What changed in this filing

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Item 1. Financial Statements

2022-11-09 compared with 2022-08-09 · 282 added, 246 removed, 971 unchanged (35% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

September 30,

(in thousands, except share data)

Current assets

26 unchanged sentences

319,675,888 and 316,963,552 shares issued and outstanding as of

June 30, 2022 and December 31, 2021, respectively

September 30, 2022 and December 31, 2021, respectively

Additional paid in capital

3 unchanged sentences

Treasury stock, at cost;

1,610,014 shares as of June 30, 2022

1,610,014 shares as of September 30, 2022

and December 31, 2021

6 unchanged sentences

ADVANTAGE SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Three Months Ended June 30,

Six Months Ended June 30,

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except share and per share data)

8 unchanged sentences

Interest expense, net

Total other expenses (income)

Total other expenses

Income before income taxes

Provision for income taxes

net income (loss) attributable to

net income attributable to

noncontrolling interest

1 unchanged sentence

Advantage Solutions Inc.

Other comprehensive (loss) income, net of tax:

Other comprehensive loss, net of tax:

Foreign currency translation adjustments

Total comprehensive (loss) income attributable to

Total comprehensive income attributable to

stockholders of Advantage Solutions Inc.

13 unchanged sentences

(in thousands, except share data)

Balance at April 1, 2022

Balance at July 1, 2022

Comprehensive income (loss)

Net income (loss)

Foreign currency translation adjustments

1 unchanged sentence

Interest on loans to Karman Topco L.P.

Increase in noncontrolling interest

Equity-based compensation of Karman

Shares issued under 2020 Employee

Stock Purchase Plan

Shares issued under 2020 Incentive

Stock-based compensation expense

Balance at June 30, 2022

Balance at September 30, 2022

Solutions Inc.

6 unchanged sentences

(in thousands, except share data)

Balance at April 1, 2021

Balance at July 1, 2021

Comprehensive income (loss)

Net income (loss)

Foreign currency translation adjustments

2 unchanged sentences

Redemption of noncontrolling interest

Equity-based compensation of Karman Topco L.P.

Shares issued upon vesting of restricted stock units

Shares issued upon exercise of warrants

Equity-based compensation of Karman

Shares issued upon exercise of

Shares issued under 2020 Employee Stock Purchase

Stock-based compensation expense

Balance at June 30, 2021

Balance at September 30, 2021

See Notes to the Condensed Consolidated Financial Statements.

10 unchanged sentences

Comprehensive income (loss)

Net income (loss)

Foreign currency translation adjustments

1 unchanged sentence

Interest on loans to Karman Topco L.P.

Increase in noncontrolling interest

Equity-based compensation of Karman

3 unchanged sentences

Stock-based compensation expense

Balance at June 30, 2022

Balance at September 30, 2022

Solutions Inc.

8 unchanged sentences

Comprehensive income (loss)

Net income (loss)

Foreign currency translation adjustments

Total comprehensive loss

Total comprehensive income (loss)

Interest on loans to Karman Topco L.P.

3 unchanged sentences

Shares issued upon vesting of restricted stock units

Shares issued under 2020 Employee Stock Purchase

Shares issued upon exercise of warrants

Stock-based compensation expense

Balance at June 30, 2021

Balance at September 30, 2021

See Notes to the Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

2 unchanged sentences

operating activities

Noncash interest expense, net

Noncash interest (income) expense, net

Depreciation and amortization

19 unchanged sentences

Purchase of businesses, net of cash acquired

Purchase of investment in unconsolidated affiliates

Purchase of property and equipment

Proceeds from divestiture

Net cash used in investing activities

7 unchanged sentences

Holdback payments

Contribution from noncontrolling interest

Redemption of noncontrolling interest

Net cash provided by (used in) financing activities

Net cash used in financing activities

Net effect of foreign currency changes on cash

17 unchanged sentences

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 June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 have been reflected in the condensed consolidated financial statements.

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, 2022 and for the three and nine months ended September 30, 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 six months ended June 30, 2022 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 and nine months ended September 30, 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

Beginning in March 2020 and continuing through the first quarter of 2021, the Company's services experienced the most severe 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.

Beginning in March 2020 and continuing through the first quarter of 2021, the Company’s services experienced the most severe 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 second quarter of 2022.

Most services began to recover in April 2021, and the recovery has continued through the third 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.

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 affected, and continues to 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 over operations by the local agencies in Russia.

1 unchanged sentence

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) .

in the Condensed Consolidated Statements of Operations and Comprehensive Income .

Recent Accounting Standards

Accounting Standards Recently Adopted by the Company

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848):

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on

5 unchanged sentences

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.

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.

2 unchanged sentences

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):

2 unchanged sentences

The guidance is applied 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.

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

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

20 unchanged sentences

Disaggregated revenues were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

8 unchanged sentences

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

Revenues recognized during t he three and six months ended June 30, 2022 that were included in Deferred revenues as of December 31, 2021 were $ 6.2 million and $ 27.9 million, respectively .

Revenues recognized during the three and six months ended June 30, 2021 that were included in Deferred revenues as of December 31, 2020 were $ 5.8 million and $ 31.9 million, respectively.

Revenues recognized during t he three and nine months ended September 30, 2022 that were included in Deferred revenues as of December 31, 2021 were $ 1.4 million and $ 29.2 million, respectively .

Revenues recognized during the 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 million, respectively.

2022 Acquisitions

During the six months ended June 30, 2022, the Company acquired a sales business and two marketing businesses.

During the nine months ended September 30, 2022, the Company acquired two sales businesses and two marketing 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.

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.

2 unchanged sentences

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 have been included in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) since its respective date of acquisition.

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

The aggregate purchase price for the acquisitions referenced above was $ 75.5 million, which includes $ 74.1 million paid in cash, $ 0.5 million recorded as contingent consideration liabilities, and $ 0.8 million recorded as holdback amounts.

4 unchanged sentences

Of the resulting goodwill relating to these acquisitions, $ 0.8 million is deductible for tax purposes.

The preliminary fair values of the identifiable assets and liabilities of the acquisitions completed during the six months ended June 30, 2022, as of the applicable acquisition dates, are as follows:

The Company acquired a 70 % ownership interest in one acquisition which also includes a put option exercisable by the 20 % shareholder that allows such shareholder to sell its 20 % noncontrolling interest to the Company for a multiple of the acquired subsidiary’s adjusted earnings.

As the put option is outside of the Company’s control, the estimated value of the 20 % noncontrolling interest is presented as a redeemable noncontrolling interest outside of permanent equity on the Condensed Consolidated Balance Sheets.

The preliminary fair values of the identifiable assets and liabilities of the acquisitions completed during the nine months ended September 30, 2022, as of the applicable acquisition dates, are as follows:

(in thousands)

8 unchanged sentences

Total liabilities

Redeemable noncontrolling interest

Noncontrolling interest

Total identifiable net assets

4 unchanged sentences

Client relationships

The operating results of the businesses acquired during the six months ended June 30, 2022 contributed total revenues of $ 8.0 million and $ 8.5 million in the three and six months ended June 30, 2022, respectively.

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 six months ended June 30, 2022, the Company incurred immaterial amounts in transaction costs related to the acquisitions described above.

Total identifiable intangible assets

The operating results of the businesses acquired during the nine months ended September 30, 2022 contributed total revenues of $ 12.8 million and $ 21.3 million in the three and nine months ended September 30, 2022, 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, 2022, the Company incurred immaterial amounts 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).

in the Condensed Consolidated Statements of Operations and Comprehensive Income.

2021 Acquisitions

During the six months ended June 30, 2021, the Company acquired three sales businesses.

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

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

3 unchanged sentences

The allocation of the excess purchase price was based upon estimates and assumptions.

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 results of operations of each acquired business has been included in the Condensed Consolidated Statements of Operations and Comprehensive Income 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.

4 unchanged sentences

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

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

The 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)

14 unchanged sentences

Client relationships

Developed technology

Total identifiable intangible assets

The operating results of the businesses acquired during the six months ended June 30, 2021 contributed total revenues of $ 6.3 million and $ 10.9 million in the three and six months ended June 30, 2021, respectively.

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 six months ended June 30, 2021, the Company incurred immaterial amounts in transaction costs related to the acquisitions described above.

During the three and nine months ended September 30, 2021, the Company incurred $ 0.3 million 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).

in the Condensed Consolidated Statements of Operations and Comprehensive Income.

Supplemental Pro-Forma Information (unaudited)

Supplemental information on an unaudited pro-forma basis, presented as if the acquisitions executed during the period from January 1, 2021 to August 9, 2022 had been consummated as of the beginning of the comparative prior period, is as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Supplemental information on an unaudited pro-forma basis, presented as if the acquisitions executed during the period from January 1, 2021 to November 9, 2022 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)

Goodwill and Intangible Assets

Changes in goodwill for the six months ended June 30, 2022 are as follows:

Changes in goodwill for the nine months ended September 30, 2022 are as follows:

(in thousands)

5 unchanged sentences

Foreign exchange translation effects

Balance at June 30, 2022

Accumulated impairment losses related to goodwill were $ 652.0 million as of June 30, 2022 and 2021.

Balance at September 30, 2022

Accumulated impairment losses related to goodwill were $ 652.0 million as of September 30, 2022 and 2021.

The following tables set forth information for intangible assets:

June 30, 2022

September 30, 2022

(amounts in thousands)

19 unchanged sentences

Total other intangible assets

Accumulated impairment losses related to indefinite-lived intangibles assets were $ 580.0 million as of June 30, 2022 and December 31, 2021.

Amortization of intangible assets was $ 50.7 million and $ 49.2 million for the three months ended June 30, 2022 and 2021, respectively, and $ 100.9 million and $ 98.6 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, estimated future amortization expense 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 September 30, 2022 and December 31, 2021.

Amortization of intangible assets was $ 50.0 million and $ 49.8 million for the three months ended September 30, 2022 and 2021, respectively, and $ 150.9 million and $ 148.4 million for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, estimated future amortization expense of the Company’s existing intangible assets are as follows:

(in thousands)

1 unchanged sentence

Total amortization expense

September 30,

(in thousands)

Term Loan Facility

Revolving Credit Facility

Government loans for COVID-19 relief

3 unchanged sentences

Long-term debt, net of current portion

As of June 30, 2022, the Company had $ 1.3 billion of debt outstanding under the Term Loan Facility (as defined in the Annual Report on Form 10-K filed March 1, 2022 for the year ended December 31, 2021) and $ 775.0 million of debt outstanding under the Notes (as defined in the Annual Report on Form 10-K filed March 1, 2022 for the year ended December 31, 2021) 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 June 30, 2022.

As of September 30, 2022, the Company had $ 1.3 billion of debt outstanding under the Term Loan Facility (as defined in the Annual Report on Form 10-K filed March 1, 2022 for the year ended December 31, 2021 (the “2021 Annual Report”) ) and $ 775.0 million of debt outstanding under the Notes (as defined in the 2021 Annual 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 September 30, 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 and $ 6.6 million during the three and six months ended June 30, 2022 and 2021, respectively.

The Company made the minimum quarterly principal

payments of $ 3.3 million and $ 9.9 million during the three and nine months ended September 30, 2022 and 2021, respectively.

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

As of June 30, 2022, the Company had $ 45.0 million of borrowing under the Revolving Credit Facility (as defined in the Annual Report on Form 10-K filed March 1, 2022 for the year ended December 31, 2021).

As of September 30, 2022, the Company had no borrowing under the Revolving Credit Facility (as defined in the 2021 Annual Report).

All borrowings under the Revolving Credit Facility are subject to the satisfaction of certain customary conditions.

1 unchanged sentence

The Company is required to pay a commitment fee ranging from 0.250 % to 0.375 % per annum in respect of the average daily unused commitments under the Revolving Credit Facility.

The interest rate on the Revolving Credit Facility as of June 30, 2022 was 5.75 %.

Fair Value of Financial Instruments

6 unchanged sentences

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.

June 30, 2022

September 30, 2022

(in thousands)

17 unchanged sentences

Interest Rate Cap Agreements

The Company had interest rate cap contracts with an aggregate notional value of principal of $ 650.0 million and $ 2.2 billion as of June 30, 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 June 30, 2022, $ 36.7 million of fair value of the Company’s outstanding interest rate caps were included in “Prepaid expenses and other current assets”

The Company had interest rate cap contracts with an aggregate notional value of principal of $ 650.0 million and $ 2.2 billion as of September 30, 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 September 30, 2022, $ 49.1 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).

in the Condensed Consolidated Statements of Operations and

Comprehensive Income.

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”

1 unchanged sentence

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 June 30, 2022 and 2021, the Company recorded a gain of $ 5.6 million and a loss of $ 1.2 million, respectively, within Interest expense, net, related to changes in the fair value of its derivative instruments.

During the six months ended June 30, 2022 and 2021, the Company recorded gains of $ 26.6 million and $ 4.3 million, respectively, within Interest expense, net, related to changes in the fair value of its derivative instruments.

in the Consolidated Statements of Operations and Comprehensive Income.

During the three months ended September 30, 2022 and 2021, the Company recorded a gain of $ 14.5 million and a loss of $ 0.2 million, respectively, within Interest expense , net, related to changes in the fair value of its derivative instruments.

During the nine months ended September 30, 2022 and 2021, the Company recorded gains of $ 41.1 million and $ 4.1 million, respectively, within Interest expense, net, related to changes in the fair value of its derivative instruments.

Forward Contracts

As of June 30, 2022, the Company had open euro forward contracts to hedge foreign currency exposure on a total of €

As of September 30, 2022, the Company had open euro forward contracts to hedge foreign currency exposure on a total of €

12.0 million with maturities in fiscal year 2022.

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

During the three and six months ended June 30, 2022 and 2021, the changes in fair value of the forward contracts were $ 1.7 million for both periods.

During the three and nine months ended September 30, 2022, the changes in fair value of the forward contracts were $ 3.8 million and $ 5.5 million, respectively.

During the three and nine months ended September 30, 2021, the Company recognized immaterial changes in fair value of the forward contracts.

Warrant Liability

As of June 30, 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 $ 1.8 million and $ 22.2

million, respectively.

As of September 30, 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 $ 0.7 million and $ 22.2 million, respectively.

The warrant liability was remeasured to fair value with adjustment of $ 1.1 million and $ 21.5 million reflected in “Change in fair value of warrant liability”

in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) during the three and six months ended June 30, 2022, respectively.

in the Condensed Consolidated Statements of Operations and Comprehensive Income during the three and nine months ended September 30, 2022, respectively.

The warrant liability was remeasured to fair value with adjustments of $ 3.5 million and $ 5.0 million reflected in “Change in fair value of warrant liability”

in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) during the three and six months ended June 30, 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.

in the Condensed Consolidated Statements of Operations and Comprehensive Income during 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 Consolidated Statement of Operations and Comprehensive Income 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.

7 unchanged sentences

Any resulting decreases or increases in the fair value result in a corresponding gain or loss reported in “Selling, general, and administrative expenses”

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

As of June 30, 2022, the maximum potential payment outcomes were $ 148.1 million.

in the Condensed Consolidated Statements of Operations and Comprehensive Income.

As of September 30, 2022, the maximum potential payment outcomes were $ 132.0 million.

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

September 30,

(in thousands)

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Carrying Value

Balance at June 30, 2022

Balance at September 30, 2022

Term Loan Facility

Revolving Credit Facility

Government loans for COVID-19 relief

11 unchanged sentences

Accounts Receivable

Three Months Ended June 30,

Six Months Ended June 30,

As of June 30,

As of December 31,

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

1 unchanged sentence

Investment in Unconsolidated Affiliates

During the three months ended June 30, 2022 and 2021, the Company recognized revenues of $ 3.8 million and $ 4.7 million, respectively, from a parent company of an unconsolidated affiliate.

During the six months ended June 30, 2022 and 2021, the Company recognized revenues of $ 7.6 million and $ 9.3 million, respectively, from a parent company of an unconsolidated affiliate.

Accounts receivable from this client were $ 2.5 million and $ 2.4 million as of June 30, 2022 and December 31, 2021, respectively.

The Company’s effective tax rates were 26.4 % and 53.3 % for the three months ended June 30, 2022 and 2021, respectively.

During the three months ended September 30, 2022 and 2021, the Company recognized revenues of $ 4.4 million and $ 4.4 million, respectively, from a parent company of an unconsolidated affiliate.

During the nine months ended September 30, 2022 and 2021, the Company recognized revenues of $ 11.1 million and $ 13.7 million, respectively, from a parent company of an unconsolidated affiliate.

Accounts receivable from this client were $ 1.9 million and $ 2.4 million as of September 30, 2022 and December 31, 2021, respectively.

The Company’s effective tax rates were 4.7 % and 25.4 % for the three months ended September 30, 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 the three months pretax book income differences and the discrete impact of tax rate changes of $ 3.1 million for the three months ended June 30, 2021, no t included in the three months ended June 30, 2022.

The Company’s effective tax rates were 32.8 % and 61.5 % for the six months ended June 30, 2022 and 2021, respectively.

The fluctuation in the Company’s effective tax rate was primarily due to the three months pretax book income differences and the discrete impact of $ 5.0 million to remeasure the deferred tax liability as a result of a reduction in the Company's blended state tax rate driven primarily by a Pennsylvania statutory tax rate change for the three months ended September 30, 2022, no t included in the three months ended September 30, 2021.

The Company’s effective tax rates were 20.6 % and 36.0 % for the nine months ended September 30, 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 the six months pretax book income differences and the discrete impact of tax rate changes of $ 3.1 million for the six months ended June 30, 2021, no t included in the six months ended June 30, 2022.

The fluctuation in the Company’s effective tax rate was primarily due to the nine months pretax book income differences, the discrete impact of $ 5.0 million to remeasure the deferred tax liability as a result of a reduction in the Company's blended state tax rate driven primarily by a Pennsylvania statutory tax rate change for the nine months ended September 30, 2022, offset by a shortfall adjustment of $ 2.4 million of stock based compensation for the nine months ended September 30, 2022.

On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act (“IRA”), which imposes a new corporate alternative minimum tax (“CAMT”), an excise tax on stock buybacks, and significant tax incentives for energy and climate initiatives, among other provisions.

The Company does not expect the CAMT to have a material impact on its consolidated financial statements.

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

4 unchanged sentences

These reportable segments are organized by the types of services provided, similar economic characteristics, and how the Company manages its business.

The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements;

The assets and liabilities of the Company are

managed centrally and are reported internally in the same manner as the consolidated financial statements;

therefore, no additional information is produced or included herein.

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(in thousands)

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Depreciation and amortization

Operating income

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Depreciation and amortization

Operating income (loss)

Operating income

(in thousands)

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Depreciation and amortization

Operating income

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Depreciation and amortization

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claims, and asserted indemnification, fraud and other claims against the Take 5 Sellers as counterclaims and cross-claims in the arbitration proceedings.

In August 2022, the arbitrator made an interim award in favor of the Company.

In October 2022, the arbitrator made a final award in favor of the Company.

The Company is currently unable to estimate if or when it will be able to collect any amounts associated with this arbitration.

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The Take 5 Matter may result in additional litigation against the Company, including lawsuits from clients, or governmental investigations, which may expose the Company to potential liability in excess of the amounts being offered by the Company as refunds to Take 5 clients.

The Company is currently unable to determine the amount of

any potential liability, costs or expenses (above the amounts already being offered as refunds) that may result from any lawsuits or investigations associated with the Take 5 Matter or determine whether any such issues will have any future material adverse effect on the Company’s financial position, liquidity, or results of operations.

The Company is currently unable to determine the amount of any potential liability, costs or expenses (above the amounts already being offered as refunds) that may result from any lawsuits or investigations associated with the Take 5 Matter or determine whether any such issues will have any future material adverse effect on the Company’s financial position, liquidity, or results of operations.

Although the Company has insurance covering certain liabilities, the insurance may not be sufficient to cover any potential liability or expenses associated with the Take 5 Matter.

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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 $ 12.5 million and $ 10.3 million during the three months ended June 30, 2022 and 2021, respectively.

The related deferred tax benefit for stock-based compensation recognized was $ 3.0 million and $ 1.5 million for the three months ended June 30, 2022 and 2021, respectively.

The Company recognized stock-based compensation expense of $ 20.3 million and $ 20.2 million during the six months ended June 30, 2022 and 2021, respectively.

The related deferred tax benefit for stock-based compensation recognized was $ 4.5 million and $ 3.1 million for the six months ended June 30, 2022 and 2021, respectively.

The Company recognized stock-based compensation expense and equity-based compensation expense associated with the Common Series C Units of Karman Topco L.P.

of $ 6.7 million and $ 8.3 million during the three months ended September 30, 2022 and 2021, respectively.

The related deferred tax benefit for stock-based compensation recognized was $ 1.4 million and $ 1.3 million for the three months ended September 30, 2022 and 2021, respectively.

The Company recognized stock-based compensation expense and equity-based compensation expense associated with the Common Series C Units of Karman Topco L.P.

of $ 27.0 million and $ 28.5 million during the nine months ended September 30, 2022 and 2021, respectively.

The related deferred tax benefit for stock-based compensation recognized was $ 6.0 million and $ 4.4 million for the nine months ended September 30, 2022 and 2021, respectively.

Performance Restricted Stock Units

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The PSUs are scheduled to vest over a three-year period from the date of grant and may vest from 0 % to 150 % of the number of shares set forth in the table below.

The number of PSUs earned shall be adjusted to be proportional to the partial performance between the Threshold Goals, Target Goals and Maximum Goals.

The number of

PSUs earned shall be adjusted to be proportional to the partial performance between the Threshold Goals, Target Goals and Maximum Goals.

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

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Under the provision of ASC 718 Compensation—Stock Compensation , 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 six months ended June 30, 2022 and an intrinsic value associated with the new award of $ 1.2 million that is expected to 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 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 nine months ended September 30, 2022 and an intrinsic value associated with the new award of $ 1.2 million that is expected to 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 for awards in which the performance period has not yet concluded.

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December 31, 2021

The following table summarizes the PSU activity for the six months ended June 30, 2022:

The following table summarizes the PSU activity for the nine months ended September 30, 2022:

Performance Share Units

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PSU performance adjustment

Outstanding at June 30, 2022

Outstanding at September 30, 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 six months ended June 30, 2022, the following activities involving RSUs occurred under the Plan:

During the nine months ended September 30, 2022, the following activities involving RSUs occurred under the Plan:

Number of RSUs

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Outstanding at January 1, 2022

Outstanding at June 30, 2022

As of June 30, 2022, the total remaining unrecognized compensation cost related to RSUs amounted to $ 40.0 million, which is expected to be amortized over the weighted-average remaining requisite service periods of 2.4 years.

Outstanding at September 30, 2022

As of September 30, 2022, the total remaining unrecognized compensation cost related to RSUs amounted to $ 30.4 million, which is expected to be amortized over the weighted-average remaining requisite service periods of 2.2 years.

Stock Options

Pursuant to the Plan, a total of 945,664 non-qualified stock options were granted during the six months ended June 30, 2022 and 945,664 remained outstanding as of June 30, 2022 with a weighted average exercise price of $ 5.99 per share.

A total of 261,324 non-qualified stock options were forfeited during the six months ended June 30, 2022, with a weighted average exercise price of $ 9.20 .

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

Pursuant to the Plan, a total of 945,664 non-qualified stock options were granted during the nine months ended September 30, 2022 and 945,664 remained outstanding as of September 30, 2022 with a weighted average exercise price of $ 5.99 per share.

A total of 261,324 non-qualified stock options were forfeited during the nine months ended September 30, 2022, with a weighted average exercise price of $ 9.20 .

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

September 30,

Dividend yield

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Expected term (years)

As of June 30, 2022, the Company had approximately $ 1.6 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 1.7 years .

The intrinsic value of all outstanding options as of June 30, 2022 was zero based on the market price of the Company's common stock of $ 3.80 per share.

As of September 30, 2022, the Company had approximately $ 1.4 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 1.6 years .

The intrinsic value of all outstanding options as of September 30, 2022 was zero based on the market price of the Company's common stock of $ 2.13 per share.

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.

The put and call option agreement may be exercised at the discretion of the noncontrolling interest holder by providing written notice to the Company.

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

The carrying value of the redeemable noncontrolling interest was $ 3.4 million as of September 30, 2022.

(in thousands)

Balance at January 1, 2022

Fair value at acquisition

Net income attributable to redeemable noncontrolling interests

Dividend distribution

Foreign currency translation adjustment

Balance at September 30, 2022

During the nine months ended September 30, 2022, the Company acquired one sales business which included a put option exercisable by the 20 % shareholder that allows such shareholder to sell its 20 % noncontrolling interest to the Company for a multiple of the acquired subsidiary’s adjusted earnings.

The fair value of the redeemable noncontrolling interest and put option at the acquisition date was valued based on a mix of the income approach for determining the value of the redeemable noncontrolling interest and market approach for determining the most advantageous redemption point for the put option using a Monte Carlo simulation method.

The fair value assigned to this interest is estimated using Level 3 inputs based on unobservable inputs.

Earnings Per Share

The Company calculates earnings per share using a dual presentation of basic and diluted earnings per share.

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.

Basic earnings per share is calculated by dividing net income 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 performance stock units, restricted stock units, public and private placement warrants, the employee stock purchase plan and stock options.

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

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

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Advantage Solutions Inc.

Change in fair value of warrant liability

Numerator for diluted earnings per share

Weighted average common shares outstanding

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Diluted earnings per common share

The Company had 18,578,321 warrants to purchase Class A common stock at $ 11.50 per share outstanding at June 30, 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 and six months ended June 30, 2022 did not exceed the exercise price of the warrants.

The Company had 18,578,325 warrants to purchase Class A common stock at $ 11.50 per share outstanding at June 30, 2021.

The Company had 18,578,321 warrants to purchase Class A common stock at $ 11.50 per share outstanding at September 30, 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 and nine months ended September 30, 2022 did not exceed the exercise price of the warrants.

The Company had 18,578,324 warrants to purchase Class A common stock at $ 11.50 per share outstanding at September 30, 2021.

Subsequent Events

In October 2022, the Company granted 2,153,900 RSUs and 1,170,000 stock options, with an estimated aggregate grant date fair value of $ 4.8 million and $ 1.2 million, respectively.

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including the section titled “Item 2.

This Quarterly Report on Form 10-Q (this “Quarterly Report”), including the section titled “Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations,”

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sales and marketing.

Through our sales segment, which generated approximately 63.1% and 66.8% of our total revenues in the six months ended June 30, 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’

Through our sales segment, which generated approximately 62.5% and 65.9% of our total revenues in the nine months ended September 30, 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 36.9% and 33.2% of our total revenues in the six months ended June 30, 2022 and 2021, respectively, we help brands and retailers reach consumers through two main categories within the marketing segment.

Through our marketing segment, which generated approximately 37.5% and 34.1% of our total revenues in the nine months ended September 30, 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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Globally, the most impacted services were our experiential services.

Most services began to improve in April 2021, and the improvement has continued through the second 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 June 30, 2022 as compared to the three months ended June 30, 2021 includes:

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

Our financial performance for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 includes:

Revenues increased by $122.3 million, or 13.2%, to $1,051.1 million;

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Net income decreased by $1.1 million, or 4.5% to $23.2 million;

Adjusted Net Income decreased by $0.7 million, or 1.6%, to $40.7 million;

Adjusted Net Income increased by $3.6 million, or 6.1%, to $62.7 million;

Adjusted EBITDA decreased by $15.5 million, or 11.6%, to $118.3 million.

Our financial performance for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 includes:

Our financial performance for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 includes:

Revenues increased by $377.2 million, or 14.7% to $2,947.0 million;

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Adjusted EBITDA decreased by $43.8 million, or 11.9% to $323.3 million.

During the six months ended June 30, 2022, we acquired three businesses.

During the nine months ended September 30, 2022, we acquired four businesses.

The aggregate purchase price was $75.5 million, of which $74.1 million was paid in cash, $0.5 million in contingent consideration and $0.8 million in holdback.

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Part of our strategy is to generate organic growth by expanding our existing client relationships, continuing to win new clients, pursuing channel expansion and new industry opportunities, enhancing our digital technology solutions, developing our international platform, delivering operational efficiencies and expanding into logical adjacencies.

We believe that by pursuing these organic growth opportunities we will be able to continue to enhance our value proposition to our clients and thereby grow our business.

We believe that by pursuing

these organic growth opportunities we will be able to continue to enhance our value proposition to our clients and thereby grow our business.

Acquisitions.

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

Excluding the 2017 acquisition of Daymon Worldwide Inc., we have completed 73 acquisitions from January 2014 to August 9, 2022, ranging in purchase prices from approximately $0.3 million to $98.5 million.

Excluding the 2017 acquisition of Daymon Worldwide Inc., we have completed 73 acquisitions from January 2014 to November 9, 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.

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Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in “Selling, general and administrative expenses”

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

in our Condensed Consolidated Statements of Operations and Comprehensive Income.

Depreciation and Amortization.

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Our quarterly results are seasonal in nature, with the fourth fiscal quarter typically generating a higher proportion of our revenues than other fiscal quarters, as a result of higher consumer spending.

We generally record slightly lower revenues in the first fiscal quarter of each year, as our clients begin to roll out new programs for the year, and consumer spending generally is less in the first

fiscal quarter than other quarters.

We generally record slightly lower revenues in the first fiscal quarter of each year, as our clients begin to roll out new programs for the year, and consumer spending generally is less in the first fiscal quarter than other quarters.

Timing of our clients’

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When we divest a business, we consider the revenues that the divested business generated in the 12 months prior to its divestiture to be subtracted from acquired revenues for the 12 months following its divestiture.

For example, if we completed a divestiture on July 1, 2021 for a business, we would consider the amount of revenues

from the divested business from July 1, 2020 to June 30, 2021 to be subtracted from acquired revenues during the period from July 1, 2021 to June 30, 2022.

For example, if we completed a divestiture on July 1, 2021 for a business, we would consider the amount of revenues from the divested business from July 1, 2020 to June 30, 2021 to be subtracted from acquired revenues during the period from July 1, 2021 to June 30, 2022.

We measure organic revenue growth and acquired revenue growth by comparing the organic revenues or acquired revenues, respectively, period over period, net of any divestitures.

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Included in our depreciation and amortization expense is amortization of acquired intangible assets.

We have ascribed value to identifiable intangible assets other than goodwill in our purchase price allocations for companies

we have acquired.

We have ascribed value to identifiable intangible assets other than goodwill in our purchase price allocations for companies we have acquired.

These assets include, but are not limited to, client relationships and trade names.

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Depreciation Expense

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

Depreciation expense relates to the property and equipment that we own, which represented less than 1% of our total assets at September 30, 2022 and 2021, respectively.

Income tax 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.

We have positive cash flow characteristics, as described below, due to the limited required capital investment in the fixed assets and working capital needs to operate our business in the normal course.

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Adjusted Net Income is a non-GAAP financial measure.

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 Karman Topco L.P., (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.

Adjusted Net Income means Net income 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) related tax adjustments and (xiii) other adjustments that management believes are helpful in evaluating our operating performance.

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.

Adjusted Net Income should not be considered as an alternative for net income (loss), our most directly comparable measure presented on a GAAP basis.

Adjusted Net Income should not be considered as an alternative for Net income, our most directly comparable measure presented on a GAAP basis.

Adjusted EBITDA and Adjusted EBITDA by Segment

Adjusted EBITDA and Adjusted EBITDA by segment are supplemental non-GAAP financial measures of 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 Karman Topco L.P., (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.

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

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 Months Ended June 30, 2022 and 2021

The following table sets forth items derived from the Company’s consolidated statements of operations for the three months ended June 30, 2022 and 2021 in dollars and as a percentage of total revenues.

Three Months Ended June 30,

Six Months Ended June 30,

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

Results of Operations for the Three and Nine Months Ended September 30, 2022 and 2021

The following table sets forth items derived from the Company’s consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021 in dollars and as a percentage of total revenues.

Three Months Ended September 30,

Nine Months Ended September 30,

(amounts in thousands)

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Interest expense, net

Total other expenses (income)

Total other expenses

Income before income taxes

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(1) Adjusted Net Income and Adjusted EBITDA are financial measures that are not calculated in accordance with GAAP.

For a discussion of our presentation of Adjusted Net Income and Adjusted EBITDA and reconciliations of net income (loss) to Adjusted Net Income and Adjusted EBITDA, see “

For a discussion of our presentation of Adjusted Net Income and Adjusted EBITDA and reconciliations of Net income to Adjusted Net Income and Adjusted EBITDA, see “

—Non-GAAP Financial Measures .”

Comparison of the Three Months Ended June 30, 2022 and 2021

Three Months Ended June 30,

Comparison of the Three Months Ended September 30, 2022 and 2021

Three Months Ended September 30,

(amounts in thousands)

Total revenues

Total revenues increased by $131.1 million, or 15.4%, during the three months ended June 30, 2022, as compared to the three months ended June 30, 2021.

The sales segment revenues increased $42.5 million during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, of which $42.8 million were revenues from acquired businesses.

Excluding revenues from acquired businesses and unfavorable foreign exchange rates of $12.0 million, the segment experienced an increase of $11.7 million in organic revenues primarily due to growth in our retail merchandising services and international businesses, partially offset by a decrease in our foodservice and third party selling and retailing services.

The marketing segment revenues increased $88.6 million during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, of which $10.0 million were revenues from acquired businesses.

Excluding revenues from acquired businesses, the segment experienced an increase of $78.6 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 as a result of the COVID-19 pandemic.

Total revenues increased by $122.3 million, or 13.2%, during the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.

The sales segment revenues increased $49.1 million during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021, of which $23.6 million were revenues from acquired

Excluding revenues from acquired businesses and unfavorable foreign exchange rates of $17.0 million, the segment experienced an increase of $42.5 million in organic revenues primarily due to growth in our retail merchandising services and international businesses, partially offset by a decrease in our third party selling and retailing services.

The marketing segment revenues increased $73.2 million during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021, of which $11.0 million were revenues from acquired businesses.

Excluding revenues from acquired businesses and unfavorable foreign exchange rates of $5.7 million, the segment experienced an increase of $67.9 million in organic revenues.

Cost of Revenues

Cost of revenues as a percentage of revenues for the three months ended June 30, 2022 was 85.8%, as compared to 82.1% for the three months ended June 30, 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.

Cost of revenues as a percentage of revenues for the three months ended September 30, 2022 was 86.4%, as compared to 82.5% for the three months ended September 30, 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, and the ongoing investment and inflationary impact in recruiting, wage, and employee benefit expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses as a percentage of revenues for the three months ended June 30, 2022 was 5.4% compared to 5.5% for the three months ended June 30, 2021, which stayed relatively consistent year over year.

Selling, general and administrative expenses as a percentage of revenues for the three months ended September 30, 2022 was 3.6%, compared to 4.1% for the three months ended September 30, 2021, primarily due to the change in fair value adjustments related to contingent consideration and a decrease in legal fees associated with the Take 5 Matter.

Depreciation and Amortization Expense

Depreciation and amortization expense decreased by $4.2 million or 6.7% to $58.4 million for the three months ended June 30, 2022 compared to $62.7 million for the three months ended June 30, 2021.

The decrease was primarily due to a decrease in amortization expenses from our internally developed software.

Depreciation and amortization expense decreased by $1.4 million, or 2.3%, to $57.8 million for the three months ended September 30, 2022 compared to $59.2 million for the three months ended September 30, 2021, which stayed relatively consistent year over year.

Operating Income

Three Months Ended June 30,

Three Months Ended September 30,

(amounts in thousands)

Total operating income

In the sales segment, the decrease in operating income during the three months ended June 30, 2022 was primarily attributable to ongoing investments in labor and wage spend, partially offset by a decrease in depreciation expense.

In the marketing segment, the increase in operating income during the three months ended June 30, 2022 was primarily attributable to the growth in revenues as described above.

In the sales segment, the decrease in operating income during the three months ended September 30, 2022 was due to a shift in revenue mix and ongoing investment and inflationary impact in recruiting, wage, and employee benefit expenses.

In the marketing segment, the increase in operating income during the three months ended September 30, 2022 was due to the growth in revenues, partially offset by the increase in cost of revenues as described above.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability represents $4.9 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 June 30, 2022, approximating the fair value with the warrant price of the public warrants.

Change in fair value of warrant liability represents $1.1 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, 2022, approximating the fair value with the warrant price of the public warrants.

Interest Expense, net

Interest expense, net decreased $9.0 million, or 24.2%, to $28.2 million for the three months ended June 30, 2022, from $37.2 million for the three months ended June 30, 2021.

Interest expense, net decreased $12.9 million, or 35.4%, to $23.6 million for the three months ended September 30, 2022, from $36.5 million for the three months ended September 30, 2021.

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

Provision for Income Taxes

Provision for income taxes was $1.3 million for the three months ended June 30, 2022 as compared to $6.6 million for the three months ended June 30, 2021.

The fluctuation was primarily attributable to the decrease in pre-tax income during the three months ended June 30, 2022 and decrease of $2.8 million of discrete items for the three months ended June 30, 2022.

Net income was $3.7 million for the three months ended June 30, 2022, compared to net income of $5.8 million for the three months ended June 30, 2021.

The decrease in net income was primarily driven by the decrease in operating income, partially offset by the decrease in interest expense, net as described above.

Provision for income taxes was $1.2 million for the three months ended September 30, 2022 as compared to $8.3 million of provision for income taxes for the three months ended September 30, 2021.

The fluctuation was primarily attributable to the decrease in pre-tax income during the three months ended September 30, 2022 and decrease of $4.3 million of discrete items for the three months ended September 30, 2022.

Net income was $23.2 million for the three months ended September 30, 2022, compared to net income of $24.3 million for the three months ended September 30, 2021.

The decrease in net income was primarily driven by the decrease in operating income as described above, offset by the decrease in interest expense, net and provision for income taxes.

Adjusted Net Income

Adjusted Net Income for the three months ended June 30, 2022 stayed materially consistent year over year.

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

The increase in Adjusted Net Income for the three months ended September 30, 2022 was attributable to the decrease in interest expense, net as described above.

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

Non-GAAP Financial Measures.”

Adjusted EBITDA and Adjusted EBITDA by Segment

Three Months Ended June 30,

Three Months Ended September 30,

(amounts in thousands)

Total Adjusted EBITDA

Adjusted EBITDA decreased by $13.6 million, or 11.2%, to $108.3 million for the three months ended June 30, 2022, from $122.0 million for the three months ended June 30, 2021.

Adjusted EBITDA decreased by $15.5 million, or 11.6%, to $118.3 million for the three months ended September 30, 2022, from $133.8 million for the three months ended September 30, 2021.

In the sales segment, the decrease in Adjusted EBITDA was primarily attributable to the increase in cost of revenues as described above.

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Non-GAAP Financial Measures .”

Comparison of the Six Months Ended June 30, 2022 and 2021

Six Months Ended June 30,

Comparison of the Nine Months Ended September 30, 2022 and 2021

Nine Months Ended September 30,

(amounts in thousands)

Total revenues

Total revenues increased by $254.9 million, or 15.5%, during the six months ended June 30, 2022, as compared to the six months ended June 30, 2021.

The sales segment revenues increased $100.1 million during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, of which $90.6 million were revenues from acquired businesses.

Total revenues increased by $377.2 million, or 14.7%, during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.

The sales segment revenues increased $149.2 million during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, of which $114.2 million were revenues from acquired businesses.

Excluding revenues from acquired businesses and unfavorable foreign exchange rates of $33.9 million, the segment experienced an increase of $68.9 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 partially offset by a decrease in our foodservice and third party selling and retailing services.

The marketing segment revenues increased $154.8 million during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, of which $12.2 million were revenues from acquired businesses.

Excluding revenues from acquired businesses, the segment experienced an increase of $142.6 million in organic revenues.

The marketing segment revenues increased $228.0 million during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, of which $23.1 million were revenues from acquired businesses.

Excluding revenues from acquired businesses and unfavorable foreign exchange rates of $11.6 million, the segment experienced an increase of $216.5 million in organic revenues.

Cost of Revenues

Cost of revenues as a percentage of revenues for the six months ended June 30, 2022 was 85.9%, as compared to 82.4% for the six months ended June 30, 2021.

Cost of revenues as a percentage of revenues for the nine months ended September 30, 2022 was 86.1%, as compared to 82.4% for the nine months ended September 30, 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, and the ongoing investment and inflationary impact in recruiting, wage, and employee benefit expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses as a percentage of revenues for the six months ended June 30, 2022 and 2021 were 5.3%, respectively, which stayed relatively consistent year over year.

Selling, general and administrative expenses as a percentage of revenues for the nine months ended September 30, 2022 was 4.7%, compared to 4.9% for the nine months ended September 30, 2021.

Depreciation and Amortization Expense

Depreciation and amortization expense decreased by $6.1 million or 5.0% to $116.2 million for six months ended June 30, 2022 compared to $122.3 million for the six months ended June 30, 2021.

The decrease was primarily due to decrease in depreciation expenses from our internally developed software.

Depreciation and amortization expense decreased by $7.5 million or 4.1% to $174.0 million for the nine months ended September 30, 2022 compared to $181.5 million for the nine months ended September 30, 2021.

The decrease was primarily due to a decrease in depreciation expenses from our internally developed software.

Operating Income

Six Months Ended June 30,

Nine Months Ended September 30,

(amounts in thousands)

Total operating income

In the sales segment, the decrease in operating income during the six months ended June 30, 2022 was primarily attributable to ongoing investments in labor and wage spend, partially offset by a decrease in depreciation expense.

In the marketing segment, the increase in operating income during the six months ended June 30, 2022 was primarily attributable to the growth in revenues as described above.

In the sales segment, the decrease in operating income during the nine months ended September 30, 2022 was primarily attributable to a shift in revenue mix, ongoing investment and inflationary impact in recruiting, wage, and employee benefit expenses, the change in fair value adjustments related to contingent consideration, and an increase in stock-based compensation expense, partially offset by a decrease in depreciation expense.

In the marketing segment, the increase in operating income during the nine months ended September 30, 2022 was primarily attributable to the growth in revenues, partially offset by the increase in cost of revenues as described above and the change in fair value adjustments related to contingent consideration.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability represents $20.4 million of non-cash gain resulting from a fair value adjustment to warrant liability with respect to the private placement warrants for the six months ended June 30, 2022, approximating the fair value with the warrant price of the public warrants.

Change in fair value of warrant liability represents $21.5 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, 2022, approximating the fair value with the warrant price of the public warrants.

Interest Expense, net

Interest expense, net decreased $28.0 million, or 41.1%, to $40.1 million for the six months ended June 30, 2022, from $68.1 million for the six months ended June 30, 2021.

Interest expense, net decreased $40.9 million, or 39.1%, to $63.6 million for the nine months ended September 30, 2022, from $104.5 million for the nine months ended September 30, 2021.

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

Provision for Income Taxes

Provision for income taxes was $10.4 million for the six months ended June 30, 2022 as compared to $8.3 million for the six months ended June 30, 2021.

The fluctuation was primarily attributable to the increase in pre-tax income during the six months ended June 30, 2022 and an offset of discrete tax rate changes for the six months ended June 30, 2021, not included in the six months ended June 30, 2022.

Net income was $21.2 million for the six months ended June 30, 2022, compared to net income of $5.2 million for the six months ended June 30, 2021.

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

Provision for income taxes was $11.5 million for the nine months ended September 30, 2022 as compared to $16.6 million for the nine months ended September 30, 2021.

The fluctuation was primarily attributable to the increase in pre-tax income during the nine months ended September 30, 2022, partially offset by a decrease of $7.4 million of discrete items.

Net income was $44.4 million for the nine months ended September 30, 2022, compared to net income of $29.5 million for the nine months ended September 30, 2021.

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

Adjusted Net Income

The increase in Adjusted Net Income for the six months ended June 30, 2022 was attributable to the decrease in change in fair value of warrant liability, interest expense, net as described above.

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

The increase in Adjusted Net Income for the nine months ended September 30, 2022 was attributable to the decrease in change in fair value of warrant liability, and interest expense, net as described above.

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

Non-GAAP Financial Measures.”

Adjusted EBITDA and Adjusted EBITDA by Segment

Six Months Ended June 30,

Nine Months Ended September 30,

(amounts in thousands)

Total Adjusted EBITDA

Adjusted EBITDA decreased by $28.3 million, or 12.1%, to $205.1 million for the six months ended June 30, 2022, from $233.4 million for the six months ended June 30, 2021.

Adjusted EBITDA decreased by $43.8 million, or 11.9%, to $323.3 million for the nine months ended September 30, 2022, from $367.2 million for the nine months ended September 30, 2021.

In the sales segment, the decrease in Adjusted EBITDA was primarily attributable to the increase in cost of revenues as described above.

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Adjusted Net Income is a non-GAAP financial measure.

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 Karman Topco L.P., (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.

Adjusted Net Income means Net income 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) related tax adjustments and (xiii)other adjustments that management believes are helpful in evaluating our operating performance.

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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Adjusted EBITDA and Adjusted EBITDA by segment are supplemental non-GAAP financial measures of 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 Karman Topco L.P., (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.

Adjusted EBITDA means Net income 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.

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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Adjusted EBITDA

Financial information by segment, including a reconciliation of Adjusted EBITDA by segment to operating income (loss), the closest GAAP financial measure, is provided in the following table:

Financial information by segment, including a reconciliation of Adjusted EBITDA by segment to operating income, the closest GAAP financial measure, is provided in the following table:

Sales Segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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Marketing Segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Operating income (loss)

Operating income

Depreciation and amortization

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See Note 6—

Fair Value of Financial Instruments to our unaudited condensed financial statements for the three and six months ended June 30, 2022 and 2021.

Fair Value of Financial Instruments to our unaudited condensed financial statements for the three and nine months ended September 30, 2022 and 2021.

Represents fees and costs associated with activities related to our acquisitions and restructuring activities, including professional fees, due diligence, and integration activities.

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

Represents costs associated with the Take 5 Matter, primarily, professional fees and other related costs, for the three and six months ended June 30, 2022 and 2021, respectively.

Represents costs associated with the Take 5 Matter, primarily, professional fees and other related costs, for the three and nine months ended September 30, 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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A summary of our cash operating, investing and financing activities are shown in the following table:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

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Net cash used in investing activities

Net cash provided by (used in) financing activities

Net cash used in financing activities

Net effect of foreign currency fluctuations on cash

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Net Cash Provided by Operating Activities

Net cash used in operating activities during the six months ended June 30, 2022 consisted of net income of $21.2 million adjusted for certain non-cash items, including depreciation and amortization of $116.2 million and effects of changes in working capital.

Net cash provided by operating activities during the six months ended June 30, 2021 consisted of net income of $5.2 million adjusted for certain non-cash items, including depreciation and amortization of $122.3 million and effects of changes in working capital.

The decrease in cash provided by operating activities during the six months ended June 30, 2022 relative to the same period in 2021 was primarily due to increased working capital requirements to stand up services during the six months ended June 30, 2022.

Net cash used in operating activities during the nine months ended September 30, 2022 consisted of net income of $44.4 million adjusted for certain non-cash items, including depreciation and amortization of $174.0 million and effects of changes in working capital.

Net cash provided by operating activities during the nine months ended September 30, 2021 consisted of net income of $29.5 million adjusted for certain non-cash items, including depreciation and amortization of $181.5 million and effects of changes in working capital.

The decrease in cash provided by operating activities during the nine months ended September 30, 2022 relative to the same period in 2021 was primarily due to ongoing investment and inflationary impact in recruiting, wage, and employee benefit expenses during the nine months ended September 30, 2022.

Net Cash Used in Investing Activities

Net cash used in investing activities during the six months ended June 30, 2022 primarily consisted of the purchase of businesses, net of cash acquired of $67.6 million and purchase of property and equipment of $21.5 million.

Net cash used in investing activities during the six months ended June 30, 2021 primarily consisted of the purchase of businesses, net of cash acquired of $20.4 million and purchase of property and equipment of $13.0 million.

Net Cash Provided by (Used in) Financing Activities

Net cash used in investing activities during the nine months ended September 30, 2022 primarily consisted of the purchase of businesses, net of cash acquired of $74.4 million and purchase of property and equipment of $30.0 million.

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 $24.1 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.

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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 provided by financing activities during the six months ended June 30, 2022 were primarily related to borrowings of $67.1 million, and offset by repayment of $22.0 million, on our lines of credit, payment of principal on our Term Loan Facility of $6.7 million, partially offset by $1.7 million related to proceeds from the issuance of Class A common stock.

Cash flows related to financing activities during the six months ended June 30, 2021 were primarily related to borrowings of $41.7 million and repayment of $92.8 million on the Revolving Credit Facility and our lines of credit and $6.4 million related to payments of contingent consideration and holdback payments.

Cash flows used in financing activities during the nine months ended September 30, 2022 were primarily related to payments of contingent consideration and holdback payments of $31.7 million, repayment of principal on our Term Loan Facility of $9.9 million, partially offset by $3.3 million related to proceeds from the issuance of Class A common stock and $5.2 million of contribution from noncontrolling interest.

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.

Description of Credit Facilities

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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 June 30, 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 $54.5 million of outstanding letters of credit and the borrowing base limitations for additional borrowings).

As of September 30, 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 $54.5 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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Future Cash Requirement

There were no material changes to our contractual future cash requirements from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

There were no material changes to our contractual future cash requirements from those disclosed in our 2021 Annual Report.

Cash and Cash Equivalents Held Outside the United States

As of June 30, 2022 and December 31, 2021, $82.1 million and $86.2 million, respectively, of our cash and cash equivalents and marketable securities were held by foreign subsidiaries.

As of June 30, 2022, and December 31, 2021, $29.2 million and $40.0 million, respectively, of our cash and cash equivalents were held by foreign branches.

As of September 30, 2022 and December 31, 2021, $71.6 million and $86.2 million, respectively, of our cash and cash equivalents were held by foreign subsidiaries.

As of September 30, 2022, and December 31, 2021, $21.6 million and $40.0 million, respectively, of our cash and cash equivalents 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 filed March 1, 2022 for the year ended December 31, 2021 and did not materially change during the six months ended June 30, 2022.

Our critical accounting policies and estimates are included in our 2021 Annual Report and did not materially change during the nine months ended September 30, 2022.

Recently Issued Accounting Pronouncements

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

Recent Accounting Standards , to our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2022 and 2021 included in “Part I, Financial Information—Item 1.

Recent Accounting Standards , to our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 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