31, 2022 and December 31, 2021, respectively, from various financial institutions to manage the Company’s exposure to interest rate movements on variable rate credit facilities.

As of March 31, 2022, the aggregate fair value of the Company’s outstanding interest rate caps represented an outstanding net asset of $ 31.2 million.

As of December 31, 2021, the aggregate fair value of the Company’s outstanding interest rate caps represented an outstanding net asset of $ 10.2 million and an outstanding net liability of $ 0.4 million.

As of September 30, 2021, $ 5.9 million and $ 0.8 million of fair value of the Company’s outstanding interest rate caps were included in “Prepaid expenses and other current assets”

and “Other accrued expenses”

in the Condensed Consolidated Balance Sheets, respectively, with changes in fair value recognized as a component of “Interest expense, net”

in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

As of December 31, 2020, $ 1.8 million, $ 1.0 million, and $ 0.9 million of fair value of the Company’s outstanding interest rate caps were included in “Prepaid expenses and other current assets”, “Other accrued expenses”, and “Other long-term liabilities”

in the Condensed Consolidated Balance Sheets, respectively, with changes in fair value recognized as a component of “Interest expense, net”

As of March 31, 2022, $ 31.2 million of fair value of the Company’s outstanding interest rate caps were included in “Prepaid expenses and other current assets”

in the Condensed Consolidated Balance Sheets with changes in fair value recognized as a component of “Interest expense, net”

in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

During the three months ended September 30, 2021 and 2020, the Company recorded a loss of $ 0.2 million and an immaterial gain of less than $ 0.1 million, respectively, within Interest expense, net, related to changes in the fair value of its derivative instruments.

During the nine months ended September 30, 2021 and 2020, the Company recorded a gain within Interest expense, net in the amount of $ 4.1 million, and $ 0.1 million, respectively, related to changes in the fair value of its derivative instruments.

As of December 31, 2021, $ 10.2 million and $ 0.4 million of the Company’s fair value of outstanding interest rate caps were included in “Prepaid expenses and other current assets”

and “Other accrued expenses”

in the Consolidated Balance Sheets, respectively, with changes in fair value recognized as a component of “Interest expense, net”

in the Consolidated Statements of Operations and Comprehensive Income (Loss).

During the three months ended March 31, 2022 and 2021, the Company recorded a gain of $ 21.0 million and $ 5.4 million, respectively, within Interest expense, net, related to changes in the fair value of its derivative instruments.

Forward Contracts

As of September 30, 2021, the Company had three open euro forward contracts to hedge foreign currency exposure on a total of €

As of March 31, 2022, the Company had open euro forward contracts to hedge foreign currency exposure on a total of €

17.4 million with maturities in fiscal year 2022.

As of December 31, 2021, the Company had no open euro forward contracts.

During the three months and nine months ended September 30, 2021, the Company recognized $ 0.1 million and $ 0.1 million, respectively, in fair value of the forward contracts.

During the three months and nine months ended September 30, 2020, the Company recognized $ 0.4 million and $ 0.5 million, respectively, in fair value of the forward contracts.

During the three months ended March 31, 2022 and 2021, the changes in fair value of the forward contracts were immaterial for both periods.

Warrant Liability

The estimated fair value of the liability is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument.

The fair value of the warrants on the date of issuance and on each re-measurement date of certain warrants issued by the Company in a private placement in connection with the Closing (the “private placement warrants”) and classified as liabilities is estimated using the Black-Scholes option pricing model using the following assumptions:

September 30, 2021

December 31, 2020

Fair value warrants per share

Exercise price per share

Expected term (years)

Expected volatility

Risk-free interest rate

Dividend yield

As of September 30, 2021, 7,333,333 private placement warrants remained outstanding at a fair value of $ 16.2 million resulting in $ 3.5 million and $ 5.0 million gain related to the change in fair value of warrant liability for the three and nine months ended September 30, 2021, respectively.

The warrant liability is stated at fair value at each reporting period with the change in fair value recorded on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument.

As of March 31, 2022 and December 31, 2021, 7,333,333 private placement warrants, which were owned by Conyers Park II Sponsor LLC (“CP Sponsor”), remained outstanding at fair value of $ 6.7 million and $ 22.2 million, respectively.

The warrant liability was remeasured to fair value with adjustment of $ 15.4 million and $ 5.5 million reflected in “Change in fair value of warrant liability”

in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) during the three months ended March 31, 2022 and 2021, respectively.

The warrant liability is stated at fair value at each reporting period with the change in fair value recorded on the Consolidated Statement of Operations and Comprehensive Income (Loss) until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument.

The Company previously valued its private placement warrants using a Black-Scholes Model.

The private placement warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs.

They are now Level 2.

As of March 31, 2022, based on the period of time the public warrants have now been trading, the Company determined the fair value of the liability classified private placement warrants by approximating the value with the share price of the public warrants as of March 31, 2022, which is inherently less subjective and judgmental given it is based on observable inputs.

Therefore, the value of the private placement warrants are now measured at an indirectly observable quoted price in active markets for the public warrants.

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs.

Contingent Consideration Liabilities

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in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

As of September 30, 2021, the maximum potential payment outcomes were $ 291.2 million.

As of March 31, 2022, the maximum potential payment outcomes were $ 283.7 million.

The following table summarizes the changes in the carrying value of estimated contingent consideration liabilities:

September 30,

(in thousands)

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Changes in fair value

Note issuance for settlements

Measurement period adjustments

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Carrying Value

Balance at September 30, 2021

Term Loan Credit Facility

Notes payable and deferred obligations

Balance at March 31, 2022

Term Loan Facility

Government loans for COVID-19 relief

Total long-term debt

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Balance at December 31, 2021

Term Loan Credit Facility

Revolving Credit Facility

Notes payable and deferred obligations

Term Loan Facility

Government loans for COVID-19 relief

Total long-term debt

Related Party Transactions

Conyers Park and the Transactions

In May 2019, Conyers Park II Sponsor LLC, an affiliate of Centerview Capital Management, LLC, which was Conyers Park’s sponsor prior to the Merger (“CP Sponsor”), purchased 11,500,000 of Conyers Park’s Class B ordinary shares for an aggregate purchase price of $ 25,000 in cash, or approximately $ 0.002 per share.

In June 2019, CP Sponsor transferred 25,000 shares to each of four individuals, including a current member of the board of directors of the Company.

At the time of the Closing, the 11,250,000 shares of Conyers Park Class B common stock, par value $ 0.0001 per share, then held by CP Sponsor and its directors automatically converted into shares of the Company’s Class A common stock.

CP Sponsor also purchased 7,333,333 private placement warrants for a purchase price of $ 1.50 per whole warrant, or $ 11,000,000 in the aggregate, in private placement transactions that occurred simultaneously with the closing of the Conyers Park’s initial public offering and related over-allotment option.

As a result of the Closing, each private placement warrant entitles CP Sponsor to purchase one share of the Company’s Class A Common Stock at $ 11.50 per share.

Concurrent with the execution of the Merger Agreement, Conyers Park entered into the subscription agreements with certain investors, pursuant to which, among other things, Conyers Park agreed to issue and sell in a private placement shares of Conyers Park Class A common stock for a purchase price of $ 10.00 per share.

Certain of the Advantage Sponsors or their affiliates agreed to purchase an aggregate of 34,410,000 shares of Conyers Park Class A common stock.

Conyers Park also entered into a stockholders agreement (the “Stockholders Agreement”) with CP Sponsor, Topco, and certain of the Advantage Sponsors and their affiliates (collectively, the “Stockholder Parties”).

The Stockholders Agreement provides, among other things, that the Stockholder Parties agree to cast their votes such that the Company’s board of directors is constituted as set forth in the Stockholders Agreement and the Merger Agreement and will have certain rights to designate directors to the Company’s board of directors, in each case, on the terms and subject to the conditions therein.

Additionally, Conyers Park entered into a Registration Rights Agreement with CP Sponsor, Topco, the Advantage Sponsors and their affiliates and the other parties thereto, pursuant to which the Company has agreed to register for resale certain shares of Class A common stock and other equity securities that are held by the parties thereto from time to time.

Overlapping Directors

Seven members of the board of directors of the Company served as the members of the board of directors of five clients of the Company.

Until February 2, 2020, a member of the board of directors of the Company served as a member of the board of directors for a holding company of a client.

Nine members of the board of directors of the Company serve as a member of the board of directors of eight clients of the Company.

The information below details the Company’s financial relationships with those clients as of and for the periods indicated:

Three Months Ended September 30,

Nine Months Ended September 30,

Accounts Receivable

As of March 31,

As of December 31,

(in thousands)

From June 25, 2019 until October 28, 2020, a member of the board of directors of Topco served as a member of the board of directors of another client of the Company.

During the three and nine months ended September 30, 2020, the Company recognized revenues of $ 5.8 million and $ 14.9 million, respectively, from this client.

All other clients

Investment in Unconsolidated Affiliates

During the three months ended September 30, 2021 and 2020, the Company recognized revenues of $ 4.4 million and $ 3.1 million, respectively, from a parent company of an unconsolidated affiliate.

During the nine months ended September 30, 2021 and 2020, the Company recognized revenues of $ 13.7 million and $ 10.5 million, respectively, from the parent company of such unconsolidated affiliate.

Accounts receivable from this client were $ 1.8 million and $ 2.2 million as of September 30, 2021 and December 31, 2020, respectively.

The Company’s effective income tax rates were 25.4 % and 9.0 % for the three months ended September 30, 2021 and 2020, respectively.

The fluctuation in the effective rates during the three months ended September 30, 2021 and 2020 is caused by variations in the Company’s estimated annual effective tax rate from the respective previous quarters and changes in the income (loss) before income taxes in those periods.

The Company’s effective tax rate was 36.0 % and 27.6 % during the nine months ended September 30, 2021 and 2020, respectively.

During the three months ended March 31, 2022 and 2021, the Company recognized revenues of $ 3.8 million and $ 4.7 million, respectively, from a parent company of an unconsolidated affiliate.

Accounts receivable from this client were $ 2.0 million and $ 2.4 million as of March 31, 2022 and December 31, 2021, respectively.

The Company’s effective tax rates were 34.0 % and 145.6 % for the three months ended March 31, 2022 and 2021, respectively.

The effective tax rate is based upon the estimated income or loss before taxes for the year, by jurisdiction, and adjusted for estimated permanent tax adjustments.

The fluctuation in the Company’s effective tax rate was primarily due to a difference in forecasted income (loss) before income taxes used in the annual effective tax rate.

Also, the Company recorded discrete items during the nine months ended September 30, 2021, including a valuation allowance of $ 1.3 million for its Mexico operations and income tax expenses of $ 2.3 million and $ 0.8 million to adjust the deferred tax liability resulting from changes in statutory tax rates in certain foreign and state jurisdictions, respectively.

These discrete items resulted in a higher tax provision overall for the nine months ended September 30, 2021.

The fluctuation in the Company’s effective tax rate was primarily due to the three month pretax book income differences and the application of the shortfall of $ 1.1 million of stock-based compensation for the three months ended March 31, 2022.

The Company’s operations are organized into two reportable segments:

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(in thousands)

Three Months Ended September 30, 2021

Depreciation and amortization

Operating income

Three Months Ended September 30, 2020

Depreciation and amortization

Operating income

(in thousands)

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Depreciation and amortization

Operating income

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Depreciation and amortization

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The Company has accrued amounts in connection with certain legal matters, including with respect to certain of the matters described below.

There can be no assurance, however, that these accruals will be sufficient to cover such matters or other legal matters or that such matters or other legal matters will not materially or adversely affect the Company’s business, financial position, or results of operations.

There can be no assurance, however, that these accruals will be sufficient to cover such matters or other legal matters or that such matters or other legal matters will not materially or adversely affect the Company’s financial position, liquidity, or results of operations.

Employment Matters

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The Company is currently unable to estimate the potential impact related to these arbitration proceedings, but the Company has retained outside counsel to represent the Company in these matters and intends to vigorously pursue the Company’s interests.

The arbitration hearing for this matter commenced in the first quarter of 2022 and re-commenced during the second quarter of 2022;

however, the Company does not know when the Company will receive a decision from the arbitrator.

Other Legal Matters Related to Take 5

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Redeemable Noncontrolling Interest

The Company is party to a put and call option agreement with respect to the common securities that represent the remaining noncontrolling interest from a majority-owned subsidiary, which was established through a majority-owned international joint venture during the nine months ended September 30, 2021.

The put and call option agreement representing 20 % of the total outstanding noncontrolling equity interest of that subsidiary, may be exercised at the discretion of the noncontrolling interest holder by providing written notice to the Company beginning in 2026 and expiring in 2028 .

The redemption value of the put and call option agreement is based on a multiple of the majority-owned subsidiary earnings before interest, taxes, depreciation and amortization subject to

certain adjustments.

The redemption value of the put and call option agreement is based on a multiple of the majority-owned subsidiary earnings before interest, taxes, depreciation and amortization subject to certain adjustments.

The noncontrolling interest is subject to a put option that is outside of the Company’s control, and is presented as redeemable non-controlling interest in the temporary equity section of the Condensed Consolidated Balance Sheets.

The Company recorded its redeemable noncontrolling interest at fair value on the date of the related business combination transaction and recognizes changes in the redemption value at the end of each reporting period.

The carrying value of the redeemable noncontrolling interest was $ 1.8 million as of September 30, 2021.

The Company recorded its redeemable noncontrolling interest at fair value on the date of the related business combination transaction and

recognizes changes in the redemption value at the end of each reporting period.

The carrying value of the redeemable noncontrolling interest was $ 1.8 million as of March 31, 2022.

(in thousands)

September 30, 2021

March 31, 2022

Beginning Balance

Fair value at acquisition

Net loss attributable to redeemable noncontrolling interests

Net income attributable to redeemable noncontrolling interests

Foreign currency translation adjustment

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Plan ”).

As of September 30, 2021, the number of nonqualified stock options outstanding was immaterial.

The Company’s restricted stock units and performance restricted stock units, as described below, are expensed and reported as non-vested shares.

The Company recognized stock-based compensation expense of $ 8.3 million and $ 28.5 million in the three and nine months ended September 30, 2021, respectively.

The related deferred tax benefit for stock-based compensation recognized was $ 1.3 million and $ 4.4 million for the three and nine months ended September 30, 2021, respectively.

The Company recognized stock-based compensation expense of $ 7.8 million and $ 9.9 million during the three months ended March 31, 2022 and 2021, respectively.

The related deferred tax benefit for stock-based compensation recognized was $ 1.5 million and $ 1.6 million for the three months ended March 31, 2022 and 2021, respectively.

Performance Restricted Stock Units

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Details for each aforementioned defined term for each grant have been provided in the table below.

During the first quarter of 2022, the Compensation Committee determined that the achievement of the performance objective applicable to the PSU EBITDA 2021 objective was 64.6 % of target and the achievement of the performance objective applicable to the PSU Revenues 2021 objective was 126.2 % of target.

In the first quarter of 2022, the Compensation Committee determined that the PSU EBITDA and Revenue metrics will be measured separately when determining whether above-target performance has been maintained for future year performance.

Such determination is applicable to the PSUs grants made in 2021 and in 2022.

As a result, the 26.2 % above-target performance on Revenues for 2021 must be maintained in 2022 and 2023 in order for the corresponding above-target PSUs to vest in January 2024.

Assuming there is no decline in performance with respect to Revenues in 2022 and 2023, an amount equal to approximately 9.2 % of the target number of PSUs granted in January 2021 will vest in full in January 2024 as a result of the above-target Revenue performance for fiscal 2021.

The performance period for those awards ended on December 31, 2021 but remain subject to service-based vesting conditions.

Under the provision of ASC 718, the Company determined that 2021 PSUs granted were modified as of March 11, 2022 related to 205,834 above-target Revenue Metric PSUs.

The stock-based compensation expense for such modification was accounted for as a cancellation of the original award and the issuance of a new award using the fair value of the award on the date of modification, resulting in a $ 1.1 million gain upon cancellation during the three months ended March 31, 2022 and an intrinsic value associated with the new award of $ 1.2 million that will be recognized over the remaining service-based vesting term.

The fair value of PSU grants is equal to the closing price of the Company's Class A common stock on the date of the applicable grant.

The maximum potential remaining expense if the Maximum Goals were met for these awards has been provided in the table below.

Recognition of expense associated with performance-based stock is not permitted until achievement of the performance targets are probable of occurring.

(in thousands, except share and per share data)

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Expense to be

Maximum Potential

Expense to be

January 1, 2022—

The fair value of PSU grants was equal to the closing price of ADV stock on the date of the applicable grant.

The maximum potential expense if the Maximum Goals were met for these awards has been provided in the table above.

Recognition of expense associated with performance-based stock is not permitted until achievement of the performance targets are probable of occurring.

December 31, 2022

January 1, 2021—

December 31, 2021

The following table summarizes the PSU activity for the three months ended March 31, 2022:

Performance Share Units

Weighted Average Grant

Date Fair Value

Outstanding at January 1, 2022

PSU performance adjustment

Outstanding at March 31, 2022

Restricted Stock Units

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The RSUs are generally scheduled to vest over three years and are subject to the provisions of the agreement under the Plan.

During the nine months ended September 30, 2021, the following activities involving RSUs occurred under the Plan:

During the three months ended March 31, 2022, the following activities involving RSUs occurred under the Plan:

Number of RSUs

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Outstanding at January 1, 2022

Outstanding at September 30, 2021

As of September 30, 2021, the total remaining unrecognized compensation cost related to RSUs amounted to $ 28.2 million, which will be amortized over the weighted-average remaining requisite service periods of 2.4 years.

Outstanding at March 31, 2022

As of March 31, 2022, the total remaining unrecognized compensation cost related to RSUs amounted to $ 16.5 million, which will be amortized over the weighted-average remaining requisite service periods of 2.7 years.

Stock Options

Pursuant to the Plan, a total of 945,664 non-qualified stock options were granted during the three months ended March 31, 2022 and 1,206,988 remained outstanding as of March 31, 2022 with a weighted average exercise price of $ 6.68 .

The fair value of the employee stock options granted was estimated using the following weighted average assumptions for the three months ended:

Dividend yield

Expected volatility

Risk-free interest rate

Expected term (years)

As of March 31, 2022, the Company had approximately $ 2.2 million of total unrecognized compensation expense related to stock options, net of related forfeiture estimates, which the Company expects to recognize over a weighted-average period of approximately 2.7 years .

The intrinsic value of all outstanding options as of March 31, 2022 was $ 0.4 million based on the market price of the Company's Class A common stock of $ 6.38 per share.

Earnings Per Share

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Basic earnings per share is calculated by dividing net income (loss) attributable to stockholders of the Company by the weighted-average shares of common stock outstanding without the consideration for potential dilutive shares of common stock.

Diluted earnings per share represents basic earnings per share adjusted to include the potentially dilutive effect of outstanding share option awards, non-vested share awards, common stock warrants, and Performance Shares (as defined below).

Diluted earnings per share is computed by dividing the net income by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method and if-converted method, as applicable.

Diluted earnings per share represents basic earnings per share adjusted to include the potentially dilutive effect of performance stock units, restricted stock units, public and private placement warrants, the employee stock purchase plan and stock options .

Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding and the potential dilutive shares of common stock for the period determined using the treasury stock method and if-converted method, as applicable.

During periods of net loss, diluted loss per share is equal to basic loss per share because the antidilutive effect of potential common shares is disregarded.

As a result of the Transactions, the Company has retrospectively adjusted the weighted-average number of common shares outstanding prior to October 28, 2020 by multiplying them by the exchange ratio used to determine the number of common shares into which they converted.

The following is a reconciliation of basic and diluted net earnings (loss) per common share:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except share and earnings per share data)

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Weighted average common shares outstanding

Performance Stock Units

Restricted Stock Units

2 unchanged sentences

Diluted earnings (loss) per common share

During periods of net loss, diluted loss per share is equal to basic loss per share because the antidilutive effect of potential common shares is disregarded.

As part of the Transactions, 5,000,000 shares of Class A common stock were issued to Topco at Closing (the “Performance Shares”), which were subject to vesting upon satisfaction of a market performance condition for any period of 20 trading days out of 30 consecutive trading days during the five-year period after the Closing.

Topco was not able to vote or sell such shares until vesting.

The Performance Shares vested on January 15, 2021, when the closing price for the Class A common stock exceeded $ 12.00 per share for 20 trading days out of 30 consecutive trading days and were included in the September 30, 2021 earnings per share calculation.

The Company had 18,578,324 warrants, including 7,333,333 private placement warrants held by CP Sponsor, to purchase Class A common stock at $ 11.50 per share outstanding at the Closing, and 5,001 warrants were exercised during the nine months ended September 30, 2021.

The computation of diluted net income per share does no t include the assumed exercise of warrants since that would have an antidilutive effect on earnings per share for the three and nine months ended September 30, 2021.

The Company had 7,333,333 private placement warrants, which were owned by CP Sponsor, and 11,244,988 public warrants to purchase Class A common stock at $ 11.50 per share outstanding at March 31, 2022, which have been excluded in the calculation of diluted earnings per common share as the weighted average market price of the common stock during the three months ended March 31, 2022 did not exceed the exercise price of the warrants.

The Company had 7,333,333 private placement warrants, which were owned by CP Sponsor, and 11,249,992 public warrants to purchase Class A common stock at $ 11.50 per share outstanding at March 31, 2021, which have been excluded in the calculation of diluted net loss per common share, as the effect would be antidilutive due to losses incurred.

Subsequent Events

Repricing of Long-Term Debt

On October 28, 2021 (the “First Lien Amendment Effective Date”), Advantage Sales & Marketing Inc.

(the “Borrower”), an indirect wholly-owned subsidiary of the Company, together with Karman Intermediate Corp., a Delaware corporation (“Holdings”) and certain of the Borrower’s subsidiaries, entered into Amendment No.

1 to the First Lien Credit Agreement (the “First Lien Amendment”), which amended the First Lien Credit Agreement, dated October 28, 2020, by and among the Borrower, Holdings, Bank of America, N.A., as administrative agent and collateral agent (“Bank of America”), each lender party from time to time thereto, and the other parties thereto.

The First Lien Amendment was entered into by the Borrower to reduce the applicable interest rate on the term loan to 5.25 % per annum.

Additional terms and provisions amended include (i) resetting the period for six months following the First Lien Amendment Effective Date in which a 1.00 % prepayment premium shall apply to any prepayment of the term loan in connection with certain repricing events, and (ii) updating the provisions by which U.S.

Dollar LIBOR will eventually be replaced with SOFR or another interest rate benchmark to reflect the most recent standards and practices used in the industry and by Bank of America.

On October 28, 2021, the Borrower and Holdings also entered into the First Amendment to ABL Revolving Credit Agreement (the “ABL Amendment”), which amended the ABL Revolving Credit Agreement, dated October 28, 2020, by and among the Borrower, Holdings, the lenders from time to time party thereto and Bank of America, as administrative agent.

The ABL Amendment was entered into by the Borrower to amend certain terms and provisions, including (i) reducing the interest rate floor for Eurocurrency rate loans from 0.50 % to 0.00 % and base rate loans from 1.50 % to 1.00 %, and (ii) updating the provisions by which U.S.

Dollar LIBOR will eventually be replaced with SOFR or another interest rate benchmark to reflect the most recent standards and practices used in the industry and by Bank of America.

Share Repurchase Program

On November 9, 2021, the Company announced that the Board of Directors authorized a new share repurchase program (the “2021 Share Repurchase Program”) pursuant to which the Company may repurchase up to $ 100 million of the Company’s Class A common stock.

The 2021 Share Repurchase Program does not have an expiration date, but provides for suspension or discontinuation at any time.

The 2021 Share Repurchase Program permits the repurchase of our Class A common stock on the open market from time to time.

The timing and amount of any share repurchase is subject to prevailing market conditions, relevant securities laws and other considerations, and the Company is under no obligation to repurchase any specific number of shares.

Subsequent to March 31, 2022, the Company completed two acquisitions of marketing agencies.

The aggregate cash paid for these consummated acquisitions was $ 66.6 million.

The Company has determined that the purchase price allocation related to these acquisitions is impractical to report as of the date of the issuance of these condensed consolidated financial statements.

Purchase price allocations are considered preliminary and subject to adjustment during the measurement period, which is up to one year from the acquisition date.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecasted by our forward-looking statements.

More information regarding these risks and uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth in Part I, Item 1A “Risk Factors”

in our Annual Report on Form 10-K/A for the year ended December 31, 2020, and Part II, Item 1A “Risk Factors”

of this report.

Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made.

Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise.

Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise.

Executive Overview

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sales and marketing.

Through our sales segment, which generated approximately 65.9% and 65.5% of our total revenues in the nine months ended September 30, 2021 and 2020, respectively, we offer headquarter sales representation services to consumer goods manufacturers, for whom we prepare and present to retailers a business case to increase distribution of manufacturers’

Through our sales segment, which generated approximately 64.7% and 67.5% of our total revenues in the three months ended March 31, 2022 and 2021, respectively, we offer headquarter sales representation services to consumer goods manufacturers, for whom we prepare and present to retailers a business case to increase distribution of manufacturers’

products and optimize how they are displayed, priced and promoted.

We also make in-store merchandising visits for both manufacturer and retailer clients to ensure the products we represent are adequately stocked and properly displayed.

Through our marketing segment, which generated approximately 34.1% and 34.5% of our total revenues in the nine months ended September 30, 2021 and 2020, respectively, we help brands and retailers reach consumers through two main categories within the marketing segment.

Through our marketing segment, which generated approximately 35.3% and 32.5% of our total revenues in the three months ended March 31, 2022 and 2021, respectively, we help brands and retailers reach consumers through two main categories within the marketing segment.

The first and largest category is our retail experiential business, also known as in-store sampling or demonstrations, where we manage highly customized large-scale sampling programs (both in-store and online) for leading retailers.

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Business Combination with Conyers Park

On September 7, 2020, Advantage Solutions Inc., now known as ASI Intermediate Corp.

(“Conyers Park”), CP II Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Conyers Park (“Merger Sub”), and Karman Topco L.P., then the parent company of ASI (“Topco”).

In September 2020 and in connection with its entry into the Merger Agreement, Conyers Park entered into subscription agreements pursuant to which certain investors, including participating equity holders of Topco (the “Advantage Sponsors”), agreed to purchase Class A Common Stock of Conyers Park (“Common Stock”) at a purchase price of $10.00 per share (the “PIPE Investment”).

On October 28, 2020 (the “Closing Date”), Merger Sub was merged with and into ASI with ASI being the surviving company in the merger (the “Merger”

On October 28, 2020 (the “Closing Date”), Conyers Park II Acquisition Corp.

(“Conyers Park”), a Delaware corporation, consummated a merger with ASI Intermediate Corp.

(“ASI”), formerly known as Advantage Solutions Inc, with ASI surviving the merger as a wholly owned subsidiary of Conyers Park (the “Merger”

and, together with the other transactions contemplated by the Merger Agreement, the “Transactions”).

On the Closing Date, the PIPE Investment was consummated, and 85,540,000 shares of Common Stock were sold for aggregate gross proceeds of $855.4 million.

Of the 85,540,000 shares of Common Stock, the Advantage Sponsors acquired 34,410,000 shares of Common Stock, and other purchasers acquired 51,130,000 shares of Common Stock.

Holders of 32,114,818 shares of Common Stock sold in Conyers Park’s initial public offering properly exercised their right to have such shares redeemed for a full pro rata portion of the trust account holding the proceeds therefrom, calculated as of two business days prior to the Closing Date, equal to $10.06 per share, or $323.1 million in the aggregate (collectively, the “Redemptions”).

As a result of the Merger, among other things, pursuant to the Merger Agreement, Conyers Park issued to Topco, as sole stockholder of ASI prior to the Merger, aggregate consideration equal to (a) 203,750,000 shares of Common Stock, and (b) 5,000,000 shares of Common Stock that vested upon achievement of a market performance condition on January 15, 2021 (the “Performance Shares”).

After giving effect to the Transactions, the Redemptions, and the consummation of the PIPE Investment, there were 313,425,182 shares of Common Stock issued and outstanding as of the Closing Date, excluding the Performance Shares.

The Common Stock and outstanding warrants of Conyers Park (renamed “Advantage Solutions Inc.”

following the Transactions) commenced trading on the Nasdaq Global Select Market under the symbols “ADV”

and “ADVWW”, respectively, on October 29, 2020.

As noted above, an aggregate of $323.1 million was paid from the Conyers Park’s trust account to holders in connection with the Redemptions, and the remaining balance immediately prior to the closing of the Transactions of approximately $131.2 million remained in the trust account.

The remaining amount in the trust account was used to fund the Transactions, including the entry into the Senior Secured Credit Facilities (as defined below).

In connection with the Merger, ASI repaid and terminated $3.3 billion of debt arrangements under its then first lien credit agreement, second lien credit agreement, and accounts receivable securitization facility that existed as of September 30, 2020 (collectively, the “Prior Credit Facilities”) with incremental costs of $86.8 million.

This amount was repaid by ASI through a combination of (i) cash on hand, (ii) proceeds from certain private investments in Common Stock, (iii) the entry by Advantage Sales & Marketing Inc., a wholly owned subsidiary of ASI, into (a) a senior secured asset-based revolving credit facility, which permits borrowing in an aggregate principal amount of up to $400.0 million, subject to borrowing base capacity (as may be amended from time to time, the “Revolving Credit Facility”), of which $100.0 million of principal amount was borrowed as of October 28, 2020, and (b) a secured first lien term loan credit facility in an aggregate principal amount of $1.325 billion (as may be amended from time to time, the “Term Loan Facility”

and, together with the Revolving Credit Facility, the “Senior Secured Credit Facilities”), and (iv) the issuance by Advantage Solutions FinCo LLC, a direct subsidiary of Advantage Sales & Marketing Inc.

(“Finco”), of $775.0 million aggregate principal amount of 6.50% Senior Secured Notes due 2028 (the “Notes”).

The Merger was accounted for as a reverse recapitalization in accordance with GAAP.

Under this method of accounting, Conyers Park was treated as the “acquired”

company for financial reporting purposes.

This determination was primarily based on Topco having a relative majority of the voting power of the combined entity, the operations of ASI prior to the Merger comprising the only ongoing operations of the combined entity, and senior management of ASI comprising the senior management of the combined entity.

Accordingly, for accounting purposes, the financial statements of the combined entity represent a continuation of the financial statements of ASI with the acquisition being treated as the equivalent of ASI issuing stock for the net assets of Conyers Park, accompanied by a recapitalization.

The net assets of Conyers Park was stated at historical cost, with no goodwill or other intangible assets recorded.

On the Closing Date, and in connection with the closing of the Transactions (the “Closing”), Conyers Park changed its name to Advantage Solutions Inc.

Impacts of the COVID-19 Pandemic

The COVID-19 pandemic has had, and is likely to continue to have, a severe and unprecedented impact on the world.

Measures to prevent its spread, including government-imposed restrictions on large gatherings, closures of face-to-face events, “shelter in place”

health orders and travel restrictions have had a significant effect on certain of our business operations.

In response to these business disruptions, we have taken several actions including reducing certain of our discretionary expenditures, eliminating non-essential travel, terminating or amending certain office leases, furloughing, instituting pay reductions and deferrals and terminating some of our employees, particularly with respect to COVID-19 impacted operations.

These measures to prevent the spread of COVID-19 have adversely impacted certain areas of our business operations, including our in-store sampling, foodservice and international businesses.

Most notably, we temporarily suspended all in-store sampling in all U.S.

locations starting in March and April of 2020 as well as in certain international locations.

While the restrictions relating to in-store sampling services materially and adversely affected our results of operations during the year ended December 31, 2020 and the nine months ended September 30, 2021, we have started to re-open in-store sampling activities in certain retailers in certain geographies on a prudent, phased basis, and we have been successful in growing other adjacent services in our experiential marketing business such as online grocery pick-up sampling and virtual product demonstrations, both of which have seen increased adoption and demand.

While not back to pre-pandemic levels, more recently, we have seen recovery in our foodservice business, which was impacted by lower away-from-home demand on various channels, including restaurants, education and travel and lodging.

Additionally, our international business has started to show recovery after restrictions were lifted on activity in the various international geographies in which we operate.

During the year ended December 31, 2020 and the nine months ended September 30, 2021, we experienced a positive impact in our headquarter sales and private label services which, due to the large increase in consumer purchases at retail to support incremental at-home consumption, our operations have experienced a favorable increase in volume and demand.

Additionally, our e-commerce services have benefited due to the increase in consumer purchasing with online retailers.

These differing impacts are reflected in our financial results for the nine months ended September 30, 2021, which show that compared to the nine months ended September 30, 2020:

our sales segment revenues and operating income increased 12.1%, 38.0%, and Adjusted EBITDA decreased 0.6%, respectively, and;

our market segment revenues and Adjusted EBITDA increased 10.2% and 16.9%, respectively, and operating income decreased 43.4%.

We expect the ultimate significance of the impact of the pandemic on our financial condition, results of operations and cash flows will be dictated by the length of time that such circumstances continue and any future restrictions imposed on our business and operations, which will depend on the currently unknowable extent and duration of the COVID-19 pandemic and the nature and effectiveness of governmental, commercial and personal actions taken in response.

We believe the impact of the pandemic will continue to decrease during the remainder of 2021 as businesses and individuals choose to have more in-person activities.

Our financial performance for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020 includes:

Beginning in March 2020 and continuing through the first quarter of 2021, our services experienced the effects from reductions in client spending due to the economic impact related to the COVID-19 pandemic.

While mixed by services and geography, the spending reductions impacted all of our services and markets.

Globally, the most impacted services were our experiential services.

Most services began to improve in April 2021, and the improvement has continued through the first quarter of 2022.

We expect the ultimate significance of the impact of the pandemic on our financial condition, results of operations and cash flows will be dictated by the length of time that such circumstances continue and any future restrictions imposed on our business and operations, which will depend on the currently unknowable extent and duration of the COVID-19 pandemic, any new variants and the nature and effectiveness of governmental, commercial and personal actions taken in response, along with the effectiveness of ongoing vaccination and other mitigation efforts to limit the magnitude of infections and hospitalizations across the United States and globally.

Our financial performance for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 includes:

Revenues increased by $123.8 million, or 15.6%, to $914.8 million;

Operating income decreased by $14.6 million, or 38.7%, to $23.0 million;

Net income decreased by $12.4 million, or 33.7%, to $24.3 million;

Adjusted Net Income decreased by $6.5 million, or 9.9%, to $59.1 million;

Adjusted EBITDA decreased by $2.5 million, or 1.8%, to $133.8 million.

Our financial performance for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020 includes:

Revenues increased by $264.5 million, or 11.5%, to $2,569.7 million;

Operating income increased by $25.6 million, or 21.4%, to $145.6 million;

Net income decreased by $52.4 million, or 229.4%, to $29.5 million;

Net income increased by $18.1 million to $17.5 million;

Adjusted Net Income increased by $2.9 million, or 6.2%, to $49.1 million;

Adjusted EBITDA increased by $12.5 million, or 3.5%, to $367.2 million.

During the nine months ended September 30, 2021, we acquired six businesses.

The aggregate purchase price was $73.5 million, of which $40.0 million was paid in cash, $19.9 million in contingent consideration and $13.6 million in holdback.

Recent Developments

Repricing of Long-Term Debt

On October 28, 2021 (the “First Lien Amendment Effective Date”), Advantage Sales & Marketing Inc.

The First Lien Amendment was entered into by the Borrower to reduce the applicable interest rate on the term loan to 5.25% per annum, resulting in estimated interest savings of approximately $9.9 million or $7.3 million, net of tax, per annum .

Additional terms and provisions amended include (i) resetting the period for six months following the First Lien Amendment Effective Date in which a 1.00% prepayment premium shall apply to any prepayment of the term loan in connection with certain repricing events, and (ii) updating the provisions by which U.S.

Dollar LIBOR will eventually be replaced with SOFR or another interest rate benchmark to reflect the most recent standards and practices used in the industry and by Bank of America.

The ABL Amendment was entered into by the Borrower to amend certain terms and provisions, including (i) reducing the interest rate floor for Eurocurrency rate loans from 0.50% to 0.00% and base rate loans from 1.50% to 1.00%, and (ii) updating the provisions by which U.S.

Dollar LIBOR will eventually be

replaced with SOFR or another interest rate benchmark to reflect the most recent standards and practices used in the industry and by Bank of America.

Share Repurchase Program

On November 9, 2021, the Company announced that the Board of Directors authorized a new share repurchase program (the “2021 Share Repurchase Program”) pursuant to which the Company may repurchase up to $100 million of the Company’s Class A common stock.

The 2021 Share Repurchase Program does not have an expiration date, but provides for suspension or discontinuation at any time.

The 2021 Share Repurchase Program permits the repurchase of our Class A common stock on the open market from time to time.

Adjusted EBITDA decreased by $14.7 million, or 13.2%, to $96.7million.

Factors Affecting Our Business and Financial Reporting

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We have grown and expect to continue to grow our business in part by acquiring quality businesses, both domestic and international.

In December 2017, we completed the acquisition of Daymon Worldwide Inc., a leading provider of private label development and management, merchandising and experiential marketing services.

In addition to the Daymon acquisition, we have completed 69 acquisitions from January 2014 to September 30, 2021, ranging in purchase prices from approximately $0.3 million to $98.5 million.

Excluding the acquisition of Daymon Worldwide Inc., we have completed 72 acquisitions from January 2014 to May 10, 2022, ranging in purchase prices from approximately $0.3 million to $98.5 million.

Many of our acquisition agreements include contingent consideration arrangements, which are described below.

We have completed acquisitions at what we believe are attractive purchase prices and have regularly structured our agreements to result in the generation of long-lived tax assets, which have in turn reduced our effective purchase prices when incorporating the value of those tax assets.

We continue to look for strategic and tuck-in acquisitions that can be completed at attractive purchase prices.

We have completed acquisitions at what we

believe are attractive purchase prices and have regularly structured our agreements to result in the generation of long-lived tax assets, which have in turn reduced our effective purchase prices when incorporating the value of those tax assets.

We continue to look for strategic acquisitions that can be completed at attractive purchase prices.

Contingent Consideration.

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Depreciation and Amortization.

As a result of the acquisition of our business by Topco on July 25, 2014 (the “2014 Topco Acquisition”), we acquired significant intangible assets, the value of which is amortized, on a straight-line basis, over 15 years from the date of the 2014 Topco Acquisition, unless

determined to be indefinite-lived.

As a result of the acquisition of our business by Karman Topco L.P.

(“Topco”) on July 25, 2014 (the “2014 Topco Acquisition”), we acquired significant intangible assets, the value of which is amortized, on a straight-line basis, over 15 years from the date of the 2014 Topco Acquisition, unless determined to be indefinite-lived.

The amortization of such intangible assets recorded in our consolidated financial statements has a significant impact on our operating income (loss) and net income (loss).

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Our organic revenues exclude the impacts of acquisitions and divestitures, when applicable, which improves comparability of our results from period to period.

In general, when we acquire a business, the acquisition includes a contingent consideration arrangement (e.g., an earn-out provision) and, accordingly, we separately track the financial performance of the acquired business.

In such cases, we consider revenues generated by such a business during the 12 months following its acquisition to be acquired revenues.

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Acquisition-related costs are comprised of fees related to change of equity ownership, transaction costs, professional fees, due diligence and integration activities.

We also expect to incur additional expenses as a result of operating as a public company, including expenses necessary to comply with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance and reporting obligations pursuant to the rules and regulations of the Securities and Exchange Commission, as well as higher expenses for general and director and officer insurance, investor relations, and professional services.

Other (Income) Expenses

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability represents a non-cash (income) expense resulting from a fair value adjustment to warrant liability with respect to the private placement warrants and based on the input assumptions used in the Black-Scholes option pricing model, including our stock price at the end of the reporting period, the implied volatility or other inputs to the model and the number of private placement warrants outstanding, which may vary from period to period.

Change in fair value of warrant liability represents a non-cash (income) expense resulting from a fair value adjustment to warrant liability with respect to the private placement warrants.

Based on the period of time the public warrants have now been trading, we determined the fair value of the liability classified private placement warrants by approximating the value with the share price of the public warrants at the respective period end, which is inherently less subjective and judgmental given it is based on observable inputs.

Previously, the fair value of the warrant liability was based on the input assumptions used in the Black-Scholes option pricing model, including our stock price at the end of the reporting period, the implied volatility or other inputs to the model and the number of private placement warrants outstanding, which may vary from period to period.

We believe these amounts are not correlated to future business operations.

Interest Expense

Interest expense relates primarily to borrowings under our first lien credit agreement and second lien credit agreement, which were paid off in connection with the Merger, and Senior Secured Credit Facilities as described below.

Interest expense relates primarily to borrowings under the Senior Secured Credit Facilities as described below.

Liquidity and Capital Resources .”

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As a result of the 2014 Topco Acquisition, we acquired significant intangible assets, the value of which is amortized, on a straight-line basis, over 15 years from the date of the 2014 Topco Acquisition, unless determined to be indefinite-lived.

We recognized a non-cash intangible asset impairment charge of $580.0 million during the year ended December 31, 2018, related to our sales trade name resulting from the 2014 Topco Acquisition considered to be indefinite lived.

The impairment charge has been reflected in “Impairment of goodwill and indefinite-lived assets”

in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), in addition to a $652.0 million non-cash goodwill impairment charge in the sales reporting unit.

Depreciation Expense

Depreciation expense relates to the property and equipment that we own, which represented less than 1% of our total assets at September 30, 2021.

Depreciation expense relates to the property and equipment that we own, which represented less than 1% of our total assets at March 31, 2022 and 2021, respectively.

Income tax (benefit) expense and our effective tax rates can be affected by many factors, including state apportionment factors, our acquisition strategy, tax incentives and credits available to us, changes in judgment regarding our ability to realize our deferred tax assets, changes in our worldwide mix of pre-tax losses or earnings, changes in existing tax laws and our assessment of uncertain tax positions.

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—Liquidity and Capital Resources.

Prior to the consummation of the Transactions (including our entry into the Senior Secured Credit Facilities), our principal sources of liquidity have been cash flows from operations, borrowings under various revolving credit facilities and other debt.

Following the Transactions, our principal sources of liquidity are cash flows from operations, borrowings under the Revolving Credit Facility, and other debt.

Our principal sources of liquidity are cash flows from operations, borrowings under the Revolving Credit Facility, and other debt.

Our principal uses of cash are operating expenses, working capital requirements, acquisitions and repayment of debt.

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Adjusted Net Income is a non-GAAP financial measure.

management fee, (iv) changes in fair value of warrant liability, (v) fair value adjustments of contingent consideration related to acquisitions, (vi) acquisition-related expenses, (vii) costs associated with COVID-19, net of benefits received, (viii) EBITDA for economic interests in investments, (ix) restructuring expenses, (x) litigation expenses, (xi) (Recovery from) loss on Take 5, (xii) deferred financing fees, (xiii) costs associated with the Take 5 Matter, (xiv) other adjustments that management believes are helpful in evaluating our operating performance and (xv) related tax adjustments.

Adjusted Net Income means net income (loss) before (i) impairment of goodwill and indefinite-lived assets, (ii) amortization of intangible assets, (iii) equity based compensation of Topco, (iv) changes in fair value of warrant liability, (v) fair value adjustments of contingent consideration related to acquisitions, (vi) acquisition-related expenses, (vii) costs associated with COVID-19, net of benefits received, (viii) EBITDA for economic interests in investments, (ix) restructuring expenses, (x) litigation expenses (recovery), (xi) costs associated with the Take 5 Matter, (xii) other adjustments that management believes are helpful in evaluating our operating performance and (xiii) related tax adjustments.

We present Adjusted Net Income because we use it as a supplemental measure to evaluate the performance of our business in a way that also considers our ability to generate profit without the impact of items that we do not believe are indicative of our operating performance or are unusual or infrequent in nature and aid in the comparability of our performance from period to period.

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Adjusted EBITDA and Adjusted EBITDA by segment are supplemental non-GAAP financial measures of our operating performance.

management fee, (vii) changes in fair value of warrant liability, (viii) stock-based compensation expense, (ix) fair value adjustments of contingent consideration related to acquisitions, (x) acquisition-related expenses, (xi) costs associated with COVID-19, net of benefits received, (xii) EBITDA for economic interests in investments, (xiii) restructuring expenses, (xiv) litigation expenses, (xv) (Recovery from) loss on Take 5, (xvi) costs associated with the Take 5 Matter and (xvii) other adjustments that management believes are helpful in evaluating our operating performance.

Adjusted EBITDA means net income (loss) before (i) interest expense, net, (ii) (benefit from) provision for income taxes, (iii) depreciation, (iv) impairment of goodwill and indefinite-lived assets, (v) amortization of intangible assets, (vi) equity based compensation of Topco, (vii) changes in fair value of warrant liability, (viii) stock-based compensation expense, (ix) fair value adjustments of contingent consideration related to acquisitions, (x) acquisition-related expenses, (xi) costs associated with COVID-19, net of benefits received, (xii) EBITDA for economic interests in investments, (xiii) restructuring expenses, (xiv) litigation expenses (recovery), (xv) costs associated with the Take 5 Matter and (xvi) other adjustments that management believes are helpful in evaluating our operating performance.

We present Adjusted EBITDA and Adjusted EBITDA by segment because they are key operating measures used by us to assess our financial performance.

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Neither Adjusted EBITDA nor Adjusted EBITDA by segment should be considered as an alternative for net income (loss), for our most directly comparable measure presented on a GAAP basis.

Results of Operations for the Three and Nine Months Ended September 30, 2021 and 2020

The following table sets forth items derived from the Company’s consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 in dollars and as a percentage of total revenues.

Three Months Ended September 30,

Nine Months Ended September 30,

Results of Operations for the Three Months Ended March 31, 2022 and 2021

The following table sets forth items derived from the Company’s consolidated statements of operations for the three months ended March 31, 2022 and 2021 in dollars and as a percentage of total revenues.

Three Months Ended March 31,

(amounts in thousands)

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Selling, general, and administrative expenses

Recovery from Take 5

Depreciation and amortization

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Interest expense, net

Total other expenses

Income (loss) before income taxes

Provision for (benefit from) income taxes

Total other (income) expenses

Income before income taxes

Provision for income taxes

Net income (loss)

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—Non-GAAP Financial Measures .”

Comparison of the Three Months Ended September 30, 2021 and 2020

Three Months Ended September 30,

Comparison of the Three Months Ended March 31, 2022 and 2021

Three Months Ended March 31,

(amounts in thousands)

Total revenues

Total revenues increased by $144.4 million, or 18.4%, during the three months ended September 30, 2021, as compared to the three months ended September 30, 2020.

The sales segment revenues increased $55.1 million, of which $22.3 million were revenues from acquired businesses during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.

Excluding revenues from acquired businesses, the segment experienced an increase of $32.8 million in organic revenues primarily due to growth in our retail merchandising services that benefitted from several new clients and our European businesses that experienced recoveries from temporary reduction in services as a result of the COVID-19 pandemic.

The marketing segment revenues increased $89.3 million, of which $4.1 million were revenues from acquired businesses during the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.

Total revenues increased by $123.8 million, or 15.6%, during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

The sales segment revenues increased $57.6 million during the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, of which $47.9 million were revenues from acquired businesses.

Excluding revenues from acquired businesses and unfavorable foreign exchange rates of $5.0 million, the segment experienced an increase of $14.7 million in organic revenues primarily due to our European joint venture which experienced continued recoveries from temporary reduction in services as a result of the COVID-19 pandemic and growth in our retail merchandising services.

The marketing segment revenues increased $66.1 million during the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, of which $2.1 million were revenues from acquired businesses.

Excluding revenues from acquired businesses, the segment experienced an increase of $64.0 million in organic revenues.

The increase in revenues was primarily due to an increase in our in-store product demonstration

and sampling services which continue to recover from the temporary suspensions put in place last year as a result of the COVID-19 pandemic and sustained growth in our digital marketing services.

The increase in revenues was primarily due to an increase in our in-store product demonstration and sampling services which continue to recover from the temporary suspensions as a result of the COVID-19 pandemic, partially offset by a decrease in certain of our media services.

Cost of Revenues

Cost of revenues as a percentage of revenues for the three months ended September 30, 2021 was 82.5%, as compared to 79.7% for the three months ended September 30, 2020.

The increase as a percentage of revenues was largely attributable to the change in the revenue mix of our services as a result of recoveries from the COVID-19 pandemic and continued investment in our merchandising work force and to stand up associates on behalf of clients to restart services which were dormant during COVID-19.

Cost of revenues as a percentage of revenues for the three months ended March 31, 2022 was 85.9%, as compared to 82.6% for the three months ended March 31, 2021.

The increase as a percentage of revenues was largely attributable to the change in the revenue mix of our services as a result of recoveries from the COVID-19 pandemic and acquired businesses, the ongoing investment in recruiting, labor and wage spend, and an increase in self-insured medical claims.

Selling, General and Administrative Expenses

Selling, general and administrative expenses as a percentage of revenues for the three months ended September 30, 2021 was 4.1%, as compared to 1.5% for the three months ended September 30, 2020.

The increase as a percentage of revenues for the three months ended September 30, 2021 was primarily attributable to the change in restructuring expenses as a result of favorable settlement of lease liability obligations for certain exited leases, net of termination fees paid during prior year and the change in fair value adjustments related to contingent consideration.

Selling, general and administrative expenses as a percentage of revenues for the three months ended March 31, 2022 was 5.3% compared to 5.1% for the three months ended March 31, 2021, which stayed relatively consistent year over year.

Depreciation and Amortization Expense

Depreciation and amortization expense stayed relatively consistent at $59.2 million for the three months ended September 30, 2021 compared to $58.6 million for the three months September 30, 2020.

Depreciation and amortization expense stayed relatively consistent at $57.8 million for the three months ended March 31, 2022 compared to $59.6 million for the three months ended March 31, 2021.

Operating Income

Three Months Ended September 30,

Three Months Ended March 31,

(amounts in thousands)

Total operating income

In the sales and marketing segments, the decrease in operating income during the three months ended September 30, 2021 was primarily attributable to lapping favorable settlements of lease liability obligations associated with real estate realignment initiatives in 2020, a non-cash change in fair value adjustments related to contingent consideration.

In the sales segment, the decrease in operating income during the three months ended March 31, 2022 was primarily attributable to ongoing investments in labor and wage spend and an increase in the amount of self-insured medical claims.

In the marketing segment, the increase in operating income during the three months ended March 31, 2022 was primarily attributable to the growth in revenues as described above.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability represents $3.5 million of non-cash gain resulting from a fair value adjustment to warrant liability with respect to the private placement warrants for the three months ended September 30, 2021.

Fair value adjustments are based on the input assumptions used in the Black-Scholes option pricing model, including our Class A common stock price at the end of the reporting period, the implied volatility or other inputs to the model and the number of private placement warrants outstanding, which may vary from period to period.

Change in fair value of warrant liability represents $21.0 million of non-cash gain resulting from a fair value adjustment to warrant liability with respect to the private placement warrants for the three months ended March 31, 2022, approximating the fair value with the warrant price of the public warrants.

Interest Expense, net

Interest expense decreased $11.8 million, or 24.4%, to $36.5 million for the three months ended September 30, 2021, from $48.2 million for the three months ended September 30, 2020.

The decrease in interest expense, net was primarily due to the decrease in total debt as a result of the Transactions.

Interest expense decreased $19.0 million, or 61.5%, to $11.9 million for the three months ended March 31, 2022, from $30.9 million for the three months ended March 31, 2021.

The decrease in interest expense, net was primarily due to the decrease in fair value changes in derivatives instruments.

Provision for Income Taxes

Provision for income taxes was $8.3 million for the three months ended September 30, 2021 compared to $3.6 million for the three months ended September 30, 2020.

The increase was primarily attributable to the variations in the income (loss) before income taxes from the respective previous quarters.

Net income was $24.3 million for the three months ended September 30, 2021, compared to net income of $36.7 million for the three months ended September 30, 2020.

The decrease in net income was primarily driven by the decrease in operating income and unfavorable variance associated with the provision for income taxes, partially offset by the decrease in interest expense as a result of the consummation of the Transactions as described above.

Provision for income taxes was $9.0 million for the three months ended March 31, 2022 as compared to $1.7 million for the three months ended March 31, 2021.

The fluctuation was primarily attributable to the greater pre-tax income for the three months ended March 31, 2022.

Net income was $17.5 million for the three months ended March 31, 2022, compared to net loss of $0.5 million for the three months ended March 31, 2021.

The increase in net income was primarily driven by the decrease in change in fair value of warrant liability and interest expense as described above, partially offset by the decrease in operating income and increase in the provision for income taxes.

Adjusted Net Income

The decrease in Adjusted Net Income for the three months ended September 30, 2021 was attributable to the increase in provision for income taxes as described above .

The increase in Adjusted Net Income for the three months ended March 31, 2022 was attributable to the decrease in change in fair value of warrant liability, interest expense, net, partially offset by the provision for income taxes as described above .

For a reconciliation of Adjusted Net Income to Net income (loss), see “

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Adjusted EBITDA and Adjusted EBITDA by Segment

Three Months Ended September 30,

(amounts in thousands)

Total Adjusted EBITDA

Adjusted EBITDA decreased $2.5 million, or 1.8%, to $133.8 million for the three months ended September 30, 2021, from $136.3 million for the three months ended September 30, 2020.

The decrease in Adjusted EBITDA was primarily attributable to the investment to stand up our associates on behalf of clients in our retail merchandising segment and the sampling and demonstration business that is recovering from shut downs caused by the COVID-19 pandemic and by expected volume normalization in our headquarter sales services against last year’s pantry loading at-home .

For a reconciliation of Adjusted EBITDA to net income, see “—

Non-GAAP Financial Measures .”

Comparison of the Nine Months Ended September 30, 2021 and 2020

Nine Months Ended September 30,

(amounts in thousands)

Total revenues

Total revenues increased by $264.5 million, or 11.5%, during the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020.

The sales segment revenues increased $183.0 million, of which $28.4 million were revenues from acquired businesses during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.

Excluding revenues from acquired businesses, the segment experienced an increase of $154.6 million in organic revenues primarily due to growth in our retail services that benefitted from several new clients, expansion in our e-commerce services, and our European businesses which experienced recoveries from temporary reduction in services as a result of the COVID-19 pandemic.

The marketing segment revenues increased $81.4 million, of which $11.1 million were revenues from acquired businesses during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.

Excluding revenues from acquired businesses, the segment experienced an increase of $70.3 million in organic revenues.

The increase in revenues was primarily due to continued growth in our digital marketing services.

Our product demonstration and sampling revenues were consistent with prior year for the nine months ended September 30, 2021, which included a decline in first quarter this year as compared to the first quarter of 2020, which was largely at full scale pre-pandemic, and growth in the subsequent two quarters this year.

Cost of Revenues

Cost of revenues as a percentage of revenues for the nine months ended September 30, 2021 was 82.4%, as compared to 81.6% for the nine months ended September 30, 2020, which is relatively consistent year over year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses as a percentage of revenues for nine months ended September 30, 2021 was 4.9%, as compared to 5.8% for the nine months ended September 30, 2020.

The decrease as a percentage of revenues for the nine months ended September 30, 2021 was primarily attributable to a decrease in restructuring charges primarily associated with terminating certain office leases and a decrease in equity-based compensation expense associated with our Common Series D Units partially offset by stock-based compensation expense.

In connection with the Transactions, we adopted the Advantage Solutions Inc.

2020 Incentive Award Plan (the “2020 Plan”

) with awards granted during the nine months ended September 30, 2021.

Depreciation and Amortization Expense

Depreciation and amortization expense increased $3.9 million, or 2.2%, to $181.5 million for the nine months ended September 30, 2021, from $177.5 million for the nine months ended September 30, 2020.

The increase is primarily due to additional amortization expenses of intangibles from acquisitions.

Operating Income

Nine Months Ended September 30,

(amounts in thousands)

Total operating income

In the sales segment, the increase in operating income during the nine months ended September 30, 2021 was primarily attributable to growth in revenues together with the change in fair value adjustments related to contingent consideration and the decrease in selling, general and administrative expenses as described above.

In the marketing segment, the decrease in operating income during the nine months ended September 30, 2021 was primarily attributable to the change in fair value adjustments related to contingent consideration and the decrease in recovery from the Take 5 Matter partially offset by growth in revenues and the decrease in selling, general and administrative expenses as described above.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability represents $5.0 million of non-cash gain resulting from a fair value adjustment to warrant liability with respect to the private placement warrants for the nine months ended September 30, 2021.

Fair value adjustment are based on the input assumptions used in the Black-Scholes option pricing model, including our Class A common stock price at the end of the reporting period, the implied volatility or other inputs to the model and the number of private placement warrants outstanding, which may vary from period to period.

Interest Expense, net

Interest expense decreased $47.0 million, or 31.0%, to $105.5 million for the nine months ended September 30, 2021, from $151.6 million for the nine months ended September 30, 2020.

The decrease in interest expense, net was primarily due to the decrease in total debt as a result of the Transactions.

Provision for (benefit from) Income Taxes

Provision for income taxes was $16.6 million for the nine months ended September 30, 2021 as compared to a benefit from income taxes of $8.7 million for the nine months ended September 30, 2020.

The fluctuation was primarily attributable to income before taxes during the nine months ended September 30, 2021 compared to a loss before taxes during the nine months ended September 30, 2020.

In addition, discrete items during the nine months ended September 30, 2021 related to a valuation allowance for the Company’s Mexico operations and the remeasurement of deferred tax liabilities in the UK and US state jurisdictions due to income tax rate changes.

Net income was $29.5 million for the nine months ended September 30, 2021, compared to net loss of $22.8 million for the nine months ended September 30, 2020.

The increase in net income was primarily driven by the increase in operating income and decrease in interest expense as a result of the consummation of the Transactions partially offset by unfavorable variances associated with the provision for income taxes as described above.

Adjusted Net Income

The increase in Adjusted Net Income for the nine months ended September 30, 2021 was attributable to the decrease in interest expense as a result of the consummation of the Transactions and change in fair value of warrant liability partially offset by recovery from the Take 5 Matter and the increase in provision for income taxes as described above.

For a reconciliation of Adjusted Net Income to Net income (loss), see “—

Non-GAAP Financial Measures.”

Adjusted EBITDA and Adjusted EBITDA by Segment

Nine Months Ended September 30,

Three Months Ended March 31,

(amounts in thousands)

Total Adjusted EBITDA

Adjusted EBITDA increased $12.5 million, or 3.5%, to $367.2 million for the nine months ended September 30, 2021, from $354.6 million for the nine months ended September 30, 2020.

The increase in Adjusted EBITDA was primarily attributable to the growth in revenues as described above partially offset by investment in recruiting to build-back our workforce impacted by the COVID-19 pandemic .

Adjusted EBITDA decreased $14.7 million, or 13.2%, to $96.7 million for the three months ended March 31, 2022, from $111.4 million for the three months ended March 31, 2021.

The decrease in Adjusted EBITDA was primarily attributable to the increase in cost of revenues as described above.

For a reconciliation of Adjusted EBITDA to net income, see “—

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Adjusted Net Income is a non-GAAP financial measure.

management fee, (iv) change in fair value of warrant liability, (v) fair value adjustments of contingent consideration related to acquisitions, (vi) acquisition-related expenses, (vii) costs associated with COVID-19, net of benefits received, (viii) EBITDA for economic interests in investments, (ix) restructuring expenses, (x) litigation expenses, (xi) (Recovery from) loss on Take 5, (xii) deferred financing fees, (xiii) costs associated with the Take 5 Matter, (xiv) other adjustments that management believes are helpful in evaluating our operating performance and (xv) related tax adjustments.

Adjusted Net Income means net income (loss) before (i) impairment of goodwill and indefinite-lived assets, (ii) amortization of intangible assets, (iii) equity based compensation of Topco, (iv) change in fair value of warrant liability, (v) fair value adjustments of contingent consideration related to acquisitions, (vi) acquisition-related expenses, (vii) costs associated with COVID-19, net of benefits received, (viii) EBITDA for economic interests in investments, (ix) restructuring expenses, (x) litigation expenses (recovery), (xi) costs associated with the Take 5 Matter, (xii) other adjustments that management believes are helpful in evaluating our operating performance and (xiii) related tax adjustments.

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A reconciliation of Adjusted Net Income to Net income (loss) is provided in the following table:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

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Net income attributable to noncontrolling interest

Equity based compensation of Topco and Advantage Sponsors’

management fee (a)

Equity based compensation of Topco (a)

Change in fair value of warrant liability

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Restructuring expenses (e)

Litigation expenses (f)

Litigation expenses (recovery) (f)

Amortization of intangible assets (g)

Costs associated with COVID-19, net of benefits received (h)

Recovery from Take 5

Costs associated with the Take 5 Matter (i)

Tax adjustments related to non-GAAP adjustments (j)

Costs associated with the Take 5 Matter (j)

Tax adjustments related to non-GAAP adjustments (k)

Adjusted Net Income

Adjusted EBITDA and Adjusted EBITDA by segment are supplemental non-GAAP financial measures of our operating performance.

management fee, (vii) change in fair value of warrant liability, (viii) stock-based compensation expense, (ix) fair value adjustments of contingent consideration related to acquisitions, (x) acquisition-related expenses, (xi) costs associated with COVID-19, net of benefits received, (xii) EBITDA for economic interests in investments, (xiii) restructuring expenses, (xiv) litigation expenses, (xv) (Recovery from) loss on Take 5, (xvi) costs associated with the Take 5 Matter and (xvii) other adjustments that management believes are helpful in evaluating our operating performance.

Adjusted EBITDA means net income (loss) before (i) interest expense, net, (ii) provision for income taxes, (iii) depreciation, (iv) impairment of goodwill and indefinite-lived assets, (v) amortization of intangible assets, (vi) equity based compensation of Topco, (vii) change in fair value of warrant liability, (viii) stock-based compensation expense, (ix) fair value adjustments of contingent consideration related to acquisitions, (x) acquisition-related expenses, (xi) costs associated with COVID-19, net of benefits received, (xii) EBITDA for economic interests in investments, (xiii) restructuring expenses, (xiv) litigation expenses (recovery), (xv) costs associated with the Take 5 Matter and (xvi) other adjustments that management believes are helpful in evaluating our operating performance.

We present Adjusted EBITDA and Adjusted EBITDA by segment because they are key operating measures used by us to assess our financial performance.

These measures adjust for items that we believe do not reflect the ongoing operating performance of our business, such as certain noncash items, unusual or infrequent items or items that change from period to period without any material relevance to our operating performance.

We evaluate these

measures in conjunction with our results according to GAAP because we believe they provide a more complete understanding of factors and trends affecting our business than GAAP measures alone.

We evaluate these measures in conjunction with our results according to GAAP because we believe they provide a more complete understanding of factors and trends affecting our business than GAAP measures alone.

Furthermore, the agreements governing our indebtedness contain covenants and other tests based on measures substantially similar to Adjusted EBITDA.

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A reconciliation of Adjusted EBITDA to Net income (loss) is provided in the following table:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

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Interest expense, net

Provision for (benefit from) income taxes

Provision for income taxes

Depreciation and amortization

Equity based compensation of Topco and Advantage Sponsors’

management fee (a)

Equity based compensation of Topco (a)

Change in fair value of warrant liability

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Restructuring expenses (e)

Litigation expenses (f)

Litigation expenses (recovery) (f)

Costs associated with COVID-19, net of benefits received (h)

Recovery from Take 5

Costs associated with the Take 5 Matter (i)

Costs associated with the Take 5 Matter (j)

Adjusted EBITDA

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Sales Segment

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

1 unchanged sentence

Depreciation and amortization

Equity based compensation of Topco and Advantage Sponsors’

management fee (a)

Equity based compensation of Topco (a)

Stock-based compensation expense (b)

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Restructuring expenses (e)

Litigation expenses (f)

Litigation expenses (recovery) (f)

Costs associated with COVID-19, net of benefits received (h)

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Marketing Segment

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

1 unchanged sentence

Depreciation and amortization

Equity based compensation of Topco and Advantage Sponsors’

management fee (a)

Equity based compensation of Topco (a)

Stock-based compensation expense (b)

3 unchanged sentences

Restructuring expenses (e)

Litigation expenses (f)

Litigation expenses (recovery) (f)

Costs associated with COVID-19, net of benefits received (h)

Recovery from Take 5

Costs associated with the Take 5 Matter (i)

Costs associated with the Take 5 Matter (j)

Marketing Segment Adjusted EBITDA

Represents the management fees and reimbursements for expenses paid to certain of the Advantage Sponsors (or certain of the management companies associated with it or its advisors) pursuant to a management services agreement in the three and nine months ended September 30, 2021 and 2020.

Also represents expenses related to (i) equity-based compensation expense associated with grants of Common Series D Units of Topco made to one of the Advantage Sponsors, (ii) equity-based compensation expense associated with the Common Series C Units of Topco as a result of the Transactions, (iii) compensation amounts associated with the Company’s Management Incentive Plan originally scheduled for potential payment March 2022 that were accelerated and terminated as part of the Transactions, and (iv) compensation amounts associated with the anniversary payments to Tanya Domier.

Certain of Ms.

Domier’s anniversary payments were accelerated as part of the Transactions.

Represents non-cash compensation expense related to PSUs and RSUs under the 2020 Plan and the Advantage Solutions 2020 Employee Stock Purchase Plan.

Represents adjustments to the estimated fair value of our contingent consideration liabilities related to our acquisitions, excluding the present value accretion recorded in interest expense, net, for the applicable periods.

See Note 6—Fair Value of Financial Instruments to our unaudited condensed financial statements for the three and nine months ended September 30, 2021 and 2020.

Represents fees and costs associated with activities related to our acquisitions and restructuring activities related to our equity ownership, including transaction bonuses paid in connection with the Transactions, professional fees, due diligence, public company readiness and integration activities.

Represents expenses related to (i) equity-based compensation expense associated with grants of Common Series D Units of Topco made to one of the Advantage Sponsors (as defined below) and (ii) equity-based compensation expense associated with the Common Series C Units of Topco.

Represents non-cash compensation expense related to the 2020 Incentive Award Plan and the 2020 Employee Stock Purchase Plan.

Represents adjustments to the estimated fair value of our contingent consideration liabilities related to our acquisitions.

See Note 5—

Fair Value of Financial Instruments to our unaudited condensed financial statements for the three months ended March 31, 2022 and 2021.

Represents fees and costs associated with various internal reorganization activities among our consolidated entities.

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and (ii) benefits received from government grants for COVID-19 relief.

Represents costs associated with investigation and remediation activities related to the Take 5 Matter, primarily, professional fees and other related costs, for the three and nine months ended September 30, 2021 and 2020, respectively.

Represents costs associated with the Take 5 Matter, primarily, professional fees and other related costs, for the three months ended March 31, 2022 and 2021, respectively.

Represents the tax provision or benefit associated with the adjustments above, taking into account the Company’s applicable tax rates, after excluding adjustments related to items that do not have a related tax impact.

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Our principal uses of cash are operating expenses, working capital requirements, acquisitions, interest on debt and repayment of debt.

Our principal sources of liquidity prior to the Transactions included $3.3 billion of outstanding debt under our then-existing first and second lien credit agreements, which we repaid on October 28, 2020 in connection with the Transactions.

A summary of our cash operating, investing and financing activities are shown in the following table:

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

Net cash provided by operating activities

Net cash (used in) provided by operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Net cash used in financing activities

Net effect of foreign currency fluctuations on cash

Net change in cash, cash equivalents and restricted cash

Net Cash Provided by Operating Activities

Net cash provided by operating activities during the nine months ended September 30, 2021 consisted of net income of $36.4 million adjusted for certain non-cash items, including depreciation and amortization of $181.5 million and effects of changes in working capital.

Net cash provided by operating activities during the nine months ended September 30, 2020, consisted of net loss of $22.8 million adjusted for certain non-cash items, including depreciation and amortization of $177.5 million and effects of changes in working capital.

The decrease in cash provided by operating activities during the nine months ended September 30, 2021 relative to the same period in 2020 was primarily due to the decreased need for working capital in the prior year as a result of COVID-19 related temporary suspensions of in-store sampling services combined with the deferral of payment of our portion of Social Security taxes during the nine months ended September 30, 2020.

Net Cash (Used in) Provided by Operating Activities

Net cash used in operating activities during the three months ended March 31, 2022 consisted of net income of $16.9 million adjusted for certain non-cash items, including depreciation and amortization of $57.8 million and effects of changes in working capital.

Net cash provided by operating activities during the three months ended March 31, 2021 consisted of net loss of $0.5 million adjusted for certain non-cash items, including depreciation and amortization of $59.6 million and effects of changes in working capital.

The increase in cash used in operating activities during the three months ended March 31, 2022 relative to the same period in 2021 was primarily due to increased working capital requirements to stand up services during the three months ended March 31, 2022.

Net Cash Used in Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2021 primarily consisted of the purchase of businesses, net of cash acquired of $40.0 million and purchase of property and equipment of $24.5 million.

Net cash used in investing activities during the nine months ended September 30, 2020, primarily consisted of the purchase of businesses, net of cash acquired of $51.4 million and purchase of property and equipment of $23.2 million.

Net Cash (Used in) Provided by Financing Activities

Net cash used in investing activities during the three months ended March 31, 2022 primarily consisted of the purchase of businesses, net of cash acquired of $1.8 million and purchase of property and equipment of $10.4 million.

Net cash used in investing activities during the three months ended March 31, 2021 primarily consisted of the purchase of businesses, net of cash acquired of $14.0 million and purchase of property and equipment of $5.2 million.

Net Cash Used in Financing Activities

We primarily finance our growth through cash flows from operations, however, we also incur long-term debt or borrow under lines of credit when necessary to execute acquisitions.

Cash flows from financing activities consisted of borrowings related to these lines of credit and subsequent payments of principal and financing fees.

Additionally, many of our acquisition agreements include contingent consideration arrangements, which are generally based on the achievement of future financial performance by the operations attributable to the acquired companies.

The portion of the cash payment up to the acquisition date fair value of the contingent consideration liability are classified as financing outflows, and amounts paid in excess of the acquisition date fair value of that liability are classified as operating outflows.

Cash flows related to financing activities during the nine months ended September 30, 2021 were primarily related to borrowings of $51.7 million and repayment of $102.7 million on the Revolving Credit Facility and our lines of credit and $8.6 million related to payments of contingent consideration and holdback payments

Cash flows related to financing activities during the nine months ended September 30, 2020, were primarily related to the borrowing and subsequent repayment of $104.9 million under the accounts receivable securitization facility that existed as of September 30, 2020, proceeds of $2.8 million from one of our majority owned subsidiaries operating in Japan entering into a local government loan program, principal payments of $19.8 million on our long-term debt and $11.4 million related to payments of contingent consideration and holdback payments.

Cash flows used in financing activities during the three months ended March 31, 2022 were primarily related to borrowings of $9.3 million, and offset by repayment of $9.0 million, on our lines of credit, payment of principal on our Term Loan Facility of $3.3 million, partially offset by $1.7 million related to proceeds from the issuance of Class A common stock.

Cash flows used in financing activities during the three months ended March 31, 2021 were primarily related to repayment of $50.0 million on the Revolving Credit Facility and payment of principal on our Term Loan Facility of $3.3 million .

Description of Credit Facilities

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and together with the Revolving Credit Facility, the “Senior Secured Credit Facilities”).

On October 28, 2021, the Borrower entered into Amendment No.

1 to the First Lien Credit Agreement (the “First Lien Amendment”), which amended the Term Loan Facility to, among other amendments, reduce the applicable interest margins on the term loans, reset the six-month period for which a 1.00% prepayment premium shall apply to any prepayment of the term loans in connection with a repricing transaction and update the benchmark replacement provisions in connection with the upcoming cessation of U.S.

Dollar LIBOR to align with more recent standards adopted by the industry and by Bank of America.

On October 28, 2021, the Borrower also entered into the First Amendment to ABL Revolving Credit Agreement (the “ABL Amendment”), which amended the Revolving Credit Facility to reduce the interest rate floors and update the benchmark replacement provisions in the same manner as in the First Lien Amendment.

Revolving Credit Facility

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We may use borrowings under the Revolving Credit Facility to fund working capital and for other general corporate purposes, including permitted acquisitions and other investments.

As of September 30, 2021, we had unused capacity under our Revolving Credit Facility available to us of $400.0 million, subject to borrowing base limitations (without giving effect to approximately $60.3 million of outstanding letters of credit and the borrowing base limitations for additional borrowings).

As of March 31, 2022, we had unused capacity under our Revolving Credit Facility available to us of $400.0 million, subject to borrowing base limitations (without giving effect to approximately $54.8 million of outstanding letters of credit and the borrowing base limitations for additional borrowings).

Borrowings under the Revolving Credit Facility are limited by borrowing base calculations based on the sum of specified percentages of eligible accounts receivable plus specified percentages of qualified cash, minus the amount of any applicable reserves.

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The applicable margins for the Revolving Credit Facility are 2.00%, 2.25% or 2.50%, with respect to Eurodollar rate borrowings and 1.00%, 1.25% or 1.50%, with respect to base rate borrowings, in each case depending on average excess availability under the Revolving Credit Facility.

representations and warranties contained in the credit agreement governing the Revolving Credit Facility and the absence of any default or event of default thereunder.

The Borrower’s ability to draw under the Revolving Credit Facility or issue letters of credit thereunder will be conditioned upon, among other things, the Borrower’s delivery of prior written notice of a borrowing or issuance, as applicable, the Borrower’s ability to reaffirm the representations and warranties contained in the credit agreement governing the Revolving Credit Facility and the absence of any default or event of default thereunder.

The Borrower’s obligations under the Revolving Credit Facility are guaranteed by Karman Intermediate Corp.

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and (iii) certain other customary fees and expenses of the lenders and agents thereunder.

The Revolving Credit Facility contains customary covenants, including, but not limited to, restrictions on the Borrower’s ability and that of our subsidiaries to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, make acquisitions, loans, advances or investments, pay dividends, sell or otherwise transfer assets, optionally prepay or modify terms of any junior indebtedness, enter into transactions with affiliates or change our line of business.

otherwise transfer assets, optionally prepay or modify terms of any junior indebtedness, enter into transactions with affiliates or change our line of business.

The Revolving Credit Facility will require the maintenance of a fixed charge coverage ratio (as set forth in the credit agreement governing the Revolving Credit Facility) of 1.00 to 1.00 at the end of each fiscal quarter when excess availability is less than the greater of $25 million and 10% of the lesser of the borrowing base and maximum borrowing capacity.

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Such events of default include payment defaults to the lenders thereunder, material inaccuracies of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, voluntary and involuntary bankruptcy, insolvency, corporate arrangement, winding-up, liquidation or similar proceedings, material money judgments, material pension-plan events, certain change of control events and other customary events of default.

On October 28, 2021, the Borrower and Holdings entered into the First Amendment to ABL Revolving Credit Agreement (the “ABL Amendment”), which amended the ABL Revolving Credit Agreement, dated October 28, 2020, by and among the Borrower, Holdings, the lenders from time to time party thereto and Bank of America, as administrative agent.

The ABL Amendment was entered into by the Borrower to amend certain terms and provisions, including (i) reducing the interest rate floor for Eurocurrency rate loans from 0.50% to 0.00% and base rate loans from 1.50% to 1.00%, and (ii) updating the provisions by which U.S.

Dollar LIBOR will eventually be replaced with the Secured Oversight Financing Rate ( “

S OFR”) or another interest rate benchmark to reflect the most recent standards and practices used in the industry.

Term Loan Facility

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Such events of default will include payment defaults to the lenders thereunder, material inaccuracies of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, voluntary and involuntary bankruptcy, insolvency, corporate arrangement, winding-up, liquidation or similar proceedings, material money judgments, change of control and other customary events of default.

On October 28, 2021 (the “First Lien Amendment Effective Date”), the Borrower, Holdings, and certain of the Borrower’s subsidiaries, entered into Amendment No.

1 to the First Lien Credit Agreement (the “First Lien Amendment”), which amended the First Lien Credit Agreement, dated October 28, 2020, by and among the Borrower, Holdings, Bank of America, as administrative agent and collateral agent, each lender party from time to time thereto, and the other parties thereto.

Additional terms and provisions amended include (i) resetting the period for six months following the First Lien Amendment Effective Date in which a 1.00% prepayment premium shall apply to any prepayment of the term loan in connection with certain repricing events, and (ii) updating the provisions by which U.S.

Dollar LIBOR will eventually be replaced with SOFR or another interest rate benchmark to reflect the most recent standards and practices used in the industry and by Bank of America.

Senior Secured Notes

In connection with the Transactions, Finco issued $775.0 million aggregate principal amount of 6.50% Senior Secured Notes due 2028 (the “Notes”).

In connection with the Transactions, Advantage Solutions FinCo LLC (“Finco”) issued $775.0 million aggregate principal amount of 6.50% Senior Secured Notes due 2028 (the “Notes”).

Substantially concurrently with the Transactions, Finco merged with and into Advantage Sales & Marketing Inc.

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and lack of perfection of liens on a material portion of the collateral, in each case subject to applicable grace periods.

Prior Credit Facilities

In connection with the Transactions, our debt arrangements under the then first lien credit agreement and second lien credit agreement as well as the accounts receivable securitization facility that existed as of September 30, 2020 were repaid and terminated with incremental costs of $86.8 million.

For a description of the Prior Facilities that were refinanced in connection with the consummation of the Transactions on October 28, 2020,

please see the additional information set forth in Note 7—

Debt , to our audited consolidated financial statements for the year ended December 31, 2020.

Cash and Cash Equivalents Held Outside the United States

As of September 30, 2021 and December 31, 2020, $80.9 million and $87.7 million, respectively, of our cash and cash equivalents and marketable securities were held by foreign subsidiaries.

As of September 30, 2021, and December 31, 2020, $33.3 million and $28.9 million, respectively, of our cash and cash equivalents and marketable securities were held by foreign branches.

As of March 31, 2022 and December 31, 2021, $69.9 million and $86.2 million, respectively, of our cash and cash equivalents and marketable securities were held by foreign subsidiaries.

As of March 31, 2022, and December 31, 2021, $40.8 million and $40.0 million, respectively, of our cash and cash equivalents and marketable securities were held by foreign branches.

We assessed our determination as to our indefinite reinvestment intent for certain of our foreign subsidiaries and recorded a deferred tax liability of approximately $2.5 million of withholding tax as of December 31, 2021 for unremitted earnings in Canada with respect to which the Company does not have an indefinite reinvestment assertion.

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Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are included in our Annual Report on Form 10-K/A filed May 17, 2021 for the year ended December 31, 2020 and did not materially change during the three and nine months ended September 30, 2021.

Our critical accounting policies and estimates are included in our Annual Report on Form 10-K filed March 1, 2022 for the year ended December 31, 2021 and did not materially change during the three months ended March 31, 2022.

Recently Issued Accounting Pronouncements

See the information set forth in Note 1, Organization and Significant Accounting Policies –

Recent Accounting Pronouncements , to our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2021 and 2020.

included in “Part I, Financial Information—Item 1.

Recent Accounting Pronouncements , to our unaudited condensed consolidated financial statements for the three months ended March 31, 2022 and 2021 included in “Part I, Financial Information—Item 1.

Financial Statements”

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements