What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-03-01 · 412 added, 421 removed, 1323 unchanged (39% of the section changed)

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Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Operations and Comprehensive (Loss) Income

Consolidated Statements of Stockholders’

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We have audited the accompanying consolidated balance sheets of Advantage Solutions Inc.

and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive income (loss), of stockholders’

and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive (loss) income, of stockholders’

equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded four acquisitions completed in 2021 from its assessment of internal control over financial reporting as of December 31, 2021 because they were acquired by the Company in purchase business combinations during 2021.

We have also excluded the four acquisitions completed in 2021 from our audit of internal control over financial reporting.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded two acquisitions completed in 2022 from its assessment of internal control over financial reporting as of December 31, 2022 because they were acquired by the Company in purchase business combinations during 2022.

We have also excluded the two acquisitions completed in 2022 from our audit of internal control over financial reporting.

The acquired entities are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting collectively represent 1% and 1%,respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Impairment Assessments

As described in Notes 1 and 3 to the consolidated financial statements, the Company’s consolidated goodwill balance was $2.2 billion as of December 31, 2021.

Management tests its goodwill for impairment at the beginning of the fourth quarter of a given fiscal year and whenever events or changes in circumstances indicate that the carrying value of a reporting unit may exceed its fair value.

Upon performing the quantitative impairment test, if the fair value of the reporting unit is less than its carrying amount, goodwill is impaired and the excess of the reporting unit’s carrying value over the fair value is recognized as an impairment loss.

Based on the results of the quantitative impairment test performed for its reporting units, management determined that its goodwill is not impaired .

Management utilizes a combination of income and market approaches to estimate the fair value of its reporting units.

Annual Goodwill Impairment Assessment –

sales and marketing reporting units

As described in Notes 1 and 3 to the consolidated financial statements, the Company’s consolidated goodwill balance was $887.9 million as of December 31, 2022.

Management tests the Company’s goodwill for impairment at the beginning of the fourth quarter of a given fiscal year and whenever events or changes in circumstances indicate that the carrying value of a reporting unit may exceed its fair value.

When it is determined that a quantitative impairment test should be performed, if the fair value of the reporting unit is less than its carrying amount, goodwill is impaired and the excess of the reporting unit’s carrying value over the fair value is recognized as an impairment loss.

Based on the results of the Company's quantitative impairment test in the fourth quarter of 2022, the Company’s sales and marketing reporting units were written down to their respective fair values, resulting in zero excess fair value over their carrying values.

The Company recognized $1,275.7 million and $91.8 million impairment charges in the sales and marketing reporting units, respectively, for the year ended December 31, 2022.

Management utilizes a combination of income and market approaches to estimate the fair value of the Company’s reporting units.

The income approach utilizes estimates of discounted cash flows of the reporting units, which requires assumptions for the reporting units’

revenue growth rates, EBITDA margins, terminal growth rates, and discount rates, all of which require significant management judgment.

The market approach applies market multiples derived from the historical earnings data of selected guideline publicly-traded companies to the reporting units’

businesses to yield a value of each reporting unit, which requires significant management judgment.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments is a critical audit matter are (i) the significant judgment by management when determining the fair value of the reporting units;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, EBITDA margins, terminal growth rates, discount rates, and market multiples;

revenue growth rates, EBITDA margins, terminal growth rates, discount rates, and incremental net working capital all of which require significant management judgment.

The market approach applies market multiples derived from the historical earnings data of selected guideline publicly-traded companies to the Company’s reporting units’

businesses, which requires significant management judgment.

The principal considerations for our determination that performing procedures relating to the annual goodwill impairment assessment of the sales and marketing reporting units is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the sales and marketing reporting units;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over management’s valuation of the reporting units.

T hese procedures also included, among others (i) testing management’s process for determining the fair value of the reporting units;

(ii) evaluating the appropriateness of the income and market approaches, and the combination of the approaches;

(iii) testing the completeness and accuracy of the underlying data used in the valuation approaches;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates , EBITDA margins, terminal growth rates, discount rates, and market multiples.

Evaluating management’s significant assumptions related to revenue growth rates and EBITDA margins involved e valuating whether the significant assumptions were reasonable considering (i) the current and past performance of the reporting units;

(ii) the consistency with external m arket and industry data;

and (iii) whether these significant assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the income and market approaches, and the combination of the approaches and (ii) the reasonableness of the significant assumptions related to the terminal growth rates, discount rates, and market multiples.

Indefinite-Lived Intangible Assets Impairment Assessments

As described in Notes 1 and 3 to the consolidated financial statements, the Company’s consolidated indefinite-lived intangible assets net carrying value was $900 million as of December 31, 2021.

Intangible assets with indefinite useful lives are not amortized but tested annually, at the beginning of the fourth quarter, for impairment or more often if events occur or circumstances change that would create a triggering event.

Management performed its annual quantitative impairment test as of October 1, 2021, and concluded

that its indefinite-lived intangible assets were not impaired.

Management tests its indefinite-lived intangible assets for impairment using a relief from royalty method by comparing the estimated fair values of the indefinite-lived intangible assets with the carrying values.

These procedures included testing the effectiveness of controls relating to management’s annual goodwill impairment assessment, including controls over the valuation of the sales and marketing reporting units.

These procedures also included, among others (i) testing management’s process for developing the fair value estimates of the sales and marketing reporting units;

(ii) evaluating the appropriateness of the income and market valuation approaches, including utilizing a combination of the approaches to estimate the fair value of the sales and marketing reporting units;

(iii) testing the completeness and accuracy of the underlying data used in the income and market valuation approaches;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates, EBITDA margins, terminal growth rates, discount rates, incremental net working capital, and market multiples.

Evaluating management’s significant assumptions related to revenue growth rates, EBITDA margins, and incremental net working capital involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the sales and marketing reporting units;

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the income and market valuation approaches, including utilizing a combination of the approaches to estimate the fair value of the sales and marketing reporting units and (ii) the reasonableness of the significant assumptions related to terminal growth rates, discount rates, and market multiples.

Annual Indefinite-Lived Intangible Assets Impairment Assessment –

sales and marketing trade names

As described in Notes 1 and 3 to the consolidated financial statements, the Company’s indefinite-lived intangible assets balance was $695.0 million as of December 31, 2022.

Intangible assets with indefinite useful lives are not amortized but tested annually, at the beginning of the fourth quarter, for impairment or more often if evidence exists that triggering events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.

Management performed the annual indefinite-lived intangible asset impairment assessment as of October 1, 2022.

Based on this assessment, management concluded the carrying value of the indefinite-lived trade names in the sales and marketing reporting units exceeded their estimated fair values.

As a result, the Company recognized non-cash intangible asset impairment charges of $146.0 million and $59.0 million related to the Company's indefinite-lived sales and marketing trade names, respectively, during the year ended December 31, 2022.

Management tests the Company’s indefinite-lived intangible assets for impairment using a relief from royalty method by comparing the estimated fair values of the indefinite-lived intangible assets with the carrying values.

The estimates used in the determination of fair value are subjective in nature and involve the use of significant assumptions.

These estimates and assumptions include revenue growth rates, terminal growth rates, discount rates, and royalty rates, all of which require significant management judgment.

The principal considerations for our determination that performing procedures relating to the indefinite-lived intangible assets impairment assessments is a critical audit matter are (i) the significant judgment by management when determining the fair value of the indefinite-lived intangible assets;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, terminal growth rates, discount rates, and royalty rates;

The principal considerations for our determination that performing procedures relating to the annual indefinite-lived intangible assets impairment assessment of the sales and marketing trade names is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the sales and marketing trade names;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s indefinite-lived intangible assets impairment assessments, including controls over management’s valuation of the indefinite-lived intangible assets.

T hese procedures also included, among others (i) testing management’s process for determining the fair value of the indefinite-lived intangible assets;

These procedures included testing the effectiveness of controls relating to management’s annual indefinite-lived intangible assets impairment assessment, including controls over the valuation of the sales and marketing trade names.

These procedures also included, among others (i) testing management’s process for developing the fair value estimates of the sales and marketing trade names;

(ii) evaluating the appropriateness of the relief from royalty method;

(iii) testing the completeness and accuracy of the underlying data used in the relief from royalty method;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates, terminal growth rates, discount rates, and royalty rates.

Evaluating management’s significant assumption related to revenue growth rates involved evaluating whether the significant assumption was reasonable considering (i) the current and past performance of the underlying assets;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates, discount rates, and royalty rates.

Evaluating management’s significant assumption related to revenue growth rates involved evaluating whether the assumption used by management was reasonable considering (i) the current and past performance of the sales and marketing brands;

(ii) the consistency with external market and industry data;

and (iii) whether the significant assumption was consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the relief from royalty method and (ii) the r easonableness of the significant assumptions related to the terminal growth rates, discount rates, and royalty rates.

and (iii) whether this assumption was consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the relief from royalty method and (ii) the reasonableness of the significant assumptions related to discount rates and royalty rates.

/s/ PricewaterhouseCoopers LLP

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CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(in thousands, except share data)

Current assets

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Investments in unconsolidated affiliates

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDERS’

Current liabilities

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

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

and outstanding as of December 31, 2022 and 2021, respectively

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

319,690,300 and 316,963,552 shares issued and outstanding as of

December 31, 2021 and December 31, 2020, respectively

December 31, 2022 and 2021, respectively

Additional paid in capital

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Loans to Karman Topco L.P.

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Treasury stock, at cost;

1,610,014 shares as of December 31, 2021

1,610,014 shares as of December 31, 2022 and 2021

Total equity attributable to stockholders of Advantage Solutions Inc.

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ADVANTAGE SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

Year Ended December 31,

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Selling, general, and administrative expenses

Impairment of goodwill and indefinite-lived assets

Recovery from Take 5

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Total operating expenses

Operating income

Other expenses:

Operating (loss) income

Other (income) expenses:

Change in fair value of warrant liability

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Total other expenses

Income (loss) before income taxes

Provision for (benefit from) income taxes

Net income (loss)

net income attributable to noncontrolling

Net income (loss) attributable to stockholders of

(Loss) income before income taxes

(Benefit from) provision for income taxes

Net (loss) income

net income attributable to

noncontrolling interest

Net (loss) income attributable to stockholders of

Advantage Solutions Inc.

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Foreign currency translation adjustments

Total comprehensive income (loss) attributable to

Total comprehensive (loss) income attributable to

stockholders of Advantage Solutions Inc.

Net income (loss) per common share:

Net (loss) income per common share:

Weighted-average number of common shares:

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Total comprehensive (loss) income

Increase in noncontrolling interest

Redemption of noncontrolling interest

Interest on loans to Karman Topco L.P.

Equity-based compensation

Balance at December 31, 2019

Comprehensive income (loss)

Net (loss) income

Foreign currency translation adjustments

Total comprehensive (loss) income

Recapitalization transaction, net of fees and deferred taxes

Recapitalization transaction, net of fees

and deferred taxes

Issuance of performance shares

Interest on loans to Karman Topco L.P.

Equity-based compensation

Equity-based compensation of Karman

Balance at December 31, 2020

Comprehensive income (loss)

Net income (loss)

Foreign currency translation adjustments

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Redemption of noncontrolling interest

Equity-based compensation

Equity-based compensation of Karman

Vesting of stock-based compensation awards

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restricted stock units

Shares issued under Employee Stock

Purchase Plan

Shares issued under 2020 Employee

Stock Purchase Plan

Shares issued upon exercise of

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Balance at December 31, 2021

Comprehensive income (loss)

Net (loss) income

Foreign currency translation adjustments

Total comprehensive loss

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 December 31, 2022

See Notes to Consolidated Financial Statements.

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CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

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

Net (loss) income

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

operating activities

Noncash interest expense, net

Noncash interest (income) expense, net

Amortization of deferred financing fees

Impairment of goodwill and indefinite-lived assets

Extinguishment costs related to repayment and repricing of long-term debt

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Deferred income taxes

Equity-based compensation of Topco

Equity-based compensation of Karman Topco L.P.

Stock-based compensation

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Proceeds from divestiture

Return on investments from unconsolidated affiliates

Net cash used in investing activities

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Contingent consideration payments

Financing fees paid

Holdback payments

Contribution from noncontrolling interest

Purchase of treasury stock

Financing fees paid

Contribution from noncontrolling interest

Redemption of noncontrolling interest

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Cash payments for interest

Cash received from interest rate derivatives

Cash payments for income taxes, net

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(the “Company”

or “Advantage”) and ASI Intermediate changed its name to ASI Intermediate Corp.

or “Advantage”) and Legacy Advantage changed its name to ASI Intermediate Corp.

As of the Closing, Topco received 203,750,000 shares of the Company’s Class A common stock, par value $ 0.0001 per share (the “Common Stock”).

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In connection with the entry into the Merger Agreement, Conyers Park also entered into subscription agreements with certain investors (the “PIPE Investors”), pursuant to which, among other things, Conyers Park agreed to issue and sell in a private placement shares of Conyers Park Class A common stock for a purchase price of $ 10.00 per share.

The PIPE Investors, other than the Advantage Sponsors and their affiliates, have agreed to purchase an aggregate of 51,130,000 shares of Conyers Park Class A common stock.

The PIPE Investors, other than the equity holders of Topco that participated in the PIPE Investment (the “

Advantage Sponsors”) and their affiliates, agreed to purchase an aggregate of 51,130,000 shares of Conyers Park Class A common stock.

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

The shares of Conyers Park Class A common stock purchased by the PIPE Investors in the private placement are referred to as the “PIPE Shares”

and the aggregate purchase price paid for the PIPE Shares is referred to as the “PIPE Investment Amount.”

and the aggregate purchase price paid for the PIPE Shares is referred to as the “PIPE Investment.”

At the Closing, the PIPE Investment was consummated, and 85,540,000 shares of Class A common stock were issued for aggregate gross proceeds of $ 855.4 million.

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As of the Closing, the PIPE Investors, Conyers Park existing public stockholders, and CP Sponsor collectively held 109,675,182 shares of Class A common stock.

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

The Merger was accounted for as a reverse recapitalization in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”).

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

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The shares and net (loss) income per share available to holders of the Legacy Advantage’s common stock, prior to the Merger, have been retroactively restated as shares reflecting the exchange ratio established in the Merger Agreement.

In connection with the Merger, ASI Intermediate received $ 93.9 million from Conyers Park’s trust account balance after the payments of $ 323.1 million redemptions by Conyers Park public stockholders and of $ 37.3 million transaction expenses incurred by

Conyers Park, net of deferred taxes of $ 3.9 million.

ASI Intermediate incurred direct and incremental costs of approximately $ 24.0 million related to the equity issuance, consisting primarily of investment banking, legal, accounting and other professional fees, which were recorded to additional paid-in capital as a reduction of proceeds.

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The transaction bonuses and share-based compensation are included in “Selling, general and administrative expenses”

on the Company's Consolidated Statement of Operations and Comprehensive Income (Loss) for the year ended December 31, 2020.

on the Company's Consolidated Statement of Operations and Comprehensive (Loss) Income for the year ended December 31, 2020.

The Company also classified the 7,333,333 private placement warrants originally issued by Conyers Park to Conyers Park II Sponsor LLC in a private placement in connection with its initial public offering and assumed by the Company as a warrant liability with an initial fair value of the private placement warrants of $ 7.9 million with a decrease to additional paid-in capital in connection with the consummation of the Transactions on October 28, 2020.

The Company is headquartered in Irvine, California and is a leading business solutions provider to consumer goods manufacturers and retailers.

The Company’s common stock and public warrants (as further described in Note 12, Equity ) are now listed on the Nasdaq Global Select market under the symbol “ADV”

The Company is headquartered in Irvine, California and is a business solutions provider to consumer goods manufacturers and retailers.

The Company’s common stock and public warrants (as further described in Note 12, Equity ) are listed on the Nasdaq Global Select market under the symbol “ADV”

and warrants to purchase the common stock at an exercise price of $ 11.50 per share are listed on the Nasdaq Global Select market under the symbol “ADVWW”.

Basis of Presentation and Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its controlled subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”).

The consolidated financial statements include the accounts of the Company and its controlled subsidiaries and have been prepared in accordance with U.S.

The financial information set forth herein reflects:

(a) the consolidated statements of operations and comprehensive income (loss), stockholders’

(a) the consolidated statements of operations and comprehensive (loss) income, stockholders’

equity, and cash flows for the years ended December 31, 2022, 2021, and 2020 and (b) the consolidated balance sheets as of December 31, 2022 and 2021.

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and “Cost of revenues”

in the Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Income (Loss), respectively.

in the Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive (Loss) Income, respectively.

All intercompany balances and transactions have been eliminated upon consolidation.

Certain prior period balances have been reclassified to conform to the current financial statement presentation.

These reclassifications had no impact on previously reported result of operations or stockholders’

Certain prior period balances have been reclassified to conform to the current Consolidated Statements of Cash Flows.

These reclassifications had no impact on previously reported Consolidated Balance Sheets, Consolidated Statements of Operations Comprehensive (Loss) Income, and Consolidated Statements of Stockholder’s Equity.

Use of Estimates

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Revenues and expenses for these subsidiaries are translated using rates that approximate those in effect during the period.

Gains and losses from these translations are included in “Accumulated other comprehensive income (loss)”

Gains and losses from these translations are included in “Accumulated other comprehensive (loss) income”

in the Consolidated Statements of Stockholders’

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The gains or losses arising from the revaluation of foreign currency transactions to functional currency are included in “Selling, general, and administrative expenses”

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

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

Unrealized foreign currency exchange gains and losses on certain intercompany transactions that are of a long-term investment nature ( i .

e ., settlement is not planned or anticipated in the foreseeable future) are also recorded in accumulated other comprehensive income (loss) in stockholders’

The Company reports gains and losses from foreign exchange rate changes related to intercompany receivables and payables that are of a long-term investment nature, in “Other comprehensive income (loss)”

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

These items represented a net gain of $ 1.0 million, a loss of $ 2.1 million, and a loss of $ 2.9 million during the fiscal years ended December 31, 2021, 2020, and 2019, respectively.

e ., settlement is not planned or anticipated in the foreseeable future) are also recorded in accumulated other comprehensive (loss) income in stockholders’

in the Consolidated Statements of Operations and Comprehensive (Loss)

These items represented a net gain of $ 7.3 million, a gain of $ 1.0 million, and a loss of $ 2.1 million during the fiscal years ended December 31, 2022, 2021, and 2020, respectively.

Cash and Cash Equivalents

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Assessing the collectability of client receivables requires management judgment.

The Company determines its expected credit losses by specifically analyzing individual accounts receivable, historical bad debts, client credit-worthiness, current economic conditions, and accounts receivable aging trends.

The Company determines its expected credit losses by specifically analyzing individual accounts receivable, historical bad debts, client creditworthiness, current economic conditions, and accounts receivable aging trends.

Valuation reserves are periodically re-evaluated and adjusted as more information about the ultimate collectability of accounts receivable becomes available.

Upon determination that a receivable is uncollectible, the receivable balance and any associated reserve is written off.

The Company’s expected credit losses were not material for the years ended December 31, 2021, 2020 and 2019.

Concentration of Credit Risk

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and in “Selling, general, and administrative expenses”

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

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

These arrangements contain an element of risk in that the counterparties may be unable to meet the terms of such arrangements.

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and “Selling, general, administrative expenses”

within the Consolidated Statements of Operations and Comprehensive Income (Loss), depending on the nature of the assets.

within the Consolidated Statements of Operations and Comprehensive (Loss) Income, depending on the nature of the assets.

Expenditures for maintenance and repairs are expensed as incurred, whereas expenditures for improvements and replacements are capitalized.

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Gains and losses from changes in the Company’s ownership interests are recorded in results of operations until control is achieved.

In instances in which a change in the Company’s ownership interest results in obtaining control, the existing carrying value of the investment is remeasured to the acquisition date fair value and any gain or loss is recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Distributions received from unconsolidated entities that represent returns on the investor’s investment are reported as cash flows from operating activities in the Company’s Consolidated Statements of Cash Flows.

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Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred.

Goodwill and Indefinite Lived Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired in an acquisition.

The Company tests for impairment of goodwill at the reporting unit level.

The Company generally combines reporting units, which are a component of an operating segment when they have similar economic characteristics, nature of

services, types of client, distribution methods and regulatory environment.

The Company generally combines components that have similar economic characteristics, nature of services, types of client, distribution methods and

regulatory environment.

The Company has two reporting units, sales and marketing, which are also the Company’s operating segments.

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The Company has the option to perform a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value before performing a quantitative impairment test.

If the qualitative assessment indicates it is not more likely than not that the fair value of a reporting unit, as determined applying the quantitative impairment test described below, is less than the carrying amount, then there is no need to perform the quantitative impairment test.

To the extent that the qualitative approach indicates that it is more likely than not that the carrying amount is less than its fair value, the Company applies a quantitative approach.

however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit.

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The income approach utilizes estimates of discounted cash flows of the reporting units, which requires assumptions for the reporting units’

revenue growth rates, EBITDA margins, terminal growth rates, and discount rates all of which require significant management judgment.

revenue growth rates, EBITDA margins, terminal growth rates, discount rates, and incremental net working capital, all of which require significant management judgment.

The market approach applies market multiples derived from the historical earnings data of selected guideline publicly-traded companies to the Company’s reporting units’

businesses to yield a second assumed value of each reporting unit, which requires significant management judgment.

businesses, which requires significant management judgment.

The guideline companies are first screened by industry group and then further narrowed based on the reporting units’

business descriptions, markets served, competitors, EBITDA margins, and revenue size.

Market multiples are then selected from within the range of these guideline companies multiples based on the subject reporting unit.

These assumptions are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy (described in “Fair Value Measurements,”

Market multiples are then selected from within the range of these guideline companies’

multiples based on the subject reporting unit.

The Company compares a weighted average of the output from the income and market approaches to the carrying value of each reporting unit.

The Company also compares the aggregate estimated fair value of its reporting units to the estimated fair value of its total market capitalization.

The assumptions in the income and market approach are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy (described in “Fair Value Measurements,”

The Company based its fair value estimates on assumptions it believes to be reasonable but which are unpredictable and inherently uncertain.

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Additionally, if actual results are not consistent with the estimates and assumptions or if there are significant changes to the Company’s planned strategy, it may cause fair value to be less than the carrying amounts and result in an impairment of goodwill in the future.

The Company compares a weighted average of the output from the income and market approaches to the carrying value of each reporting unit.

The Company also compares the aggregate estimated fair value of its reporting units to the estimated value of its total invested capital on a marketable basis.

Based on the results of the Company’s quantitative impairment test performed for its reporting units, the Company determined that its goodwill is not impaired for the year ended December 31, 2021.

The fair values of the reporting units significantly exceeded their carrying values, which the Company defines as greater than 20% .

The Company determined that no additional triggering events occurred that required the Company to perform an interim goodwill impairment test as of December 31, 2021.

In performing the quantitative impairment test for the year ended December 31, 2020 and 2019, the Company had also determined that its goodwill was not impaired.

The fair value of the sales reporting unit exceeded its carrying value by 8.3 % and 3.5 %, respectively.

The fair value of the marketing reporting unit significantly exceeded its carrying value.

The Company determined that no additional triggering events occurred that required the Company to perform an interim goodwill impairment test as of December 31, 2020 and 2019.

Accordingly, no impairment related to the Company’s goodwill was recorded for the year ended December 31, 2020 and 2019.

Based on the results of the Company’s quantitative impairment test in the fourth quarter of 2022, the Company’s sales and marketing reporting units were written down to their respective fair values, resulting in zero excess fair value over their carrying values.

The Company recognized $ 1,275.7 million and $ 91.8 million impairment charges in the sales and marketing reporting units, respectively, for the year ended December 31, 2022, which has been reflected in “Impairment of goodwill and indefinite-lived assets”

in the Company’s Consolidated Statements of Comprehensive (Loss) Income.

While there was no single determinative event or factor, the consideration of the weight of evidence of several factors that culminated during the fourth quarter of 2022 led the Company to conclude that it was more likely than not that the fair value of the sales and marketing reporting units were below their carrying values.

These factors included:

(a) sustained decline in the Company’s share price;

(b) challenges in the labor market and continued inflationary pressures;

and (c) an increase to the discount rate as a result of the recent increases in interest rates which adversely affected the results of the quantitative impairment tests.

The uncertainty and volatility in the economic environment in which the Company operates could have an impact on the Company's future growth and could result in future impairment charges.

There is no assurance that actual future earnings, cash flows or other assumptions for the reporting units will not significantly decline from these projections.

In connection with the Company's annual quantitative impairment test effective as of October 1, 2021 and 2020, the Company concluded that the goodwill was not impaired for the years ended December 31, 2021 and 2020.

The fair value of the sales reporting unit exceeded its carrying value by 23.8 % for the year ended December 31, 2021 and exceeded its carrying value by 8.3 % for the year ended December 31, 2020.

The fair value of the marketing reporting unit exceeded its carrying value by 41.6 % for the year ended December 31, 2021 and exceeded its carrying value by 37.3 % for the year ended December 31, 2020.

Indefinite Lived Intangible Assets

The Company’s indefinite-lived intangible assets are its sales and marketing trade names.

The Company has the option to perform a qualitative assessment of whether it is more likely than not that the indefinite-lived intangible asset’s fair value is less than its carrying value before performing a quantitative impairment test.

The Company tests its indefinite-lived intangible assets for impairment using a relief from royalty method by comparing the estimated fair values of the indefinite-lived intangible assets with the carrying values.

The Company tests its indefinite-lived intangible

assets for impairment using a relief from royalty method by comparing the estimated fair values of the indefinite-lived intangible assets with the carrying values.

The estimates used in the determination of fair value are subjective in nature and involve the use of significant assumptions.

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Actual future results may differ from the estimates.

In connection with the Company’s annual quantitative impairment test as of October 1, 2021, 2020 and 2019, the Company concluded that its indefinite-lived intangible assets were not impaired for the years ended December 31, 2021, 2020 and 2019.

The fair value of the indefinite-lived intangible assets related to sales trade names significantly exceeded its carrying value for the year ended December 31, 2021, and exceeded its carrying value by 13.3 % and 8.3 % for the years ended December 31, 2020 and 2019, respectively.

The fair value of the indefinite-lived intangible assets related to marketing trade names significantly exceeded its carrying value for the year ended December 31, 2021, and exceeded its carrying value by 8.4 % and 10.0 % for the years ended December 31, 2020 and 2019, respectively.

The Company determined that no additional triggering events occurred that required the Company to perform an interim impairment test of its indefinite-lived intangible assets as of December 31, 2021, 2020, and 2019.

Accordingly, no impairment related to the Company’s intangible assets was recorded for the years ended December 31, 2021, 2020, and 2019.

The annual indefinite-lived intangible asset impairment assessment was performed effective as of October 1, 2022.

Based on this assessment, the Company concluded the carrying value of the indefinite-lived trade names in the sales and marketing reporting units exceeded their estimated fair values.

As a result, the Company recognized non-cash intangible asset impairment charges of $ 146.0 million and $ 59.0 million related to the Company’s indefinite-lived sales and marketing trade names, respectively, during the year ended December 31, 2022, which has been reflected in “Impairment of goodwill and indefinite-lived assets”

in the Company’s Consolidated Statements of Comprehensive (Loss) Income.

While there was no single determinative event or factor, the factors that led to the impairment were the same circumstances outlined in the goodwill impairment discussion above.

In connection with the Company's annual quantitative impairment test effective as of October 1, 2021, and 2020, the Company concluded that the indefinite-lived intangible assets were not impaired for the years ended December 31, 2021, and 2020.

The fair value of the indefinite-lived intangible assets related to sales trade names exceeded its carrying value by 65.0 % for the year ended December 31, 2021 and exceeded its carrying value by 13.3 % for the year ended December 31, 2020.

The fair value of the indefinite-lived intangible assets related to marketing trade names exceeded its carrying value by 33.3 % for the year ended December 31, 2021, and exceeded its carrying value by 8.4 % for the year ended December 31, 2020.

Long-Lived Assets

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The discount rate used in any estimate of discounted cash flows would be the rate required for a similar investment of like risk.

No impairment related to the Company’s long-lived assets was recorded during the years ended December 31, 2021, 2020, and 2019.

As the Company assesses impairment of long-lived assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, the Company has determined that the asset group for impairment testing is comprised of the assets and liabilities of the Company’s operating segments.

The Company has identified client relationships as the primary asset because it is the principal asset from which the components derive their cash flow generating capacity.

During fiscal year 2022, the Company concluded the impact of challenges in the labor market and continued inflationary pressures were indicators that impairment may exist related to its client relationship intangible assets.

As a result, the Company performed a recoverability test and determined that there was no impairment.

No impairment related to the Company’s client relationship intangible assets was recorded during the years ended December 31, 2021, and 2020.

No impairment related to the Company’s other long-lived assets were recorded during the years ended December 31, 2022, 2021, and 2020.

Contingent Consideration

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The Company reviews and assesses the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from these initial estimates.

Changes in the estimated fair value of contingent consideration liabilities related to the time component of the present value calculation are reported in “Interest expense”

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

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

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

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

The portion of the cash settlement up to the acquisition date fair value of the contingent consideration is classified as “Contingent consideration payments”

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The Company assesses whether these arrangements are or contain leases at lease inception.

Classification of the leases between financing and operating leases is determined by assessing whether the lease transfers ownership of the asset to the Company, the lease grants an option for the Company to purchase the underlying asset, the lease term is for the majority of the remaining asset’s economic life, or if the minimum lease payments equals or substantially exceed all of the leased asset’s fair market value.

Classification of the leases between financing and operating leases is determined by assessing whether the lease transfers ownership of the asset to the Company, the lease grants an option for the Company to purchase the underlying asset, the lease term is for the majority of the remaining asset’s economic life, or if the minimum lease payments equal or substantially exceed all of the leased asset’s fair market value.

As of December 31, 2022, the Company's finance leases were not material.

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Revenues are recognized for the commission earned during the applicable reporting period.

The Company generally earns commission revenues from headquarter relationship management, analytics, insights and intelligence, e-commerce, administration, private label development and retail services arrangements.

The Company generally earns commission revenues from headquarter relationship management, analytics, insights and intelligence, e-commerce, administration, private label

development and retail services arrangements.

As part of these arrangements, the Company provides a variety of services to consumer goods manufacturers in order to improve the manufacturer’s sales at retailers.

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For service contracts whereby the client is charged a fee per hour incurred or fee per event completed, revenues are recognized over time as actual hours are incurred or as events are completed, respectively.

For service contracts with a cost-plus arrangement,

revenues are recognized on a gross basis over time for a given period based on the actual costs incurred plus a fixed mark-up fee that is negotiated on a client-by-client basis.

For service contracts with a cost-plus arrangement, revenues are recognized on a gross basis over time for a given period based on the actual costs incurred plus a fixed mark-up fee that is negotiated on a client-by-client basis.

For certain contracts with clients, the Company is entitled to additional fees upon meeting specific performance goals or thresholds, which are referred to as bonus revenues.

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However, in cases where media content is not purchased in advance by its clients, the Company records such revenues and its related costs on a gross basis, as it bears the risk of recovering the costs to acquire the revenues related to such media content and it is responsible for fulfillment of the services thereunder.

Substantially all of the Company’s contracts with its clients either have a contract term that is less than one year with options for renewal and/or can be cancelled by either party upon 30 to 120 days’

Substantially all of the Company’s contracts with its clients either have a contract term that is less than one year with options for renewal and/or can be canceled by either party upon 30 to 120 days’

For the purpose of disclosing the transaction price allocated to remaining unsatisfied performance obligations or partially satisfied performance obligations, the Company elected policies to:

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Contract liabilities represent deferred revenues which are cash payments that are received in advance of the Company’s satisfaction of the applicable obligation(s) and are included in “Deferred revenues”

in the Consolidated Balance Sheet.

in the Consolidated Balance Sheets.

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

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income tax examinations by tax authorities for years prior to 2018.

The Company is undergoing various U.S.

federal, state and non-U.S.

tax audits for tax years 2014 through 2020.

The Company does not have any material ongoing income tax audits as of December 31, 2022.

The Company has elected to classify interest and penalties as components of tax expense.

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The cost is recognized over the requisite service period.

The Company’s equity-based compensation is based on grant date fair value determined utilizing Backsolve Option Pricing Method (“OPM”) for its Common Series C Units and a combination of the OPM and Monte Carlo valuation model for its Common Series C-2 Units.

The Company’s equity-based compensation is based on grant date fair value determined utilizing Backsolve Option Pricing Method (“OPM”) for the Topco Common Series C Units and a combination of the OPM and Monte Carlo valuation model for the Topco Common Series C-2 Units.

Warrant Liability

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement”

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging .

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s Common Stock and whether the warrant holders could potentially require “net cash settlement”

in a circumstance outside of the Company’s control, among other conditions for equity classification.

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Changes in the estimated fair value of the warrants are recognized in “Changes in fair value of warrant liability”

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

The fair value of the private placement warrants on the date of issuance and on each measurement date is estimated using a Black-Scholes option pricing model which includes inputs such as the Company’s stock price, exercise price per share, and the number of private placement warrants outstanding.

Assumptions used in the model are subjective and require significant judgment, and include implied

volatility and the risk-free interest rate.

Based on the period of time the public warrants have now been trading, the Company believes that it is also an appropriate method to determine the fair value of the liability classified private placement warrants by approximating the value with the share price of the public warrants at the respective period end, which is inherently less subjective and judgmental given it is based on observable inputs.

The Company determined the valuation as of December 31, 2021 taking into consideration that both methods did not result in a materially different valuation.

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

Based on the availability of sufficient observable information, the Company determines the fair value of the liability classified private placement warrants by approximating the value with the price of the public warrants at the respective period end, which is inherently less subjective and judgmental given it is based on observable inputs.

Other Comprehensive (Loss) Income

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The Company also uses its quantitative and qualitative analyses to determine if it is the primary beneficiary of the VIE, and if such determination is made, it includes the accounts of the VIE in its consolidated financial statements.

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 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.

As a result, the Company intends to use its influence to cause the European company to

dispose of its ownership interests in the local agencies in Russia.

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

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

Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the sole source of authoritative U.S.

GAAP literature recognized by the FASB and applicable to the Company.

The Company has reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods.

For any new pronouncements announced, management considers whether the new pronouncements could alter previous U.S.

GAAP and determine whether any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term.

The applicability of any standard is subject to the formal review of the Company’s financial management and certain standards are under consideration.

Recent Accounting Standards Adopted by the Company

In December 2019, the FASB issued ASU No.

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

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

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

Accounting Standards Recently Issued but Not Yet Adopted by the Company

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

On October 1, 2022, the Company early adopted Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 606):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 as if it had originated the contracts.

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

The guidance will be applied prospectively to business combinations occurring on or after the effective date of the amendment and did not have a material impact on the Company's consolidated financial statements.

On April 1, 2022, the Company adopted ASU 2020-04, Reference Rate Reform (Topic 848):

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

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

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

In August 2020, the FASB issued ASU No.

The Company adopted the standard prospectively and determined that the adoption of this accounting guidance did not have a material impact on its consolidated financial statements.

On January 1, 2022, the Company adopted ASU No.

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

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

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

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

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

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

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

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 consolidated financial statements and use of the if-converted method did not have an impact on the Company's overall earnings per share calculation.

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

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

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

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

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

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

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

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

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

The guidance should be applied prospectively to business combinations occurring on or after the effective date of the amendment in this update.

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

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

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 consolidated financial statements.

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

Disclosures by Business Entities about Government Assistance .

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

This standard is effective for annual periods beginning after December 15, 2021.

Early adoption is permitted.

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

The Company is required to adopt the guidance in the first quarter of fiscal 2023.

The Company is currently evaluating the impact of these amendments on its consolidated financial statements.

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 consolidated financial statements.

All other new accounting pronouncements issued, but not yet effective or adopted have been deemed to be not relevant to the Company and, accordingly, are not expected to have a material impact once adopted.

2022 Acquisitions

The Company acquired six businesses during the year ended December 31, 2021.

The Company acquired four businesses during the year ended December 31, 2022.

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

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

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

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

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

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

The allocation of the excess purchase price was based upon preliminary estimates and assumptions and is subject to post-close adjustments to working capital.

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

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

The aggregate purchase price for the acquisitions referenced above was $ 75.5 million, which includes $ 74.2 million paid in cash, $ 0.5 million recorded as contingent consideration liabilities, and $ 0.8 million recorded as holdback amounts.

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Of the resulting goodwill relating to these acquisitions, $ 1.0 million is deductible for tax purposes.

The preliminary fair values of the identifiable assets and liabilities of the acquisitions completed during the year ended December 31, 2021, as of the applicable acquisition dates, are as follows:

The fair values of the identifiable assets and liabilities of the acquisitions less post-close adjustments related to working capital completed during the year ended December 31, 2022, as of the applicable acquisition dates, are as follows:

(in thousands)

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Total consideration

Recognized amounts of identifiable assets acquired and liabilities

Recognized amounts of identifiable assets acquired and liabilities assumed:

Accounts receivable

Property and equipment

Identifiable intangible assets

Accounts payable

Other liabilities

Deferred tax liabilities and other

Total liabilities

Redeemable noncontrolling interest

Noncontrolling interest

Total identifiable net assets

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

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

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

(in thousands)

Client relationships

Developed technology

Total identifiable intangible assets

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

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

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

2021 Acquisitions

The Company acquired five businesses during the year ended December 31, 2020, of which three were sales agencies and two marketing agencies in the United States.

The Company acquired six businesses during the year ended December 31, 2021.

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

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

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

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

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

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

The aggregate purchase price for the acquisitions referenced above was $ 76.0 million, which includes $ 42.7 million paid in cash, $ 19.8 million recorded as contingent consideration liabilities, and $ 13.5 million recorded as holdback amounts.

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

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

The maximum potential payment outcome related to the acquisitions is $ 71.4 million.

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Total consideration

Recognized amounts of identifiable assets acquired and liabilities

Recognized amounts of identifiable assets acquired and liabilities assumed:

Accounts receivable

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Total liabilities

Redeemable noncontrolling interest

Total identifiable net assets

Goodwill arising from acquisitions

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

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

(in thousands)

Client relationships

The operating results of the businesses acquired during the year ended December 31, 2020 contributed total revenues of $ 64.3 million in the year ended December 31, 2020.

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

Developed technology

Total identifiable intangible assets

The operating results of the businesses acquired during the year ended December 31, 2021 contributed total revenues of $ 75.9 million during the year ended December 31, 2021.

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 year ended December 31, 2021, the Company incurred $ 1.6 million, in transaction costs related to the acquisitions described above.

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

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

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

2020 Acquisitions

The Company acquired four businesses during fiscal year 2019, of which two were marketing agencies in the United States and two were sales agencies in the Europe.

The Company acquired five businesses during the year ended December 31, 2020, of which three were sales agencies and two marketing agencies in the United States.

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

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

The results of operations of the businesses acquired by the Company have been included in the Company’s consolidated financial statements since the date of the consummation of the acquisition.

The aggregate purchase price for the acquisitions was $ 14.0 million, which includes $ 10.6 million paid in cash, $ 2.5 million recorded as contingent consideration liabilities, and $ 0.9 million recorded as holdback amounts.

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

The aggregate purchase price for the acquisitions referenced above was $ 88.1 million, which includes $ 68.0 million paid in cash, $ 14.8 million recorded as contingent consideration liabilities, and $ 5.3 million recorded as holdback amounts.

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

The maximum potential payment outcome related to the acquisitions referenced above is $ 10.7 million.

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

The maximum potential payment outcome related to the acquisitions is $ 53.0 million.

Holdback amounts are used to withhold a portion of the initial purchase price payment until certain post-closing conditions are

satisfied and are typically settled within 24 months of the acquisition.

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

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Total consideration

Recognized amounts of identifiable assets acquired and liabilities

Recognized amounts of identifiable assets acquired and liabilities assumed:

Accounts receivable

Property and equipment

Identifiable intangible assets

Total liabilities and noncontrolling liabilities

Total liabilities

Total identifiable net assets

Goodwill arising from acquisitions

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

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

(in thousands)

Client relationships

Total identifiable intangible assets

The operating results of the businesses acquired during the year ended December 31, 2019 contributed total revenues of $ 17.3 million to the Company in such period.

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

The operating results of the businesses acquired during the year ended December 31, 2020 contributed total revenues of $ 64.3 million in the year ended December 31, 2020.

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

During the year ended December 31, 2020, the Company incurred $ 0.2 million in transaction costs related to the acquisitions described above.

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

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

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

Supplemental Pro Forma Information (unaudited)

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Year Ended December 31,

(in thousands, except per share data)

Net income (loss)

(in thousands)

Net (loss) income

The unaudited pro forma supplemental information is based on estimates and assumptions which the Company believes are reasonable and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets, the pro forma impact of transaction costs which consisted of legal, advisory and due diligence fees and expenses, and the pro forma tax effect of the pro forma adjustments for the years ended December 31, 2022, 2021, and 2020.

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(in thousands)

Gross carrying amount as of January 1, 2021

Accumulated impairment charge

Balance at January 1, 2021

Measurement period adjustments

Foreign exchange translation effects

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Measurement period adjustments

Impairment charge

Foreign exchange translation effects

Balance at December 31, 2022

Accumulated impairment losses to goodwill were $ 652.0 million as of December 31, 2021 and 2020, respectively.

During the fiscal year ended December 31, 2022, the Company recognized non-cash goodwill impairment charges of $ 1,275.7 million and $ 91.8 million related to the Company’s sales and marketing reporting units, respectively, as a result of the Company’s annual evaluation of goodwill impairment test (as further described in Note 1 above).

Accumulated impairment losses to goodwill were $ 2,019.5 million and $ 652.0 million as of December 31, 2022 and 2021, respectively.

The following tables set forth information for intangible assets:

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Developed technology

Covenant not to compete

Total finite-lived intangible assets (1)

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Total other intangible assets

(1) Intangible assets, along with the related accumulated amortization, are removed from the table above at the end of the fiscal year they become fully amortized.

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

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In connection with the acquisitions during the years ended December 31, 2022 and 2021, the Company recorded intangible assets of $ 25.6 million and $ 35.6 million, respectively.

Amortization expenses included in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2021, 2020 and 2019 were $ 198.9 million, $ 191.2 million, and $ 189.9 million, respectively.

Amortization expenses included in the Consolidated Statements of Operations and Comprehensive (Loss) Income for the years ended December 31, 2022, 2021 and 2020 were $ 200.8 million, $ 198.9 million, and $ 191.2 million, respectively.

During the year ended December 31, 2022, the Company recognized non-cash intangible asset impairment charges of $ 146.0 million and $ 59.0 million related to the Company's indefinite-lived sales and marketing trade names, respectively, in connection with the Company’s annual intangible asset impairment test on October 1, 2022 (as further described in Note 1 above).

No impairment related to the Company’s intangible assets was recorded for the years ended December 31, 2021, and 2020.

Prepaid and Other Assets

Prepaid and other current assets consist of the following:

During fiscal year 2022, the Company concluded the impact of challenges in the labor market and continued inflationary pressures was an indicator that impairment may exist related to its client relationship intangible assets and as a result, the Company performed a recoverability test and determined that there was no impairment.

No impairment related to the Company’s client relationship intangible assets was recorded during the years ended December 31, 2021, and 2020.

Prepaid Expenses and Other Assets

Prepaid expenses and other current assets consist of the following:

(in thousands)

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Prepaid expenses

Miscellaneous receivables

Workers' compensation receivables

Interest rate caps

Prepaid income taxes

Other receivables

Assets held for sale

Other current assets

Total prepaid expenses and other current assets

Other assets consist of the following:

(in thousands)

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Total other assets

Inventories are stated at the lower of cost and net realizable value.

Inventory is stated at the lower of cost and net realizable value.

Costs are determined on the first-in, first-out basis.

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(in thousands)

Contingent consideration

Operating lease liability

Interest rate caps and accrued interest payable

Rebates due to retailers

Operating lease liability

Client deposits

Client refunds related to the Take 5 Matter

Employee medical self-insurance reserves

General liability insurance reserve

Note payable related to contingent consideration

Rebates due to retailers

Employee medical self-insurance reserves

Client refunds related to the Take 5 Matter

Contingent consideration

Other accrued expenses

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Contingent consideration

Deferred employer social security taxes

Other long-term liabilities

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The Company began deferring payment of the employer share of the security taxes in April 2020.

During the year ended December 31, 2021, the Company repaid $ 24.0 million and $ 24.0 million of the remaining liability was included in the “Accounts payable”

in the Consolidated Balance Sheets as of December 31, 2021.

The Company repaid $ 23.8 million and $ 24.0 million during the years ended December 31, 2022 and 2021, respectively.

Contingent Consideration Liabilities

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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 Consolidated Statements of Operations and Comprehensive Income (Loss).

The Company has reassessed the fair value of contingent consideration, noting that as of December 31, 2021, projected EBITDA related to acquisitions, which was anticipated to contribute to measurement period EBITDA, was higher than expected.

This reassessment resulted in a fair value adjustment of a $ 4.6 million loss that was included in “Selling, general, and administrative expenses”

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

remaining change in fair value for the year ended December 31, 2021 was due to present value accretion that was included in “Interest expense, net”

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

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

The Company has reassessed the fair value of contingent consideration based on the achievement of performance targets as defined in the respective purchase agreements and it resulted in a fair value adjustment of a $ 4.8 million loss that was included in “Selling, general, and administrative expenses”

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

As of December 31, 2022, the maximum potential payment outcomes were $ 112.2 million.

The Company had unsecured loan notes in aggregate of $ 4.0 million outstanding as of December 31, 2020 to settle contingent considerations related to 2017 sales acquisitions, which was included in “Other accrued expenses”

in the Consolidated Balance Sheets.

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

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Changes in fair value

Note issuance for settlements

Measurement period adjustments

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Term Loan Facility

Revolving Credit Facility

Government loans for COVID-19 relief

Notes payable and deferred obligations

Total long-term debt

current portion

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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.

Borrowings will bear interest at a floating rate, which can be either an adjusted Eurodollar rate plus an applicable margin or, at the

Borrower’s option, a base rate plus an applicable margin.

Borrowings will bear interest at a floating rate, which can be either an adjusted Eurodollar rate plus an applicable margin or, at the Borrower’s option, a base rate plus an applicable margin.

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

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(“Holdings”) and all of the Borrower’s direct and indirect wholly owned material U.S.

subsidiaries (subject to certain permitted exceptions) and Canadian subsidiaries (subject to certain permitted exceptions, including exceptions based on immateriality thresholders of aggregate assets and revenues of Canadian subsidiaries) (the “Guarantors”).

subsidiaries (subject to certain permitted exceptions) and

Canadian subsidiaries (subject to certain permitted exceptions, including exceptions based on immateriality thresholders of aggregate assets and revenues of Canadian subsidiaries) (the “Guarantors”).

The Revolving Credit Facility is secured by a lien on substantially all of Holdings’, the Borrower’s and the Guarantors’

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The ABL amendment was deemed to be a modification of the revolving credit facility for accounting purposes.

On December 2, 2022, the Borrower, Holdings and certain of the Borrower’s subsidiaries, entered into the Second Amendment to ABL Revolving Credit Agreement (the “Second Amendment”), which amends the ABL Revolving Credit Agreement, by and among the Borrower, Holdings, the lenders from time to time party thereto and Bank of America, as administrative agent, and the other parties thereto.

The Second Amendment was entered into by the Borrower to amend certain terms and provisions of the Revolving Credit Facility, including, among other things:

(i) increasing the aggregate amount of maximum revolving commitments available from $ 400 million to $ 500 million;

(ii) replacing the Eurocurrency Rate interest rate metric with a metric based on Term SOFR (as defined in the Second Amendment), whereby applicable borrowings in United States dollars will bear interest at a floating rate based on Term SOFR plus an applicable margin;

(iii) reducing each applicable interest rate pricing tier based on the Average Historical Excess Availability (as defined therein) with respect to Term SOFR borrowings, Alternative Currency borrowings, base rate borrowings and Canadian Prime Rate borrowings, in each case for each pricing tier by 0.25 % per annum;

and (iv) extending the scheduled maturity date of the borrowings to December 2, 2027.

Term Loan Facility

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The applicable margins for the Term Loan Facility are 5.25 % with respect to Eurodollar rate borrowings and 4.25 % with respect to base rate borrowings.

The Borrower may voluntarily prepay loans or reduce commitments under the Term Loan Facility, in whole or in part, subject to minimum amounts, with prior notice but without premium or penalty (other than a 1.00 % premium on any prepayment in connection with a repricing transaction prior to the date that is twelve months after the date the Company entered into the Term Loan Facility on October 28, 2020).

with a repricing transaction prior to the date that is twelve months after the date the Company entered into the Term Loan Facility on October 28, 2020).

The Borrower will be required to prepay the Term Loan Facility with 100 % of the net cash proceeds of certain asset sales (such percentage subject to reduction based on the achievement of specific first lien net leverage ratios) and subject to certain reinvestment rights, 100 % of the net cash proceeds of certain debt issuances and 50 % of excess cash flow (such percentage subject to reduction based on the achievement of specific first lien net leverage ratios).

The Borrower was not required to make any excess cash flow payment for the year ended December 31, 2020, and the Borrower did not make any other mandatory or voluntary prepayments of the Term Loan Facility for the year ended December 31, 2021.

The Borrower’s obligations under the Term Loan Facility are guaranteed by Holdings and the Guarantors.

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In connection with the First Lien Amendment, the Company incurred $ 2.3 million of third-party fees and expenses and recognized $ 1.5 million of non-cash expense on the extinguishment of debt from write off of unamortized debt issuance costs which were recorded in " Interest expense, net”

in the Consolidated Statements of Operations and Comprehensive Income (Loss) during the year ended December 31, 2021.

in the Consolidated Statements of Operations and Comprehensive (Loss) Income during the year ended December 31, 2021.

Senior Secured Notes

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The Notes are guaranteed by Holdings and each of the Issuer’s direct and indirect wholly owned material U.S.

subsidiaries (subject to certain permitted exceptions) and Canadian subsidiaries (subject to certain permitted exceptions, including exceptions

based on immateriality thresholders of aggregate assets and revenues of Canadian subsidiaries) that is a borrower or guarantor under the Term Loan Facility.

Security and ranking

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and consolidate, merge or sell all or substantially all of the Issuer’s assets.

Most of these covenants will be suspended on the Notes so long as they have investment grade ratings from both Moody’s Investors Service, Inc.

Most of these covenants will be suspended on the Notes when they have investment grade ratings from both Moody’s Investors Service, Inc.

and S&P Global Ratings and so long as no default or event of default under the Indenture has occurred and is continuing.

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All operating lease expenses are recognized on a straight-line basis over the lease term as a component of “Selling, general, and administrative expenses”

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

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

Payments under the Company’s lease arrangements are primarily fixed.

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In enacting the plan, the Company abandoned several office leases prior to reaching termination agreements with its landlords, and as a result, adjusted the useful life of these asset to reflect the remaining expected use.

The reduction to the right-of use assets and liabilities related to these leases for the year ended December 31, 2021 was $ 5.7 million and $ 7.6 million, respectively, resulting in an additional lease gain of $ 1.9 million.

The reduction to the right-of use assets and liabilities related to these leases for the year ended December 31, 2020 was $ 41.8 million and $ 42.6 million,

respectively, resulting in an additional lease gain of $ 0.8 million.

Additionally, the Company paid $ 6.8 million and $ 18.0 million in termination fees for the years ended December 31, 2021 and 2020, respectively, which were recorded in “Selling, general and administrative expenses”

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

The reduction to the right-of use assets and liabilities related to these leases resulted in an additional lease gain of $ 0.3 million, $ 1.9 million, and $ 0.8 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Additionally, the Company paid $ 1.3 million, $ 6.8 million and $ 18.0 million in termination fees for the years ended December 31,

2022, 2021 and 2020, respectively, which were recorded in “Selling, general and administrative expenses”

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

Based on the present value of the lease payments for the remaining lease term of the Company’s existing leases, the Company’s right-of-use assets and lease liabilities for operating leases as of December 31, 2022 and 2021 were as follows:

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Present value of lease liabilities

The Company has additional operating leases for real estate of $ 10.0 million which have not commenced as of December 31, 2021, and as such, have not been recognized on the Company’s Consolidated Balance Sheet.

These operating leases commence in 2022.

Fair Value of Financial Instruments

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Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value.

These tiers include:

Level 1, defined as observable inputs such as quoted prices in active markets;

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable;

and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of December 31, 2022, and 2021, the Company’s interest rate derivatives and forward contracts are Level 2 assets and liabilities with the related fair values based on third-party pricing service models.

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Liabilities measured at fair value

Derivative financial instruments

Warrant liability

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Interest Rate Cap Agreements

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

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

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

As of December 31, 2022, the aggregate fair value of the Company’s outstanding interest rate caps represented an outstanding net asset of $ 47.5 million.

As of December 31, 2022, $ 47.5 million of the Company’s fair value of outstanding interest rate caps were included in “Prepaid expenses and other current assets”

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

in the Consolidated Statements of Operations and Comprehensive (Loss) 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”

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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).

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

“Other accrued

expenses,”

and “Other long-term liabilities”

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 years ended December 31, 2021, 2020, and 2019, the Company recognized interest income of $ 8.3 million, interest expense of $ 0.4 million and interest expense of $ 2.7 million, respectively, related to changes in the fair value of its derivative instruments, respectively.

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

During the years ended December 31, 2022, 2021, and 2020, the Company recognized interest income of $ 43.8 million, interest income of $ 8.3 million and interest expense of $ 0.4 million, respectively, related to changes in the fair value of its derivative instruments, respectively.

Warrant Liability

The estimated fair value of the liability is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 2 financial instrument.

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

The 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 (Loss) Income until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument.

On October 28, 2020, the Company recorded the initial warrant liability of the private placement warrants of $ 7.9 million.

Subsequently, the warrant liability was remeasured to fair value with adjustment of $ 1.0 million and $ 13.4 million reflected in “Change in fair value of warrant liability”

in the Consolidated Statements of Operations and Comprehensive Income (Loss) during the year ended December 31, 2021 and 2020, respectively.

Subsequently, the warrant liability was remeasured to fair value resulting in a gain of $ 21.2 million and a loss of $ 1.0 million reflected in “Change in fair value of warrant liability”

in the Consolidated Statements of Operations and Comprehensive (Loss) Income during the year ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, and 2021, 7,333,333 private placement warrants remained outstanding at fair value of $ 1.0 million and $ 22.2 million, respectively.

The fair value of the warrants on the date of issuance and on each remeasurement date of those warrants classified as liabilities is estimated using the Black-Scholes option pricing model using the following inputs and assumptions:

Fair value warrants per share

Exercise price per share

Expected term (years)

Expected volatility

Risk-free interest rate

Dividend yield

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

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

Beginning in the first quarter of 2022, they are classified as Level 2 based on the availability of sufficient observable information using the price of the public warrants as an indirectly observable quoted price in active markets to measure the fair value of the private placement warrants, which is inherently less subjective and judgmental given it is based on observable inputs.

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

Long-term Debt

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Balance at December 31, 2022

Term Loan Credit Facility

Term Loan Facility

Government loans for COVID-19 relief

Notes payable and deferred obligations

Total long-term debt

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Balance at December 31, 2021

Term Loan Credit Facility

Revolving Credit Facility

Term Loan Facility

Government loans for COVID-19 relief

Notes payable and deferred obligations

Total long-term debt

The fair value of debt reported in the table above is based on adjusted price quotations on the debt instruments in an active market.

The Company believes that the carrying value of its other borrowings, including amounts outstanding, if any, for the Revolving Credit Facility, approximate fair market value based on maturities for debt of similar terms.

Investments in Unconsolidated Affiliates

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Income from the Company’s equity method investments, included in “Cost of revenues”

in the Consolidated Statements of Operations and Comprehensive Income (Loss), was $ 10.3 million, $ 5.1 million, and $ 4.9 million for the years ended December 31, 2021, 2020, and 2019, respectively.

in the Consolidated Statements of Operations and Comprehensive (Loss) Income, was $ 10.6 million, $ 10.3 million, and $ 5.1 million for the years ended December 31, 2022, 2021, and 2020, respectively.

The Company’s proportionate share in their net assets at December 31, 2022, and 2021 were $ 123.2 million and $ 118.0 million, respectively.

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2020 Incentive Award Plan (the “Plan”).

As of December 31, 2021, the number of nonqualified stock options outstanding was immaterial.

The Company’s RSUs and PSUs, as described below, are expensed and reported as non-vested shares.

The Company recognized stock-based compensation expense of $ 39.4 million for the year ended December 31, 2021.

The related deferred tax benefit for stock-based compensation recognized was $ 6.6 million for the year ended December 31, 2021.

The Company recognized stock-based compensation expense of $ 36.9 million and $ 39.4 million

for the year ended December 31, 2022 and 2021, respectively.

The related deferred tax benefit for stock-based compensation recognized was $ 7.9 million and $ 6.6 million for the year ended December 31, 2022 and 2021, respectively.

Performance Restricted Stock Units

Performance restricted stock units (“PSUs”) are subject to the achievement of certain performance conditions based on the Company’s revenues and Adjusted EBITDA targets in the respective measurement period and the recipient’s continued service to the Company.

Performance restricted stock units (“PSUs”) are subject to the achievement of certain performance conditions based on the Company’s revenues (“PSU Revenues”) and Adjusted EBITDA (“PSU EBITDA”) targets in the respective measurement period and the recipient’s continued service to the Company.

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.

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

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

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

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

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

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

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

Under the provision of ASC 718 Compensation—Stock Compensation , the Company determined that 2021 PSUs granted were modified as of March 11, 2022 related to 205,834 above-target PSU Revenues metrics.

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.

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

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Performance Period

Expense to be

Maximum Potential

Expense to be

January 1, 2021—

December 31, 2021

Maximum Remaining Unrecognized Compensation Expense

Weighted-average remaining requisite service periods

January 1, 2022—December 31, 2022

January 1, 2021—December 31, 2021

The following table summarizes the PSU activity for the year ended December 31, 2022:

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Outstanding at January 1, 2022

PSU performance adjustment

Outstanding at December 31, 2022

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As the result of an amendment and restatement of the Limited Partnership Agreement, on March 15, 2018, 75 % of all Common Series C Units awards are subject to vesting over four fiscal years from their respective issuance date.

The remaining 25 % of the units vest if and when Topco’s private equity sponsors as of the date of the 2014 Topco Acquisition realize a pre-tax internal rate of return of 20 % compounded annually with respect to the Common Series A Units of Topco held by such sponsors.

The remaining 25 % of the units were forfeited.

To the extent the Common Series C Units vest, such units may still be forfeited as a result of termination of the employment of the applicable holders or upon a non-qualifying exit event.

Certain awards vest over the remaining initial four-year term, subject to the employee’s continued employment.

In addition, certain Common Series C Units were issued in connection with the Daymon Acquisition to Daymon employees, certain of which are deemed to be vested upon issuance, and certain on which vest in four installments on each of the first four anniversaries following the completion of the Daymon Acquisition, subject to such employee’s continued employment with the Company.

In addition, Topco issued certain Common Series C Units in connection with the 2017 acquisition of Daymon Worldwide Inc.

(“Daymon”) to certain Daymon employees, certain of which were deemed to vested upon issuance, and certain of which vested in four annual installments, subject to such employee’s continued employment with the Company.

The Limited Partnership Agreement also authorizes Topco to issue 35,000 Common Series C-2 Units to employees of the Company, which are deemed to be vested upon issuance and subject to substantially similar forfeiture provisions as the Common Series C Units, including forfeiture upon certain terminations of employment with the Company of the applicable holders or a non-qualifying exit event.

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The Company did not use a dividend yield as it has not historically paid distributions.

The following weighted average assumptions were used in determining the fair value of Common Series C Unit grants made during the years ended December 31, 2020 and 2019:

The following weighted average assumptions were used in determining the fair value of Common Series C Unit grants made during the year ended December 31, 2020:

Year Ended December 31,

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Lack of marketability discount

Expected term (years)

The following weighted average assumptions were used in determining the fair value of Common Series C-2 Unit grants made during the years ended December 31, 2020 and 2019:

Expected term

The following weighted average assumptions were used in determining the fair value of Common Series C-2 Unit grants made during the year ended December 31, 2020:

Year Ended December 31,

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Cost of equity capital

Expected term (years)

Expected term

Topco has the option to repurchase Common Series C Units for cash.

The following table summarizes the activity in the Common Series C Units:

Year Ended December 31,

Beginning of the period

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The following table summarizes the activity in the Common Series C-2 Units:

Year Ended December 31,

Beginning of the period

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Lack of marketability discount

Expected term (years)

Expected term

On December 31, 2022, there were 30,000 Common Series D Units outstanding.

During the years ended December 31, 2022, 2021, and 2020, the Company recorded equity-based compensation expense of $ 4.1 million, $ 15.0 million, and $ 13.8 million, respectively, included in “Selling, general, and administrative expenses”

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

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

Stock Options

In October 2020, the Company adopted the Plan, which provides for the issuance of qualified and non-qualified stock options to officers, directors, employees and other qualified persons.

The Plan is administered by the board of directors of the Company or a committee appointed by the board of directors.

A total of 261,324 non-qualified stock options were granted during the year ended December 31, 2021 and remained outstanding as of December 31, 2021, with a weighted average exercise price of $ 9.20 .

During the year ended December 31, 2022, the following activities involving stock options occurred under the Plan:

Stock Options

Weighted Average Exercise Price

Outstanding at January 1, 2022

Outstanding at December 31, 2022

Stock-based compensation costs related to stock options granted to employees are measured at the date of grant based on the estimated fair value of the award, net of estimated forfeitures.

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The Company will continue to use judgment in evaluating the assumptions related to the Company's stock-based compensation on a prospective basis.

As the Company continue to accumulate

additional data, the Company may have refinements to the Company's estimates, which could materially impact the Company's future stock-based compensation expense.

As the Company continue to accumulate additional data, the Company may have refinements to the Company's estimates, which could materially impact the Company's future stock-based compensation expense.

The fair value of the employee stock options was estimated using the following assumptions for the periods presented:

Year Ended December 31,

Grant date fair value

Dividend yield

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Risk-free interest rate

Expected term (years)

Expected term

As of December 31, 2022, the Company had approximately $ 2.2 million of total unrecognized compensation expense related to stock options, net of related forfeiture estimates, which the Company expects to recognize over a weighted-average period of approximately 1.7 years.

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(a) customary employment with the Company for more than 20 hours per week and more than five months per calendar year, or (b) continuous employment with the Company for a minimum period of time, not to exceed two years, prior to the first date of an offering.

An employee may not be granted rights to purchase stock under the ESPP if such employee (x) immediately after the grant would own stock possessing five percent or more of the total combined voting power or value of the common stock, exceeds $ 25,000 of fair market value of such stock.

An employee may not be granted rights to purchase stock under the ESPP if such employee (x) immediately after the grant would own stock possessing five percent or more of the total combined voting power or value of the common stock, or (y) would purchase in excess of $ 25,000 of fair market value of such stock in an offering period.

Additionally, “highly compensated employees”

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A participant may not transfer purchase rights under the ESPP other than by will, the laws of descent and distribution or as otherwise provided under the ESPP.

In the event of a specified corporate transaction, such as the merger or change in control, a successor corporation may assume, continue or substitute each outstanding purchase right.

In the event of a specified corporate transaction, such as a merger or change in control, a successor corporation may assume, continue or substitute each outstanding purchase right.

If the successor corporation does not assume, continue or substitute for the outstanding purchase rights, the offering in progress will be shortened and a new exercise date will be set.

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Holders of the Company’s Class A common stock are entitled to one vote for each share on each matter on which they are entitled to vote.

At December 31, 2022, there were 319,690,300 shares of Class A common stock legally issued and outstanding.

At December 31, 2021, there were 316,963,552 shares of Class A common stock legally issued and outstanding, including 5,000,000 Performance Shares issued to Topco at the Closing, which were subject to vesting upon satisfaction of a market performance condition after the Closing.

Such performance shares vested on January 15, 2021 when the market performance condition was satisfied.

Topco did not have the right to vote the Performance Shares until the vesting condition for the Performance Shares was achieved.

Preferred stock —The Company is authorized to issue 10,000,000 preferred stock with no par value of $0.0001 per share.

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s Class A common stock under the 2021 Share Repurchase Program.

As a result of repurchases during the year ended December 31, 2021, there remains $ 87.4 million of share repurchase availability under the 2021 Share Repurchase Program as of December 31, 2021.

Warrants —As of December 31, 2021, 11,244,988 public warrants were outstanding.

As a result of repurchases during the year ended December 31, 2021, there remains $ 87.4 million of share repurchase availability under the 2021 Share Repurchase Program as of December 31, 2022 and 2021.

Warrants —As of December 31, 2022 and 2021, 11,244,988 public warrants were outstanding.

Each whole warrant entitles the holder to purchase one whole share of the Company’s Class A common stock at an exercise price of $ 11.50 per share, subject to adjustment.

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The warrants will expire five years after the completion of the Merger, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

As of December 31, 2021, 7,333,333 private placement warrants were outstanding.

As of December 31, 2022 and 2021, 7,333,333 private placement warrants were outstanding.

The private placement warrants are identical to the public warrants, except that the private placement warrants and the Class A common stock issuable upon exercise of the private placement warrants were not transferable, assignable or salable until 30 days after the completion of the Merger, subject to certain limited exceptions.

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prior written notice of redemption;

within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

if, and only if, the last reported closing price of the common stock equals or exceeds $18.00 per share (as adjusted for share splits, share dividends, reorganizations, reclassifications, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

For cash or Class A common stock:

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

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

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

Year Ended December 31,

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Basic earnings per share computation:

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

Net (loss) income attributable to stockholders of

Advantage Solutions Inc.

Weighted average common shares - basic

Basic earnings (loss) per common share

Basic (loss) earnings per common share

Diluted earnings per share computation:

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

Net (loss) income attributable to stockholders of

Advantage Solutions Inc.

Weighted average common shares outstanding

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Weighted average common shares - diluted

Diluted earnings (loss) per common share

Diluted (loss) earnings per common share

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

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Therefore, these Performance Shares are excluded from shares outstanding for basic and diluted earnings per share until the contingency is resolved.

The 5,000,000 Performance Shares vested on January 15, 2021, when the closing price for the Class A common stock exceeded $ 12.00 per share for 20 trading days out of 30 consecutive trading days.

The Company had 11,244,988 of public warrants and 7,333,333 of private placement warrants held by the CP Sponsor (as defined below), to purchase Class A common stock at $ 11.50 per share at the Closing, at of which remain outstanding at December 31, 2021.

The 5,000,000

Performance Shares vested on January 15, 2021, when the closing price for the Class A common stock exceeded $ 12.00 per share for 20 trading days out of 30 consecutive trading days.

The Company had 11,244,988 of public warrants and 7,333,333 of private placement warrants held by the CP Sponsor (as defined below), to purchase Class A common stock at $ 11.50 per share at the Closing, which remain outstanding at December 31, 2022 and 2021.

See Note 12 —

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Conyers Park and the Transactions

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

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

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

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

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

directors, in each case, on the terms and subject to the conditions therein.

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

Overlapping Directors

Eight members of the board of directors of the Company served as the members of the board of directors of clients of the Company.

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

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

Accounts Receivable

Year Ended December 31,

as of December 31,

(In thousands)

All other clients

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

During the year ended December 31, 2020, the Company recognized revenues of $ 16.4 million from this client.

Accounts receivable from this client was zero as of December 31, 2020.

Investment in Unconsolidated Affiliates

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Certain funds managed by CVC Credit Partners, which is part of the same network of companies providing investment management advisory services operating under the CVC brand as CVC Capital Partners, act as lenders under the Company’s Term Loan Facility.

As of December 31, 2021, the funds managed by CVC Credit Partners held $ 6.2 million of the aggregate principal outstanding under the Term Loan Facility.

Prior to the Closing of the Transactions, the funds managed by CVC Credit Partners under the Company’s Prior First Lien Credit Agreement and Prior Second Lien Credit Agreement were $ 100.2 million and $ 31.1 million, respectively, as of December 31, 2019.

The funds managed by CVC Credit Partners held zero and $ 6.2 million of the aggregate principal outstanding under the Term Loan Facility as of December 31, 2022 and 2021, respectively.

Loans to Karman Topco L.P.

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This loan matures on December 31, 2023 and is pre-payable at any time without penalty.

Restructuring Charges

Restructuring charges include severance plans designed to integrate and reduce costs intended to further improve efficiencies in operational activities and align cost structures consistent with revenue levels associated with business changes.

In response to the COVID-19 pandemic, the Company commenced a plan during the year ended December 31, 2020 involving terminating certain employees, particularly with respect to COVID-19 impacted operations.

The Company recorded severance expenses of $ 1.0 million, $ 4.6 million, and $ 2.3 million included in “Selling, general, and administrative expenses”

in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2021, 2020, and 2019, respectively.

As of December 31, 2021 and 2020, $ 0.3 million and $ 1.3 million of the Company’s restructuring charges were included in “Other accrued expenses”

in the Consolidated Balance Sheets, respectively.

The following table summarizes the Company’s restructuring activity:

Facilities and

Restructuring

(in thousands)

Balance at January 1, 2019

Payments/utilization

Balance at December 31, 2019

Payments/utilization

Balance at December 31, 2020

Payments/utilization

Balance at December 31, 2021

The following table summarizes the Company’s restructuring charges by segment:

Year Ended December 31,

(in thousands)

Total restructuring charges

Total restructuring charges represents the total charges by segments for the years ended December 31, 2021, 2020, and 2019, respectively.

The provision for (benefit from) income taxes is as follows:

The (benefit from) provision for income taxes is as follows:

Year Ended December 31,

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Total current tax expense

(Benefit) deferred tax expense

Deferred tax (benefit) expense

Total deferred tax benefit

Total provision for (benefit from) income taxes

A reconciliation of the provision for (benefit from) income taxes based on the federal statutory income tax rate attributable to the Company’s effective income tax rate is as follows:

Total (benefit from) provision for income taxes

A reconciliation of the Company's effective income tax rate as compared to the federal statutory income tax rate is as follows:

Year Ended December 31,

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Foreign tax, net of federal tax benefit

Global intangible low taxed income

Transaction expenses

Goodwill impairment

Disallowed executive compensation

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Fair value of warrant liability

Non-deductible expenses

Return to provision on permanent differences

Work opportunity tax credit

Research and development credit

Effective tax rate

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(in thousands)

Income (loss) before income taxes

(Loss) income before income taxes

Net deferred tax liabilities consist of the following:

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Interest expense

Net operating losses

Right-of-use liabilities

Net operating losses

Transaction expenses

Contingent liabilities

Social security tax deferral

Insurance reserves

Acquired intangibles, including goodwill

Debt issuance costs

Acquired intangible assets, including goodwill

Social security tax deferral

Total deferred tax assets

Deferred tax liabilities

Acquired intangibles including goodwill

Debt issuance costs

Acquired intangible assets, including goodwill

Interest rate caps

Right-of-use assets

Debt issuance costs

Restructuring expenses

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Net deferred tax liabilities

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) that was signed into law on March 27, 2020 allows employers to defer payment of a portion of payroll taxes otherwise due on wages paid between the enactment date and December 31, 2020 and remit the deferred payroll taxes in equal amounts on December 31, 2021 and December 31, 2022.

Under this provision of the CARES Act, the Company has recorded the tax impact of $ 6.4 million and $ 12.6 million as a deferred tax asset as of December 31, 2021 and 2020.

Under this provision of the CARES Act, the Company has recorded the tax impact of $ 6.4 million as a deferred tax asset as of December 31, 2021 and no remaining balance as of December 31, 2022.

On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act (“IRA”), which, among other things, imposes a new corporate alternative minimum tax and an excise tax on stock buybacks.

The Company did no t have any stock buybacks during the year ended December 31, 2022.

The Company held cash and cash equivalents in foreign subsidiaries of $ 81.8 million and $ 86.2 million as of December 31, 2022 and 2021, respectively.

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Deferred tax assets are only recorded to the extent that they are realizable based upon past and future income.

As a result of the evaluation, the Company established a valuation allowance of $ 6.9 million, $ 6.7 million, and $5.6 million on its foreign affiliates’

As a result of the evaluation, the Company established a valuation allowance of $ 5.4

million, $ 6.9 million and $ 6.7 million on its foreign affiliates’

deferred tax assets as of December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2022, the Company had $ 4.9 million of United States Federal Net Operating Losses (“NOL”), $ 22.6 million state NOLs, and $ 19.6 million foreign NOLs.

The change of ownership provisions of the Tax Reform Act of 1986 may limit

utilization of a portion of The Company’s domestic NOLs to future periods.

The United States Federal NOLs expire between 2036 and 2037, $13.8 million of the state NOLs expire between 2023 and 2040 and the remaining $4.0 million of the state NOLs carry forward indefinitely.

The change of ownership provisions of the Tax Reform Act of 1986 may limit utilization of a portion of The Company’s domestic NOLs to future periods.

The United States Federal NOLs expire in 2037, $16.0 million of the state NOLs expire between 2023 and 2041 and the remaining $6.6 million of the state NOLs carry forward indefinitely.

Foreign NOLs of $7.7 million expire between 2024 and 2032 and the remaining $11.9 million of the foreign NOLs carry forward indefinitely.

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therefore, no additional information is produced or included herein.

The Company and its chief operating decision maker evaluate performance based on revenues and operating income.

The Company and its chief operating decision maker evaluate performance based on revenues and operating (loss) income.

(in thousands)

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Depreciation and amortization

Operating income

Operating loss

Year Ended December 31, 2021

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primarily includes the Company’s operation in the U.K., Germany, the Netherlands and Japan.

Redeemable Noncontrolling Interest

Redeemable Noncontrolling Interests

The Company is party to a put and call option agreement with respect to the common securities that represent the remaining noncontrolling interest from a majority-owned subsidiary, which was established through a majority-owned international joint venture during the year ended December 31, 2021.

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The carrying value of the redeemable noncontrolling interest was $ 3.7 million as of December 31, 2022.

Changes in redeemable noncontrolling interest for the years ended December 31, 2022 and 2021, are as follows:

(in thousands)

December 31, 2021

Beginning Balance

Balance at January 1, 2021

Fair value at acquisition

Net loss attributable to redeemable noncontrolling interests

Net income attributable to redeemable noncontrolling interests

Foreign currency translation adjustment

Ending Balance

Balance at December 31, 2021

Fair value at acquisition

Net income attributable to redeemable noncontrolling interests

Dividend distribution

Foreign currency translation adjustment

Balance at December 31, 2022

During the year ended December 31, 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.

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 Consolidated Balance Sheets.

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.

Commitments and Contingencies

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The Company has retained outside counsel to represent it in these matters and is vigorously defending its interests.

Commercial Matters

The Company has also been involved in various litigation matters and arbitrations with respect to commercial matters arising with clients, vendors and third-party sellers of businesses.

The Company has retained outside counsel to represent it in these matters and is vigorously defending its interests.

Legal Matters Related to Take 5

6 unchanged sentences

In September 2019, the Take 5 Sellers initiated arbitration proceedings against the Company, alleging breach of the Take 5 APA as a result of the Company’s decision to terminate the operations of the Take 5 business, and seeking monetary damages equal to all unpaid earn-out payments under the Take 5 APA (plus interest, fees and costs).

In 2020, the Take 5 sellers amended their statement of claim to allege defamation, relating to statements the Company made to customers in connection with terminating the operations of the Take 5 business, and seeking monetary damages for the alleged injury

to their reputation.

The Company filed its response to the Take 5 Sellers’

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

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

The arbitration hearing for this matter commenced in the first quarter of 2022;

however, the Company does not know when the hearing will be concluded and when the Company will receive a decision from the arbitrator.

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

The Company is actively pursuing the collection of this award in state court in Florida.

The Take 5 Sellers have attempted to have the award vacated in the district court in Washington, D.C., and in the state court in Florida.

The Company has asked the Washington, D.C.

court to dismiss the petition or, in the alternative, abstain until the Florida case is resolved.

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

Other Legal Matters Related to Take 5

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The Company has outstanding surety bonds issued for its benefit of $ 16.0 million and $ 10.0 million as of December 31, 2022, and 2021, respectively.

Subsequent Events

In January 2023, Jill Griffin resigned as the Company's Chief Executive Officer and entered into a Separation Agreement and General Release (the “Separation Agreement”), pursuant to which Ms.

Griffin’s employment terminated effective as of January 16, 2023.

Pursuant to the Separation Agreement, Ms.

Griffin is eligible to receive severance benefits including, without limitation, continued payment of base salary for 24 months following the date of termination.

In February 2023, David Peacock was appointed the Company’s Chief Executive Officer.

The Company and Mr.

Peacock entered into an employment agreement that provides for Mr.

Peacock to receive a cash signing bonus of $ 1.3 million, a $ 3.0 million share award grant, 8,000,000 options for shares of the Company’s Class A Common Stock (at various exercise prices), and annual grants consistent with the Company’s historical equity vesting in annual installments over three years of (i) $ 1.5 million in the form of RSUs, and (ii) $ 1.5 million in the form of PSUs subject to additional vesting requirements upon the attainment of performance goals established by the Compensation Committee of the Board.

ADVANTAGE SOLUTIONS INC.

13 unchanged sentences

Loans to Karman Topco L.P.

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Common stock in treasury, at cost;

11 unchanged sentences

Cost of revenues

Impairment of goodwill and indefinite-lived assets

Selling, general, and administrative expenses

3 unchanged sentences

Operating income

Other expenses:

Other (income) expenses:

Change in fair value of warrant liability

Interest expense, net

Total other expenses

Loss before income taxes and equity in net income of subsidiaries

Total other (income) expenses

Income (loss) before income taxes and equity in net income of subsidiaries

Provision for income taxes

Net loss before equity in net income of subsidiaries

Equity in net income (loss) of subsidiaries

Net income (loss) attributable to subsidiaries

Net income (loss) before equity in net income of subsidiaries

Equity in net (loss) income of subsidiaries

Net (loss) income attributable to subsidiaries

Other comprehensive (loss) income, net of tax equity in

comprehensive (loss) income of subsidiaries

Total comprehensive income (loss)

Total comprehensive (loss) income

See Notes to Condensed Registrant Only 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-K

Item 8. Financial Statements and Supplementary Data