What changed in this filing

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Item 1. Financial Statements

2023-05-10 compared with 2022-11-09 · 287 added, 602 removed, 651 unchanged (58% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

(in thousands, except share data)

19 unchanged sentences

Deferred income tax liabilities

Warrant liability

Other long-term liabilities

5 unchanged sentences

323,555,298 and 319,690,300 shares issued and outstanding as of

September 30, 2022 and December 31, 2021, respectively

March 31, 2023 and December 31, 2022, respectively

Additional paid in capital

3 unchanged sentences

Treasury stock, at cost;

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

and December 31, 2021

1,610,014 shares as of March 31, 2023

and December 31, 2022, respectively

Total equity attributable to stockholders of Advantage Solutions Inc.

5 unchanged sentences

ADVANTAGE SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

Three Months Ended March 31,

(in thousands, except share and per share data)

4 unchanged sentences

Total operating expenses

Operating income

Other (income) expenses:

Operating (loss) income

Other expenses (income):

Change in fair value of warrant liability

Interest expense, net

Total other expenses

Income before income taxes

Provision for income taxes

net income attributable to

noncontrolling interest

Net income attributable to stockholders of

Total other expenses (income)

(Loss) income before income taxes

(Benefit from) provision for income taxes

Net (loss) income

net loss attributable to noncontrolling interest

Net (loss) income attributable to stockholders of

Advantage Solutions Inc.

Other comprehensive loss, net of tax:

Other comprehensive income, net of tax:

Foreign currency translation adjustments

Total comprehensive income attributable to

Total comprehensive (loss) income attributable to

stockholders of Advantage Solutions Inc.

Net income per common share:

Net (loss) income per common share:

Weighted-average number of common shares:

11 unchanged sentences

(in thousands, except share data)

Balance at July 1, 2022

Comprehensive income (loss)

Foreign currency translation adjustments

Total comprehensive income (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 September 30, 2022

Solutions Inc.

Nonredeemable

Comprehensive

Stockholders'

Noncontrolling

Stockholders'

Income (Loss)

(in thousands, except share data)

Balance at July 1, 2021

Comprehensive income (loss)

Foreign currency translation adjustments

Total comprehensive income (loss)

Interest on loans to Karman Topco L.P.

Redemption of noncontrolling interest

Equity-based compensation of Karman

Shares issued upon exercise of

Shares issued under 2020 Employee Stock Purchase

Stock-based compensation expense

Balance at September 30, 2021

See Notes to the Condensed Consolidated Financial Statements.

Treasury Stock

Solutions Inc.

Nonredeemable

Comprehensive

Stockholders'

Noncontrolling

Stockholders'

Income (Loss)

(in thousands, except share data)

Balance at January 1, 2023

1 unchanged sentence

Foreign currency translation adjustments

Total comprehensive income (loss)

Total comprehensive (loss) income

Interest on loans to Karman Topco L.P.

Increase in noncontrolling interest

Equity-based compensation of Karman

1 unchanged sentence

Stock Purchase Plan

Payments for taxes related to net

share settlement under 2020

Incentive Award Plan

Shares issued under 2020 Incentive

Stock-based compensation expense

Balance at September 30, 2022

Balance at March 31, 2023

Treasury Stock

Solutions Inc.

8 unchanged sentences

Comprehensive income (loss)

Net income (loss)

Foreign currency translation adjustments

1 unchanged sentence

Interest on loans to Karman Topco L.P.

Redemption of noncontrolling interest

Equity-based compensation of Karman Topco L.P.

Equity-based compensation of Topco

Shares issued under 2020 Employee Stock

Purchase Plan

Shares issued under 2020 Incentive

Shares issued upon vesting of restricted stock units

Shares issued under 2020 Employee Stock Purchase

Shares issued upon exercise of warrants

Stock-based compensation expense

Balance at September 30, 2021

Balance at March 31, 2022

See Notes to the Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net income to net cash provided by

Net (loss) income

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

operating activities

Noncash interest (income) expense, net

Noncash interest expense (income)

Amortization of deferred financing fees

Depreciation and amortization

6 unchanged sentences

Distribution received from unconsolidated affiliates

Loss on disposal of property and equipment

Loss on divestiture

Loss on sale of businesses and classification of assets held for sale

Loss on disposal of assets

Changes in operating assets and liabilities, net of effects from

6 unchanged sentences

Other accrued expenses and other liabilities

Net cash provided by operating activities

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of businesses, net of cash acquired

Purchase of investment in unconsolidated affiliates

Purchase of property and equipment

Proceeds from divestiture

Net cash used in investing activities

2 unchanged sentences

Payments on lines of credit

Proceeds from issuance of long-term debt

Principal payments on long-term debt

Repurchases from the Term Loan Facility

Proceeds from issuance of common stock

Payments for taxes related to net share settlement

under 2020 Incentive Award Plan

Contingent consideration payments

Holdback payments

Contribution from noncontrolling interest

Redemption of noncontrolling interest

Net cash used in financing activities

18 unchanged sentences

The Condensed Consolidated Balance Sheet at December 31, 2022 was derived from the audited Consolidated Balance Sheet at that date and does not include all the disclosures required by GAAP.

In the opinion of management, all adjustments which are of a normal recurring nature and necessary for a fair statement of the results as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 have been reflected in the condensed consolidated financial statements.

In the opinion of management, all adjustments which are of a normal recurring nature and necessary for a fair statement of the results as of March 31, 2023 and for the three months ended March 31, 2023 and 2022 have been reflected in the condensed consolidated financial statements.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2022 and the related footnotes thereto.

Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.

COVID-19 Pandemic

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

While mixed by services and geography, the spending reductions impacted all of the Company’

s services and markets.

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

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

Impact of the War in Ukraine

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

During the first quarter of 2022, the war in Ukraine resulted in the imposition of sanctions by the United States, the United Kingdom, and the European Union, that 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 Condensed Consolidated Statements of Operations and Comprehensive Income .

Recent Accounting Standards

Accounting Standards Recently Adopted by the Company

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

Facilitation of the Effects of Reference Rate Reform on

Financial Reporting .

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

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

On April 1, 2022, the Company adopted the standard prospectively and determined that the adoption of this accounting guidance did not have a material impact on its condensed 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, simplifies the contract settlement assessment for equity classification, requires the use of the if-converted method for all convertible instruments in the diluted earnings per share calculation and expands disclosure requirements.

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

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

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

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

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

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

Disclosures by Business Entities about Government Assistance .

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

The guidance is applied prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application.

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

Accounting Standards Recently Issued but Not Yet Adopted by the Company

In October 2021, the FASB issued 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 GAAP.

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.

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.

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.

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 Stockholders’

Revenue Recognition

1 unchanged sentence

Substantially all of the Company’s contracts with clients involve the transfer of a service to the client, which represents a performance obligation that is satisfied over time because the client simultaneously receives and consumes the benefits of the services provided.

In most cases, the contracts consist of a performance obligation that is comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service).

In most cases, the contracts provide for a performance obligation that is comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service).

For these contracts, the Company allocates the ratable portion of the consideration based on the services provided in each period of service to such period.

7 unchanged sentences

Disaggregated revenues were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

8 unchanged sentences

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

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

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

2022 Acquisitions

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

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

As such, the purchase consideration for each acquired business was allocated to the acquired tangible and intangible assets

and liabilities assumed based upon their respective fair values.

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

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

The allocation of the excess purchase price was based upon preliminary estimates and assumptions and is subject to 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 have been included in the Condensed Consolidated Statements of Operations and Comprehensive Income since its respective date of acquisition.

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

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 $ 1.6 million.

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

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

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

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

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

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

(in thousands)

Consideration:

Fair value of contingent consideration

Total consideration

Recognized amounts of identifiable assets acquired and liabilities

Accounts receivable

Identifiable intangible assets

Accounts payable

Deferred tax liabilities and other

Total liabilities

Redeemable noncontrolling interest

Noncontrolling interest

Total identifiable net assets

Goodwill arising from acquisitions

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

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

(in thousands)

Client relationships

Total identifiable intangible assets

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

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

During the three and nine months ended September 30, 2022, the Company incurred immaterial amounts in transaction costs related to the acquisitions described above.

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

in the Condensed Consolidated Statements of Operations and Comprehensive Income.

2021 Acquisitions

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

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

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

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

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

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

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

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

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

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

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

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

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

Revenues recognized during t he three months ended March 31, 2023 that were included in Deferred revenues as of December 31, 2022 were $ 12.8 million .

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

Held for Sale

In April 2023, the Company entered into an agreement and sold a portion of its sales reporting unit resulting in classification of certain assets and liabilities as held for sale as of March 31, 2023.

The total assets and liabilities of the sales reporting unit disposal group that have met the classification of held for sale in the Company’s Condensed Consolidated Balance Sheet are as follows:

(in thousands)

Consideration

Fair value of contingent consideration

Total consideration

Recognized amounts of identifiable assets acquired and liabilities

March 31, 2023

Accounts receivable

Inventory and other assets

Property and equipment

Identifiable intangible assets

Total liabilities

Redeemable noncontrolling interest

Total identifiable net assets

Goodwill arising from acquisitions

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

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

(in thousands)

Client relationships

Developed technology

Total identifiable intangible assets

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

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

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

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

in the Condensed Consolidated Statements of Operations and Comprehensive Income.

Supplemental Pro-Forma Information (unaudited)

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

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Goodwill and Intangible Assets

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

(in thousands)

Balance at January 1, 2021

Measurement period adjustments

Foreign exchange translation effects

Balance at December 31, 2021

Measurement period adjustments

Foreign exchange translation effects

Balance at September 30, 2022

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

Intangible assets

Total assets held for sale

Accounts payable

Other long-term liabilities

Total liabilities held for sale

Assets and liabilities to be disposed of by the sale are classified as held for sale if the carrying amount is principally expected to be recovered through a sale rather than through continuing use.

The classification occurs when the disposal group is available for immediate sale and the sale is probable.

These criteria are generally met when an agreement to sell exists, or management has committed to a plan to sell the assets within one year.

Disposal groups are measured at the lower of carrying amount or fair value less costs to sell, and long-lived assets included within the disposal group are not depreciated or amortized.

The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value of the

disposal group.

The Company determined that the disposal groups classified as held for sale do not meet the criteria for classification as discontinued operations.

During the three months ended March 31, 2023, the Company recorded a loss of $ 11.7 million to remeasure the disposal group to fair value plus costs to sell as a component of “Selling, general, and administrative expenses”

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

Intangible Assets

The following tables set forth information for intangible assets:

September 30, 2022

March 31, 2023

(amounts in thousands)

1 unchanged sentence

Gross Carrying

Impairment Charges

Finite-lived intangible assets:

1 unchanged sentence

Developed technology

Covenant not to compete

Total finite-lived intangible assets

5 unchanged sentences

Gross Carrying

Impairment Charges

Finite-lived intangible assets:

1 unchanged sentence

Developed technology

Covenant not to compete

Total finite-lived intangible assets

1 unchanged sentence

Total other intangible assets

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

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

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

Amortization of intangible assets was $ 49.7 million and $ 50.3 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, estimated future amortization expense of the Company’s existing intangible assets are as follows:

(in thousands)

1 unchanged sentence

Total amortization expense

September 30,

(in thousands)

5 unchanged sentences

Long-term debt, net of current portion

As of September 30, 2022, the Company had $ 1.3 billion of debt outstanding under the Term Loan Facility (as defined in the Annual Report on Form 10-K filed March 1, 2022 for the year ended December 31, 2021 (the “2021 Annual Report”) ) and $ 775.0 million of debt outstanding under the Notes (as defined in the 2021 Annual Report) with maturity dates of October 28, 2027 and November 15, 2028 , respectively.

The Company was in compliance with all of its affirmative and negative covenants under the Term Loan Facility and Notes as of September 30, 2022.

As of March 31, 2022, the Company had $ 1.3 billion of debt outstanding under the Term Loan Facility (as defined in the Annual Report on Form 10-K filed March 1, 2023 for the year ended December 31, 2022 (the “2022 Annual Report”) ) and $ 775.0 million of debt outstanding under the Notes (as defined in the 2022 Annual Report) with maturity dates of October 28, 2027 and November 15, 2028 , respectively.

The Company was in compliance with all of its affirmative and negative covenants under the Term Loan Facility and Notes as of March 31, 2023.

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

The Company made the minimum quarterly principal

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

The Company made the minimum quarterly principal payments of $ 3.3 million in each of the three months ended March 31, 2023 and 2022.

Additionally, the Company voluntarily repurchased an aggregate $ 2.0 million principal amount of its Term Loan Facility during the three months ended March 31, 2023.

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

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

As of March 31, 2023, the Company had no borrowings under the Revolving Credit Facility (as defined in the 2022 Annual Report).

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

Borrowings under the credit agreement bear interest at a floating rate, which at the option may be either (i) a base rate plus a margin ranging from 1.0 % to 1.50 % per annum or (ii) LIBOR plus a margin ranging from 2.00 % to 2.50 % per annum.

Borrowings under the credit agreement bear interest at a floating rate, which at the option may be either (i) a base rate or Canadian Prime Rate plus an applicable margin of 0.75 %, 1.00 %, or 1.25 % per annum or (ii) Term SOFR or Alternative Currency Spread plus an applicable margin of 1.75 %, 2.00 % or 2.25 % per annum.

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

7 unchanged sentences

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

September 30, 2022

March 31, 2023

(in thousands)

12 unchanged sentences

Liabilities measured at fair value

Derivative financial instruments

Warrant liability

2 unchanged sentences

Interest Rate Cap Agreements

The Company had interest rate cap contracts with an aggregate notional value of principal of $ 650.0 million and $ 2.2 billion as of September 30, 2022 and December 31, 2021, respectively, from various financial institutions to manage the Company’s exposure to interest rate movements on variable rate credit facilities.

As of September 30, 2022, $ 49.1 million of fair value of the Company’s outstanding interest rate caps were included in “Prepaid expenses and other current assets”

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

in the Condensed Consolidated Statements of Operations and

Comprehensive Income.

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

and “Other accrued expenses”

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

in the Consolidated Statements of Operations and Comprehensive Income.

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

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

Forward Contracts

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

12.0 million with maturities in fiscal year 2022.

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

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

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

Warrant Liability

As of September 30, 2022 and December 31, 2021, 7,333,333 private placement warrants, which were owned by Conyers Park II Sponsor LLC (“CP Sponsor”), remained outstanding at fair value of $ 0.7 million and $ 22.2 million, respectively.

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

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

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

in the Condensed Consolidated Statements of Operations and Comprehensive Income during the three and nine months ended September 30, 2021, respectively.

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

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

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 period of time the public warrants have been trading.

The Company determined the fair value of the liability classified private placement warrants by approximating the value with the share price of the public warrants which is inherently less subjective and judgmental given it is based on observable inputs.

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

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

The Company had interest rate cap contracts with an aggregate notional value of principal of $ 650.0 million as of March 31, 2023 and December 31, 2022, respectively, from various financial institutions to manage the Company’s exposure to interest rate movements on variable rate credit facilities.

The fair value of the Company’s outstanding interest rate caps of $ 39.6 million and $ 47.5 million were included in “Prepaid expenses and other current assets”

in the Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022, respectively, with changes in fair value recognized as a component of “Interest expense, net”

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

During the three months ended March 31, 2023 and 2022, the Company recorded a gain of $ 1.9 million and a gain of $ 21.0 million, respectively, within Interest expense , net, related to changes in the fair value of its derivative instruments.

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 Condensed Consolidated Statements of Operations and Comprehensive Income.

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

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

As of March 31, 2023, the maximum potential payment outcomes were $ 109.5 million.

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

September 30,

(in thousands)

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Changes in fair value

Measurement period adjustments

Foreign exchange translation effects

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Carrying Value

Balance at September 30, 2022

Balance at March 31, 2023

Term Loan Facility

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Related Party Transactions

Overlapping Directors

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

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

Accounts Receivable

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

All other clients

Beginning February 2023, an officer of the Company has served as a member of the board of directors of a client of the Company.

The Company recognized $ 0.8 million of revenues from such client during the three months ended March 31, 2023.

Accounts receivable from this client were $ 0.6 million as of March 31, 2023.

Investment in Unconsolidated Affiliates

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

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

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

The Company’s effective tax rates were 4.7 % and 25.4 % for the three months ended September 30, 2022 and 2021, respectively.

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

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

The Company’s effective tax rates were 20.6 % and 36.0 % for the nine months ended September 30, 2022 and 2021, respectively.

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

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

On August 16, 2022, the U.S.

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

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

During the three months ended March 31, 2023 and 2022, the Company recognized revenues of $ 3.7 million and $ 3.8 million, respectively, from a parent company of an unconsolidated affiliate.

Accounts receivable from this client were $ 1.9 million and $ 1.7 million as of March 31, 2023 and December 31, 2022, respectively.

The Company’s effective tax rates were 13.9 % and 34.0 % for the three months ended March 31, 2023 and 2022, respectively.

The effective tax rate is based upon the estimated income or loss before taxes for the year, by

jurisdiction, and adjusted for estimated permanent tax adjustments.

The fluctuation in the Company’s effective tax rate was primarily due to a difference in projected book income or loss of each jurisdiction used in the annual effective tax rate and the application of the shortfall of $ 2.6 million of stock-based compensation for the three months ended March 31, 2023.

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

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Through the Company’s sales segment, the Company serves as a strategic intermediary between consumer goods manufacturers and retailer partners and performs critical merchandizing services on behalf of both consumer goods manufacturers and retailer partners.

Through the Company’s marketing segment, the Company develops and executes marketing programs for manufacturers and retailers.

Through the Company’s marketing segment, the Company develops and executes marketing programs for consumer goods manufacturers and retailers.

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

The assets and liabilities of the Company are

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

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

therefore, no additional information is produced or included herein.

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

(in thousands)

Three Months Ended September 30, 2022

Depreciation and amortization

Operating income

Three Months Ended September 30, 2021

Depreciation and amortization

Operating income

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

(in thousands)

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Depreciation and amortization

Operating income

Nine Months Ended September 30, 2021

Operating loss

Three Months Ended March 31, 2022

Depreciation and amortization

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

Employment Matters

The Company has also been involved in various litigation, including purported class or representative actions with respect to matters arising under the California Labor Code and Private Attorneys General Act.

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

Legal Matters Related to Take 5

On April 1, 2018, the Company acquired certain assets and assumed liabilities of Take 5 Media Group (“Take 5”).

In June 2019, as a result of a review of internal allegations related to inconsistency of data provided by Take 5 to its clients, the Company commenced an investigation into Take 5’s operations.

In July 2019, as a result of the Company’s investigation, the Company determined that revenue during the fiscal year ended December 31, 2018 attributable to the Take 5 business had been recognized for services that were not performed on behalf of clients of Take 5 and that inaccurate reports were made to Take 5 clients about those services (referred to as the “Take 5 Matter”).

As a result of these findings, in July 2019, the Company terminated all operations of Take 5, including the use of its associated trade names and the offering of its services to its clients and offered refunds to Take 5 clients of collected revenues attributable to Take 5 since the Company’s acquisition of Take 5.

USAO and FBI Voluntary Disclosure and Investigation Related to Take 5

The Company voluntarily disclosed to the United States Attorney’s Office and the Federal Bureau of Investigation certain misconduct occurring at Take 5, a line of business that the Company closed in July 2019.

In April 2018, the Company acquired the business of Take 5 Media Group (“Take 5”).

As a result of an investigation into that business in 2019 that identified certain misconduct, the Company terminated all operations of the Take 5 in July 2019, including the use of its associated trade names and the offering of its services to its clients and offered refunds to clients of collected revenues attributable to the period after the Company’s acquisition.

The Company refers to the foregoing as the Take 5 Matter.

The Company voluntarily disclosed to the United States Attorney’s Office and the Federal Bureau of Investigation certain misconduct occurring at Take 5.

The Company intends to cooperate in this and any other governmental investigations that may arise in connection with the Take 5 Matter.

At this time, the Company cannot predict the ultimate outcome of any investigation related to the Take 5 Matter and is unable to estimate the potential impact such an investigation may have on the Company.

Arbitration Proceedings Related to Take 5

In August 2019, as a result of the Take 5 Matter, the Company provided a written indemnification claim notice to the sellers of Take 5 (the “Take 5 Sellers”) seeking monetary damages (including interest, fees and costs) based on allegations of breach of the asset purchase agreement (the “Take 5 APA”), as well as fraud.

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.

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

In August 2019, the Company requested monetary indemnification from the sellers of Take 5 (including interest, fees and costs) based on allegations of breach of the asset purchase agreement, as well as fraud.

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

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

Other Legal Matters Related to Take 5

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

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

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

The Take 5 Matter may result in additional litigation against

the Company, including lawsuits from clients, or governmental investigations, which may expose the Company to potential liability in excess of the amounts offered by the Company as refunds to Take 5 clients.

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

Stock-Based Compensation

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

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

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

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

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

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

of $ 9.1 million and $ 7.8 million during the three months ended March 31, 2023 and 2022, respectively.

The related deferred tax benefit for stock-based compensation recognized was $ 2.0 million and $ 1.5 million for the three months ended March 31, 2023 and 2022, 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.

The number of

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

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

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

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

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

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

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

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

During the first quarter of 2023, the Compensation Committee determined that the achievement of the performance objective applicable to the PSU EBITDA 2022 objective did not meet the minimum threshold and the achievement of the performance objective applicable to the PSU Revenues 2022 objective was 83.2 % of Target Goals.

The performance period for those awards ended on December 31, 2022 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 Revenue Metric PSUs.

The stock-based compensation expense for such modification was accounted for as a cancellation of the original award and the issuance of a new award using the fair value of the award on the date of modification, resulting in a $ 1.1 million gain upon cancellation during the nine months ended September 30, 2022 and an intrinsic value associated with the new award of $ 1.2 million that is expected to be recognized over the remaining service-based vesting term.

The fair value of PSU grants is equal to the closing price of the Company’

s Class A common stock on the date of the applicable grant.

The maximum potential remaining expense if the Maximum Goals were met for these awards has been provided in the table below for awards in which the performance period has not yet concluded.

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

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

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

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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 nine months ended September 30, 2022:

January 1, 2023—December 31, 2023

January 1, 2022—December 31, 2022

January 1, 2021—December 31, 2021

The following table summarizes the PSU activity for the three months ended March 31, 2023:

Performance Share Units

3 unchanged sentences

PSU performance adjustment

Outstanding at September 30, 2022

Outstanding at March 31, 2023

Restricted Stock Units

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

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

During the three months ended March 31, 2023, the following activities involving RSUs occurred under the Plan:

Number of RSUs

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Outstanding at January 1, 2023

Outstanding at September 30, 2022

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

Outstanding at March 31, 2023

As of March 31, 2023, the total remaining unrecognized compensation cost related to RSUs amounted to $ 41.8 million, which is expected to be amortized over the weighted-average remaining requisite service periods of 2.5 years.

Stock Options

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

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

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

September 30,

During the three months ended March 31, 2023, the following activities involving stock options occurred under the Plan:

Stock Options

Weighted Average Exercise Price

Outstanding at January 1, 2023

Outstanding at March 31, 2023

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

Exercise price

Dividend yield

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Risk-free interest rate

Expected term (years)

As of September 30, 2022, the Company had approximately $ 1.4 million of total unrecognized compensation expense related to stock options, net of related forfeiture estimates, which the Company expects to recognize over a weighted-average period of approximately 1.6 years .

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

Redeemable Noncontrolling Interest

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

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

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

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

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

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

(in thousands)

Balance at January 1, 2022

Fair value at acquisition

Net income attributable to redeemable noncontrolling interests

Dividend distribution

Foreign currency translation adjustment

Balance at September 30, 2022

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

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

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

Expected term

As of March 31, 2023, the Company had approximately $ 7.2 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 4.6 years .

The intrinsic value of all outstanding options as of March 31, 2023 was zero based on the market price of the Company's common stock of $ 1.58 per share.

Earnings Per Share

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

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

Basic earnings per share computation:

Net income attributable to stockholders of

Net (loss) income attributable to stockholders of

Advantage Solutions Inc.

Weighted average common shares - basic

Basic earnings per common share

Basic (loss) earnings per common share

Diluted earnings per share computation:

Net income attributable to stockholders of

Net (loss) income attributable to stockholders of

Advantage Solutions Inc.

Weighted average common shares outstanding

Performance and Restricted Stock Units

Performance Stock Units

Restricted Stock Units

Employee stock purchase plan and stock options

Weighted average common shares - diluted

Diluted earnings per common share

The Company had 18,578,321 warrants to purchase Class A common stock at $ 11.50 per share outstanding at September 30, 2022, which have been excluded in the calculation of diluted earnings per common share as the weighted average market price of the common stock during the three and nine months ended September 30, 2022 did not exceed the exercise price of the warrants.

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

Diluted (loss) earnings per common share

The Company had 18,578,321 warrants to purchase Class A common stock at $ 11.50 per share outstanding at March 31, 2023 and 2022, respectively, which have been excluded in the calculation of diluted earnings per common share, as the weighted average market price of the common stock during the three months ended March 31, 2023 and 2022 did not exceed the exercise price of the warrants.

In accordance with the treasury method the weighted average shares outstanding assuming dilution include the incremental effect of stock-based awards, except when such effect would be antidilutive.

Stock-based awards of 2.2 million weighted-average shares were outstanding for the three months ended March 31, 2023, but were not included in the computation of diluted loss per common share, because the net loss position of the Company made them antidilutive.

In addition, PSUs related to 4.8 million and 4.4 million shares assuming achievement of the Target Goals were outstanding for the three months ended March 31, 2023 and 2022, respectively, but were not included in the computation of diluted (loss) earnings per common share, as the performance targets were not yet met.

Subsequent Events

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

In April 2023, the Company entered into two interest rate collar transactions in an aggregate notional amount of $ 300.0 million.

Both collars have maturity dates of April 5, 2026 .

In April 2023, a majority owned subsidiary of the Company operating in Japan entered into a loan agreement for an aggregate of approximately $ 1.5 million with a bank lender pursuant to a local government loan program.

The purpose of the loan is to use the borrowed funds for working capital and to fund the anticipated recovery of business operations from the COVID-19 pandemic.

Half of the loan bears an interest rate of 1.70 % per annum until the maturity date of April 30, 2043 .

The remainder of the loan bears 0.80 % per annum until April 18, 2026 , at which time the loan will bear an interest rate of 1.70 % until the maturity date.

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

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

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

of this report.

of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2023.

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

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sales and marketing.

Through our sales segment, which generated approximately 62.5% and 65.9% of our total revenues in the nine months ended September 30, 2022 and 2021, respectively, we offer headquarter sales representation services to consumer goods manufacturers, for whom we prepare and present to retailers a business case to increase distribution of manufacturers’

Through our sales segment, which generated approximately 60.6% and 64.7% of our total revenues in the three months ended March 31, 2023 and 2022, respectively, we offer headquarter sales representation services to consumer goods manufacturers, for whom we prepare and present to retailers a business case to increase distribution of manufacturers’

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

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

Through our marketing segment, which generated approximately 37.5% and 34.1% of our total revenues in the nine months ended September 30, 2022 and 2021, respectively, we help brands and retailers reach consumers through two main categories within the marketing segment.

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

Through our marketing segment, which generated approximately 39.4% and 35.3% of our total revenues in the three months ended March 31, 2023 and 2022, respectively, we help brands and retailers reach consumers through two main categories within the marketing segment.

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

The second category is our collection of specialized agency services, in which we provide private label services to retailers and develop granular marketing programs for brands and retailers through our shopper, consumer and digital marketing agencies.

Business Combination with Conyers Park

On October 28, 2020, Conyers Park II Acquisition Corp.

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

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

and, together with the other transactions contemplated by the merger agreement, the “Transactions”).

On October 28, 2020, and in connection with the closing of the Transactions, Conyers Park changed its name to Advantage Solutions Inc.

Impacts of the COVID-19 Pandemic

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

Our services experienced the effects from reductions in client spending due to the economic impact related to the COVID-19 pandemic.

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

Globally, the most impacted services were our experiential services.

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

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

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

Operating income decreased by $18.8 million, or 28.6%, to $46.8 million;

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

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

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

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

Globally, the most impacted services were our in-store sampling and demonstration services which have continued to improve through the first quarter of 2023.

Our financial performance for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 includes:

Revenues increased by $97.2 million, or 10.6%, to $1,012.0 million;

Operating income decreased by $47.5 million, or 32.6% to $98.1 million;

Net income increased by $14.9 million, or 50.5% to $44.4 million;

Adjusted Net Income increased by $5.8 million, or 3.9% to $152.5 million;

Operating loss increased by $31.3 million, or 135.9%, to $8.3 million;

Net loss increased by $65.2 million, or 371.9% to $47.7 million;

Adjusted Net Income decreased by $35.3 million, or 72.0%, to $13.8 million;

Adjusted EBITDA decreased by $4.7 million, or 4.8%, to $92.1 million.

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

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

Factors Affecting Our Business and Financial Reporting

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

We believe that by pursuing

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

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

Acquisitions.

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

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

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

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

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

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

Contingent Consideration.

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

in our Condensed Consolidated Statements of Operations and Comprehensive Income.

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

Depreciation and Amortization.

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

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

Acquisition, unless determined to be indefinite-lived.

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

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Marketing segment revenues are primarily recognized in the form of a fee-for-service (including retainer fees, fees charged to clients based on hours incurred, project-based fees or fees for executing in-person consumer engagements or experiences, which engagements or experiences we refer to as events), commissions or on a cost-plus basis, in each case, related to services including experiential marketing, shopper and consumer marketing services, private label development or our digital, social and media services.

Given our acquisition strategy, we analyze our financial performance, in part, by measuring revenue growth in two ways—revenue growth attributable to organic activities and revenue growth attributable to acquisitions, which we refer to as organic revenues and acquired revenues, respectively.

Given our acquisitions, we analyze our financial performance, in part, by measuring revenue growth in two ways—revenue growth attributable to organic activities and revenue growth attributable to acquisitions, which we refer to as organic revenues and acquired revenues, respectively.

We define organic revenues as any revenues that are not acquired revenues.

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For example, if we completed an acquisition on July 1, 2022 for a business that included a contingent consideration arrangement, we would consider revenues from the acquired business from July 1, 2022 to June 30, 2023 to be acquired revenues.

We generally consider growth attributable to the financial performance of an acquired business after the 12-month anniversary of the date of acquisition to be organic.

We generally consider growth

attributable to the financial performance of an acquired business after the 12-month anniversary of the date of acquisition to be organic.

In limited cases, when the acquisition of an acquired business does not include a contingent consideration arrangement, or we otherwise do not separately track the financial performance of the acquired business due to operational integration, we consider the revenues that the business generated in the 12 months prior to its acquisition to be our acquired revenues for the 12 months following its acquisition, and any differences in revenues actually generated during the 12 months after its acquisition to be organic.

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Selling, general and administrative expenses consist primarily of salaries, payroll taxes and benefits for corporate personnel.

Other overhead costs include information technology, occupancy costs for corporate personnel, professional services fees, including accounting and legal services, and other general corporate expenses.

Other overhead costs include information technology, professional services fees, including accounting and legal services, and other general corporate expenses.

Additionally, included in selling, general and administrative expenses are costs associated with the changes in fair value of the contingent consideration of acquisitions and other acquisition-related costs.

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

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

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

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

Based on the availability of sufficient observable information, we determine 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.

Interest Expense

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Amortization Expense

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

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

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It is difficult to predict with any precision the amount of expense we may record relating to future acquired intangible assets.

Depreciation Expense

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

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

Depreciation expense relates to the property and equipment that we own, which represented less than 1% of our total assets at March 31, 2023 and 2022, respectively.

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

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

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Adjusted Net Income is a non-GAAP financial measure.

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

Adjusted Net Income means net loss before (i) impairment of goodwill and indefinite-lived assets, (ii) amortization of intangible assets, (iii) equity-based compensation of Karman Topco L.P., (iv) changes in fair value of warrant liability, (v) fair value adjustments of contingent consideration related to acquisitions, (vi) acquisition-related expenses, (vii) costs associated with COVID-19, net of benefits received, (viii) net income attributable to noncontrolling interest, (ix) reorganization and restructuring expenses, (x) litigation expenses, (xi) loss on disposal of assets, (xii) gain on repurchases from the

Term Loan Facility, (xiii) costs associated with the Take 5 Matter, (xvi) other adjustments that management believes are helpful in evaluating our operating performance, and (xv) related tax adjustments.

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

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

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

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

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

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

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

Results of Operations for the Three Months Ended March 31, 2023 and 2022

The following table sets forth items derived from the Company’s consolidated statements of operations for the three months ended March 31, 2023 and 2022 in dollars and as a percentage of total revenues.

Three Months Ended March 31,

(amounts in thousands)

Cost of revenues

Selling, general, and administrative

Selling, general, and administrative expenses

Depreciation and amortization

Total expenses

Operating income

Operating (loss) income

Other (income) expenses:

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Interest expense, net

Total other expenses

Income before income taxes

Provision for income taxes

Total other expenses (income)

(Loss) income before income taxes

(Benefit from) provision for income taxes

Net (loss) income

Other Financial Data

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

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

For a discussion of our presentation of Adjusted Net Income and Adjusted EBITDA and

reconciliations of Net income to Adjusted Net Income and Adjusted EBITDA, see “

—Non-GAAP Financial Measures .”

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

Three Months Ended September 30,

(amounts in thousands)

Total revenues

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

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

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

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

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

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

Cost of Revenues

Cost of revenues as a percentage of revenues for the three months ended September 30, 2022 was 86.4%, as compared to 82.5% for the three months ended September 30, 2021.

The increase as a percentage of revenues was largely attributable to the change in the revenue mix of our services as a result of recoveries from the COVID-19 pandemic and acquired businesses, and the ongoing investment and inflationary impact in recruiting, wage, and employee benefit expenses.

Selling, General and Administrative Expenses

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

Depreciation and Amortization Expense

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

Operating Income

Three Months Ended September 30,

(amounts in thousands)

Total operating income

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

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

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability represents $1.1 million of non-cash gain resulting from a fair value adjustment to warrant liability with respect to the private placement warrants for the three months ended September 30, 2022, approximating the fair value with the warrant price of the public warrants.

Interest Expense, net

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

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

Provision for Income Taxes

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

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

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

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

Adjusted Net Income

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

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

Non-GAAP Financial Measures.”

Adjusted EBITDA and Adjusted EBITDA by Segment

Three Months Ended September 30,

(amounts in thousands)

Total Adjusted EBITDA

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

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

In the marketing segment, the increase in the Adjusted EBITDA was primarily attributable to the growth in revenues as described above.

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

Non-GAAP Financial Measures .”

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

Nine Months Ended September 30,

Comparison of the Three Months Ended March 31, 2023 and 2022

Three Months Ended March 31,

(amounts in thousands)

Total revenues

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

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

Excluding revenues from acquired businesses and unfavorable foreign exchange rates of $33.9 million, the segment experienced an increase of $68.9 million in organic revenues primarily due to our European joint venture which experienced continued recoveries from temporary reduction in services as a result of the COVID-19 pandemic and growth in our retail merchandising services partially offset by a decrease in our foodservice and third party selling and retailing services.

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

Total revenues increased by $97.2 million, or 10.6%, during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

The sales segment revenues increased $21.4 million during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, of which $4.2 million were revenues from acquired businesses.

Excluding revenues from acquired businesses and unfavorable foreign exchange rates of $8.4 million, the segment experienced an increase of $25.6 million in organic revenues primarily due to growth in our retail merchandising services and European joint venture.

The marketing segment revenues increased $75.8 million during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, of which $7.9 million were revenues from acquired businesses.

Excluding revenues from acquired businesses and unfavorable foreign exchange rates of $4.7 million, the segment experienced an increase of $72.6 million in organic revenues.

The increase in revenues was primarily due to an increase in our in-store product demonstration and sampling services, partially offset by a decrease in certain of our digital services.

Cost of Revenues

Cost of revenues as a percentage of revenues for the nine months ended September 30, 2022 was 86.1%, as compared to 82.4% for the nine months ended September 30, 2021.

Cost of revenues as a percentage of revenues for the three months ended March 31, 2023 was 87.8%, as compared to 85.9% for the three months ended March 31, 2022.

The increase as a percentage of revenues was largely attributable to the change in the revenue mix of our services and the inflationary impact in recruiting and wages.

Selling, General and Administrative Expenses

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

Selling, general and administrative expenses as a percentage of revenues for the three months ended March 31, 2023 was 7.4%, compared to 5.3% for the three months ended March 31, 2022, primarily due to $16.5 million of non-cash loss on disposal of assets and adjustments to assets held for sale and $10.5 million increase in reorganization charges, primarily related to the transition of certain of our executive officers.

Depreciation and Amortization Expense

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

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

Operating Income

Nine Months Ended September 30,

Depreciation and amortization expense was $57.1 million for the three months ended March 31, 2023 compared to $57.8 million for the three months ended March 31, 2022, which stayed relatively consistent year over year.

Operating (Loss) Income

Three Months Ended March 31,

(amounts in thousands)

Total operating income

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

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

Total operating (loss) income

The increase in operating loss during the three months ended March 31, 2023 was due to one-time charges in selling, general and administrative expenses as described above.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability represents $21.5 million of non-cash gain resulting from a fair value adjustment to warrant liability with respect to the private placement warrants for the nine months ended September 30, 2022, approximating the fair value with the warrant price of the public warrants.

Change in fair value of warrant liability was $0.1 million of non-cash gain for the three months ended March 31, 2023 compared to $15.4 million of non-cash gain resulting from a fair value adjustment to warrant liability with respect to the private placement warrants for the three months ended March 31, 2022.

Interest Expense, net

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

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

Provision for Income Taxes

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

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

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

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

Interest expense, net increased by $35.3 million, or 297.1%, to $47.2 million for the three months ended March 31, 2023, from $11.9 million for the three months ended March 31, 2022.

The increase in interest expense was primarily due to the change in fair value in our derivative instruments in the prior year, which lowered the prior year expense, and higher interest rates in 2023.

(Benefit from) Provision for Income Taxes

Benefit from taxes was $7.7 million for the three months ended March 31, 2023 as compared to $9.0 million of provision for income taxes for the three months ended March 31, 2022.

The fluctuation was primarily attributable to a pre-tax loss during the three months ended March 31, 2023 compared to a pre-tax income during the three months ended March 31, 2022.

Net (Loss) Income

Net loss was $47.7 million for the three months ended March 31, 2023, compared to net income of $17.5 million for the three months ended March 31, 2022.

The decrease in net income was primarily driven by the increase in interest expense, decrease in operating income as described above, offset by the benefit from income taxes.

Adjusted Net Income

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

The decrease in Adjusted Net Income for the three months ended March 31, 2023 was attributable to the increase in interest expense, net and decrease in non-cash gain from the change in fair value of warrant liability as described above.

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

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Adjusted EBITDA and Adjusted EBITDA by Segment

Nine Months Ended September 30,

Three Months Ended March 31,

(amounts in thousands)

Total Adjusted EBITDA

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

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

In the marketing segment, the increase in the Adjusted EBITDA was primarily attributable to the growth in revenues as described above.

Adjusted EBITDA decreased by $4.7 million, or 4.8%, to $92.1 million for the three months ended March 31, 2023, from $96.7 million for the three months ended March 31, 2022.

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

In the marketing segment, the decrease was driven largely by continued headwinds in our higher-margin digital services, partially offset by the growth in revenues from the in-store sampling and demonstration services as described above.

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

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Adjusted Net Income is a non-GAAP financial measure.

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

Adjusted Net Income means net (loss) income before (i) amortization of intangible assets, (ii) impairment of goodwill and indefinite-lived assets (iii) equity-based compensation of Karman Topco L.P., (iv) changes in fair value of warrant liability, (v) fair value adjustments of contingent consideration related to acquisitions, (vi) acquisition-related expenses, (vii) costs associated with COVID-19, net of benefits received, (viii) net income attributable to noncontrolling interest, (ix) reorganization and restructuring expenses, (x) litigation expenses, (xi) loss on disposal of assets, (xii) gain on repurchases from the Term Loan Facility, (xiii) costs associated with the Take 5 Matter, (xiv) other adjustments that management believes are helpful in evaluating our operating performance, and (xv) related tax adjustments.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

Net (loss) income

Net income attributable to noncontrolling interest

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Acquisition-related expenses (d)

Restructuring expenses (e)

Litigation (f)

Amortization of intangible assets (g)

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

Costs associated with the Take 5 Matter (i)

Tax adjustments related to non-GAAP adjustments (j)

Reorganization and restructuring expenses (e)

Loss on disposal of assets (g)

Amortization of intangible assets (h)

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

Gain on repurchases from the Term Loan Facility (m)

Costs associated with the Take 5 Matter (j)

Tax adjustments related to non-GAAP adjustments (k)

Adjusted Net Income

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

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

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

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

Net (loss) income

Interest expense, net

Provision for income taxes

(Benefit from) provision for income taxes

Depreciation and amortization

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Acquisition-related expenses (d)

EBITDA for economic interests in investments (k)

Restructuring expenses (e)

Litigation (f)

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

Costs associated with the Take 5 Matter (i)

Loss on disposal of assets (g)

EBITDA for economic interests in investments (l)

Reorganization and restructuring expenses (e)

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

Costs associated with the Take 5 Matter (j)

Adjusted EBITDA

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Sales Segment

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

Operating income

Operating (loss) income

Depreciation and amortization

4 unchanged sentences

Acquisition-related expenses (d)

EBITDA for economic interests in investments (k)

Restructuring expenses (e)

Litigation (f)

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

Loss on disposal of assets (g)

EBITDA for economic interests in investments (l)

Reorganization and restructuring expenses (e)

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

Sales Segment Adjusted EBITDA

Marketing Segment

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

Operating income

Operating (loss) income

Depreciation and amortization

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Acquisition-related expenses (d)

EBITDA for economic interests in investments (k)

Restructuring expenses (e)

Litigation (f)

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

Costs associated with the Take 5 Matter (i)

Loss on disposal of assets (g)

EBITDA for economic interests in investments (l)

Reorganization and restructuring expenses (e)

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

Costs associated with the Take 5 Matter (j)

Marketing Segment Adjusted EBITDA

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

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

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

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See Note 5—

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

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

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

Represents legal settlements that are unusual or infrequent costs associated with our operating activities.

Fair Value of Financial Instruments to our unaudited condensed financial statements for the three months ended March 31, 2023 and 2022.

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

Represents fees and costs associated with various internal reorganization activities, including professional fees, lease exit costs, severance, and nonrecurring compensation costs.

Represents legal settlements, reserves, and expenses that are unusual or infrequent costs associated with our operating activities.

Represents losses on disposal of assets related to divestitures and losses on sale of businesses and classification of assets held for sale, less cost to sell.

Represents the amortization of intangible assets recorded in connection with the 2014 Topco Acquisition and our other acquisitions.

Represents (i) costs related to implementation of strategies for workplace safety in response to COVID-19, including employee-relief fund, additional sick pay for front-line associates, medical benefit payments for furloughed associates, and personal protective equipment;

Represents (i) costs related to implementation of strategies for workplace safety in response to COVID-19, including additional sick pay for front-line associates and personal protective equipment;

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

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

Represents costs associated with the Take 5 Matter, primarily, professional fees and other related costs.

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

Represents additions to reflect our proportional share of Adjusted EBITDA related to our equity method investments and reductions to remove the Adjusted EBITDA related to the minority ownership percentage of the entities that we fully consolidate in our financial statements.

Represents a gain associated with the repurchases from the Term Loan Facility during the three months ended March 31, 2023.

For additional information, refer to Note 4—

Debt to our unaudited condensed financial statements for the three months ended March 31, 2023 and 2022.

Liquidity and Capital Resources

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

Nine Months Ended September 30,

(in thousands)

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Net Cash Provided by Operating Activities

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

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

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

Net cash used in operating activities during the three months ended March 31, 2023 consisted of net loss of $47.7 million adjusted for certain non-cash items, including depreciation and amortization of $57.1 million and effects of changes in working capital.

Net cash used in operating activities during the three months ended March 31, 2022 consisted of net income of $17.5 million adjusted for certain non-cash items, including depreciation and amortization of $57.8 million and effects of changes in working capital.

The increase in cash provided by operating activities during the three months ended March 31, 2023 relative to the same period in 2022 was primarily due to increased working capital requirements to stand up our services during the three months ended March 31, 2022.

Net Cash Used in Investing Activities

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

Net cash used in investing activities during the nine months ended September 30, 2021 primarily consisted of the purchase of businesses, net of cash acquired of $40.0 million and purchase of property and equipment of $24.1 million.

Net cash used in investing activities during the three months ended March 31, 2023 primarily consisted of the purchase of property and equipment of $7.3 million.

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

Net Cash Used in Financing Activities

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

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

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

Cash flows used in financing activities during the three months ended March 31, 2023 were primarily related to payments of contingent consideration and holdback payments of $2.5 million, repayment of principal on our Term Loan Facility of $3.4 million, repurchases from the Term Loan Facility of $1.7 million, partially offset by $1.2 million related to proceeds from the issuance of Class A common stock.

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

Description of Credit Facilities

Senior Secured Credit Facilities

In connection with the consummation of the Transactions, Advantage Sales & Marketing Inc.

(the “Borrower”), an indirect wholly-owned subsidiary of the Company, entered into (i) a senior secured asset-based revolving credit facility in an aggregate principal amount of up to $400.0 million, subject to borrowing base capacity (as may be amended from time to time, the “Revolving Credit Facility”) and (ii) a secured first lien term loan credit facility in an aggregate principal amount of $1.325 billion (as may be amended from time to time, the “Term Loan Facility”

Advantage Sales & Marketing Inc.

(the “Borrower”), an indirect wholly-owned subsidiary of the Company, has (i) a senior secured asset-based revolving credit facility in an aggregate principal amount of up to $500.0 million, subject to borrowing base capacity (as may be amended from time to time, the “Revolving Credit Facility”) and (ii) a secured first lien term loan credit facility in an aggregate principal amount of $1.293 billion (as may be amended from time to time, the “Term Loan Facility”

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

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Bank of America, N.A., is administrative agent and ABL Collateral Agent.

The Revolving Credit Facility is scheduled to mature in October 2025.

The Revolving Credit Facility is scheduled to mature in December 2027.

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

As of September 30, 2022, we had unused capacity under our Revolving Credit Facility available to us of $400.0 million, subject to borrowing base limitations (without giving effect to approximately $54.5 million of outstanding letters of credit and the borrowing base limitations for additional borrowings).

As of March 31, 2023, we had unused capacity under our Revolving Credit Facility available to us of $500.0 million, subject to borrowing base limitations (without giving effect to approximately $44.5 million of outstanding letters of credit and the borrowing base limitations for additional borrowings).

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

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.

Borrowings will bear interest at a floating rate, which can be either an adjusted Term SOFR or Alternative Currency Spread rate plus an applicable margin or, at the Borrower’s option, a base rate or Canadian Prime Rate plus an applicable margin.

The applicable margins for the Revolving Credit Facility are 1.75%, 2.00% or 2.25%, with respect to Term SOFR or Alternative Currency Spread rate borrowings and 0.75%, 1.00%, or 1.25%, with respect to base rate or Canadian Prime Rate borrowings, in each case depending on average excess availability under the Revolving Credit Facility.

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

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

The Revolving Credit Facility contains customary covenants, including, but not limited to, restrictions on the Borrower’s ability and that of our subsidiaries to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, make acquisitions, loans, advances or investments, pay dividends, sell or

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

grant liens or security interests on assets, make acquisitions, loans, advances or investments, pay dividends, sell or otherwise transfer assets, optionally prepay or modify terms of any junior indebtedness, enter into transactions with affiliates or change our line of business.

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

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

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

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

Dollar LIBOR will eventually be replaced with the Secured Oversight Financing Rate (“SOFR”) or another interest rate benchmark to reflect the most recent standards and practices used in the industry.

Term Loan Facility

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

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

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

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

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

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

Senior Secured Notes

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

On October 28, 2020, Advantage Solutions FinCo LLC (“Finco”) issued $775.0 million aggregate principal amount of 6.50% Senior Secured Notes due 2028 (the “Notes”).

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

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In addition, the Issuer may redeem up to 40% of the original aggregate principal amount of Notes before November 15, 2023 with the net cash proceeds of certain equity offerings at a redemption price equal to 106.5% of the aggregate principal amount of such Notes to be redeemed, plus accrued and unpaid interest.

Furthermore, prior to November 15, 2023 the Issuer may redeem during each calendar year up to 10% of the original aggregate principal amount of the Notes at a redemption price equal to 103% of the aggregate principal amount of such Notes to be redeemed, plus accrued and unpaid interest.

Furthermore, prior to November 15, 2023 the Issuer may redeem during each calendar year up to 10% of the original aggregate principal amount of the Notes at a redemption price

equal to 103% of the aggregate principal amount of such Notes to be redeemed, plus accrued and unpaid interest.

If the Issuer or its restricted subsidiaries sell certain of their respective assets or experience specific kinds of changes of control, subject to certain exceptions, the Issuer must offer to purchase the Notes at par.

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Cash and Cash Equivalents Held Outside the United States

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

As of September 30, 2022, and December 31, 2021, $21.6 million and $40.0 million, respectively, of our cash and cash equivalents were held by foreign branches.

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

As of March 31, 2023, and December 31, 2022, $92.2 million and $81.8 million, respectively, of our cash and cash equivalents were held by foreign subsidiaries.

As of March 31, 2023, and December 31, 2022, $25.6 million and $28.1 million, respectively, of our cash and cash equivalents were held by foreign branches.

We assessed our determination as to our indefinite reinvestment intent for certain of our foreign subsidiaries and recorded a deferred tax liability of approximately $2.8 million of withholding tax as of December 31, 2022 for unremitted earnings in Canada with respect to which we do not have an indefinite reinvestment assertion.

We will continue to evaluate our cash needs, however we currently do not intend, nor do we foresee a need, to repatriate funds from the foreign subsidiaries except for Canada.

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In addition, we expect existing domestic cash and cash flows from operations to continue to be sufficient to fund our domestic operating activities and cash commitments for investing and financing activities, such as debt repayment and capital expenditures, for at least the next 12 months and thereafter for the foreseeable future.

If we should require more capital in the United States than is generated by our domestic operations, for example, to fund significant discretionary activities such as business acquisitions, we could elect to repatriate future earnings from foreign jurisdictions.

These alternatives could result in higher tax expense or increased interest expense.

If we should require more capital in the United States than is generated by our domestic operations, for example, to fund significant discretionary activities such as business acquisitions or to settle debt, we could elect to repatriate future earnings from foreign jurisdictions.

These alternatives could result in higher income tax expense or increased interest expense.

We consider the majority of the undistributed earnings of our foreign subsidiaries, as of December 31, 2022, to be indefinitely reinvested and, accordingly, no provision has been made for taxes in excess of the $2.8 million noted above.

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Critical Accounting Policies and Estimates

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

Our critical accounting policies and estimates are included in our 2022 Annual Report and did not materially change during the three months ended March 31, 2023.

Recently Issued Accounting Pronouncements

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

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

Financial Statements”

in this Quarterly Report.

Not applicable

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

What changed 10-Q

Item 1. Financial Statements