What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-04 · 228 added, 205 removed, 910 unchanged (32% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

(in thousands, except share data)

26 unchanged sentences

325,774,637 and 319,690,300 shares issued and outstanding as of

June 30, 2023 and December 31, 2022, respectively

September 30, 2023 and December 31, 2022, respectively

Additional paid in capital

3 unchanged sentences

Treasury stock, at cost;

1,610,014 shares as of June 30, 2023

1,610,014 shares as of September 30, 2023

and December 31, 2022, respectively

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except share and per share data)

12 unchanged sentences

Net (loss) income

net income (loss) attributable to noncontrolling interest

net income attributable to noncontrolling interest

Net (loss) income attributable to stockholders of

Advantage Solutions Inc.

Other comprehensive income (loss), net of tax:

Other comprehensive loss, net of tax:

Foreign currency translation adjustments

17 unchanged sentences

(in thousands, except share data)

Balance at April 1, 2023

Balance at July 1, 2023

Comprehensive (loss) income

4 unchanged sentences

Equity-based compensation of Karman

Shares issued under 2020 Employee

Stock Purchase Plan

Shares issued under 2020 Incentive

Stock-based compensation expense

Balance at June 30, 2023

Balance at September 30, 2023

Treasury Stock

7 unchanged sentences

(in thousands, except share data)

Balance at April 1, 2022

Balance at July 1, 2022

Comprehensive income (loss)

Net income (loss)

Foreign currency translation adjustments

1 unchanged sentence

Interest on loans to Karman Topco L.P.

Increase in noncontrolling interest

Equity-based compensation of Karman

Shares issued under 2020 Employee

Stock Purchase Plan

Shares issued under 2020 Incentive

Stock-based compensation expense

Balance at June 30, 2022

Balance at September 30, 2022

See Notes to the Condensed Consolidated Financial Statements.

22 unchanged sentences

Stock-based compensation expense

Balance at June 30, 2023

Balance at September 30, 2023

Treasury Stock

9 unchanged sentences

Comprehensive income (loss)

Net income (loss)

Foreign currency translation adjustments

1 unchanged sentence

Interest on loans to Karman Topco L.P.

Increase in noncontrolling interest

Equity-based compensation of Karman

3 unchanged sentences

Stock-based compensation expense

Balance at June 30, 2022

Balance at September 30, 2022

See Notes to the Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

13 unchanged sentences

Distribution received from unconsolidated affiliates

Loss on sale of businesses and assets held for sale

Loss on sale of businesses

Gain on repurchases of Term Loan Facility debt

Loss on disposal of assets

Loss on disposal of property and equipment

Changes in operating assets and liabilities, net of effects from

9 unchanged sentences

Purchase of businesses, net of cash acquired

Purchase of investment in unconsolidated affiliates

Purchase of property and equipment

Proceeds from divestiture

Proceeds from divestitures

Proceeds from sale of investment in unconsolidated affiliates

Net cash used in investing activities

2 unchanged sentences

Payments on lines of credit

Proceeds from issuance of long-term debt

Proceeds from government loans for COVID-19 relief

6 unchanged sentences

Holdback payments

Contribution from noncontrolling interest

Redemption of noncontrolling interest

Net cash (used in) provided by financing activities

Net cash used in financing activities

Net effect of foreign currency changes on cash

17 unchanged sentences

The Condensed Consolidated Balance Sheet at December 31, 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 June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 have been reflected in the condensed consolidated financial statements.

In the opinion of management, all adjustments which are of a normal recurring nature and necessary for a fair statement of the results as of September 30, 2023 and for the three and nine months ended September 30, 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 six months ended June 30, 2023 are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.

Operating results for the three and nine months ended September 30, 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.

13 unchanged sentences

Disaggregated revenues were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

8 unchanged sentences

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

Revenues recognized during t he three and six months ended June 30, 2023 that were included in Deferred revenues as of December 31, 2022 were $ 5.3 million and $ 18.1 million, respectively .

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

Revenues recognized during t he three and nine months ended September 30, 2023 that were included in Deferred revenues as of December 31, 2022 were $ 3.8 million and $ 21.9 million, respectively .

Revenues recognized during the 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.

Divestitures and Acquisitions

2023 Divestitures

The Company recognized a loss on the sale of businesses of $ 1.1 million and $ 17.7 million for the three and six months ended June 30, 2023, respectively, as a component of “Selling, general, and administrative expenses”

During the nine months ended September 30, 2023, the Company recognized a loss on the sale of businesses of $ 17.5 million, as a component of “Selling, general, and administrative expenses”

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

The Company determined that the sale of the businesses did not meet the criteria for classification as discontinued operations.

During the three months ended June 30, 2023, the Company sold a portion of its sales reporting unit that was previously classified as held for sale and received $ 12.8 million of proceeds.

The proceeds are net of transaction fees, holdbacks, and the estimated fair value of contingent consideration based on financial metrics of the portion of the sales reporting unit sold, which has a maximum potential achievement of $ 2.0 million.

The Company received $ 12.8 million of proceeds, which are net of transaction fees and holdbacks.

2022 Acquisitions

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

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

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

4 unchanged sentences

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.

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.

2 unchanged sentences

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

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

The Company acquired a 70 % ownership interest in one acquisition, which also includes a put option exercisable by each of the 12 % and 18 % noncontrolling interest holders that allows the 12 % holder to sell its 12 % noncontrolling interest to the Company, and the 18 % holder to sell 8 % of its noncontrolling interest to 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 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)

2 unchanged sentences

Total consideration

Recognized amounts of identifiable assets acquired and liabilities

Recognized amounts of identifiable assets acquired and liabilities assumed:

Accounts receivable

3 unchanged sentences

Total liabilities

Redeemable noncontrolling interest

Noncontrolling interest

Total identifiable net assets

4 unchanged sentences

Client relationships

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

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

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”

1 unchanged sentence

Goodwill and Intangible Assets

Changes in goodwill for the six months ended June 30, 2023 are as follows:

Changes in goodwill for the nine months ended September 30, 2023 are as follows:

(in thousands)

6 unchanged sentences

Foreign exchange translation effects

Balance at June 30, 2023

Accumulated impairment losses related to goodwill were $ 2,019.5 million as of June 30, 2023 and December 31, 2022 , of which, $ 1,927.7 million and $ 91.8 million were for the Company's sales and marketing units respectively.

Balance at September 30, 2023

Accumulated impairment losses related to goodwill were $ 2,019.5 million as of September 30, 2023 and December 31, 2022 , of which, $ 1,927.7 million and $ 91.8 million were for the Company's sales and marketing reporting units respectively.

The following tables set forth information for intangible assets:

June 30, 2023

September 30, 2023

(amounts in thousands)

19 unchanged sentences

Total other intangible assets

Amortization of intangible assets was $ 49.5 million and $ 50.7 million for the three months ended June 30, 2023 and 2022, respectively, and $ 99.3 million and $ 100.9 million for the six months ended June 30, 2023 and

2022, respectively.

As of June 30, 2023, estimated future amortization expense of the Company’s finite-lived intangible assets are as follows:

Amortization of intangible assets was $ 49.2 million and $ 50.0 million for the three months ended September 30, 2023 and 2022, respectively, and $ 148.5 million and $ 150.9 million for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, estimated future amortization expense of the Company’s finite-lived 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 June 30, 2023, the Company had $ 1.2 billion of debt outstanding under the Term Loan Facility and $ 775.0 million of debt outstanding under the Notes (both as defined in the Annual Report on Form 10-K filed March 1, 2023 for the year ended D ecember 31, 2022 (the “2022 Annual Report”) with maturity dates of October 28, 2027 and November 15, 2028 , respectively.

Term Loan Facility bears interest at a floating rate of Term SOFR plus an applicable margin of 4.50 % per annum.

As of September 30, 2023, the Company had $ 1.18 billion of debt outstanding under the Term Loan Facility and $ 775.0 million of debt outstanding under the Notes (both as defined in the Annual Report on Form 10-K filed March 1, 2023 for the year ended D ecember 31, 2022 (the “2022 Annual Report”)) with maturity dates of October 28, 2027 and November 15, 2028 , respectively.

Term Loan Facility bears interest at a floating rate of Term SOFR plus an applicable margin of 4.50 % per annum, subject to additional spread adjustment on SOFR ranging from 0.11 % to 0.26 %.

Interest on the Notes is payable semi-annually in arrears at a rate of 6.50 % per annum.

The Company was in compliance with all of its affirmative and negative covenants under the Term Loan Facility and Notes as of June 30, 2023.

The Company was in compliance with all of its affirmative and negative covenants under the Term Loan Facility and Notes as of September 30, 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 $ 6.6 million during the three and six months ended June 30, 2023 and 2022, respectively.

The Company made the minimum quarterly principal payments of $ 3.3 million and $ 9.9 million during the three and nine months ended September 30, 2023 and 2022, respectively.

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

1 unchanged sentence

Dollar LIBOR provisions with SOFR, effective June 30, 2023.

The Company voluntarily repurchased an aggregate $ 52.4 million and $ 54.4 million principal amount of its Term Loan Facility during the three and six months ended June 30, 2023, respectively.

The Company recognized a gain on the repurchase of $ 4.7 million and $ 5.0 million for the three and six months ended June 30, 2023, respectively, as a component of “Interest expense, net”

The Company voluntarily repurchased an aggregate of $ 56.8 million and $ 111.2 million principal amount of its Term Loan Facility during the three and nine months ended September 30, 2023, respectively.

The Company recognized a gain on the repurchase of an immaterial amount and $ 5.2 million for the three and nine months ended September 30, 2023, respectively, as a component of “Interest expense, net”

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

As of June 30, 2023, the Company had no borrowings under the Revolving Credit Facility (as defined in the 2022 Annual Report).

As of September 30, 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 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

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.

June 30, 2023

September 30, 2023

(in thousands)

16 unchanged sentences

Interest Rate Cap Agreements

The Company had interest rate cap contracts with an aggregate notional value of principal of $ 650.0 million as of June 30, 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.

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.

The Company had interest rate cap contracts with an aggregate notional value of principal of $ 650.0 million as of September 30, 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 Company also had two interest rate collar contracts in an aggregate notional amount of $ 300.0 million with maturity dates of April 5, 2026.

The fair value of the Company’s outstanding interest rate caps and collars of $ 39.2 million and $ 47.5 million were included in “Prepaid expenses and other current assets”

in the Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, respectively, with changes in fair value recognized as a component of “Interest expense, net”

in the Condensed Consolidated Balance Sheets as of September 30, 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 June 30, 2023 and 2022, the Company recorded a gain of $ 11.4 million and a gain of $ 5.6 million, respectively, within Interest expense , net, related to changes in the fair value of its derivative

During the six months ended June 30, 2023 and 2022, the Company recorded a gain of $ 9.5 million and a gain of $ 26.6 million, respectively, within Interest expense , net, related to changes in the fair value of its derivative instruments.

During the three months ended September 30, 2023 and 2022, the Company recorded a gain of $ 3.2 million and a gain of $ 14.5 million, respectively, within Interest expense , net, related to changes in the fair value of its derivative instruments.

During the nine months ended September 30, 2023 and 2022, the Company recorded a gain

of $ 12.6 million and a gain of $ 41.1 million, respectively, within Interest expense , net, related to changes in the fair value of its derivative instruments.

Contingent Consideration Liabilities

During each reporting period, the Company measures the fair value of its contingent liabilities by evaluating the significant unobservable inputs and probability weightings using Monte Carlo simulations.

During each reporting period, the Company measures the fair value of its contingent consideration liabilities by evaluating the significant unobservable inputs and probability weightings using Monte Carlo simulations.

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 (Loss) Income.

As of June 30, 2023, the maximum potential payment outcomes were $ 78.0 million.

As of September 30, 2023, the maximum potential payment outcomes were $ 76.1 million.

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

September 30,

(in thousands)

8 unchanged sentences

Carrying Value

Balance at June 30, 2023

Balance at September 30, 2023

Term Loan Facility

7 unchanged sentences

Total long-term debt

Investment in Unconsolidated Affiliates

During the third quarter of 2023, the Company recorded other-than-temporary impairment charges of $ 2.7 million in “Selling, general, and administrative expenses”

in the Consolidated Statements of Operations and Comprehensive (Loss) Income related to an equity method investee.

The Company determined that the decline in fair value was other than temporary in nature based on the extent to which the market value of the Company’s

equity investment was determined to be less than its carrying value and the financial condition and near-term prospects for its recovery in the market value.

Related Party Transactions

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 $ 1.1 million and $ 2.0 million of revenues from such client during the three and six months ended June 30, 2023, respectively.

Accounts receivable from this client were $ 0.6 million as of June 30, 2023.

The Company recognized $ 1.2 million and $ 3.2 million of revenues from such client during the three and nine months ended September 30, 2023, respectively.

Accounts receivable from this client were $ 0.6 million as of September 30, 2023.

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

The Company recognized $ 4.0 million of revenues from such client during the three months ended September 30, 2023.

Accounts receivable from this client were $ 2.6 million as of September 30, 2023.

Investment in Unconsolidated Affiliates

During the three months ended June 30, 2023 and 2022, the Company recognized revenues of $ 4.5 million and $ 3.8 million, respectively, from a parent company of an unconsolidated affiliate.

During the six months ended June 30, 2023 and 2022, the Company recognized revenues of $ 8.3 million and $ 7.6 million, respectively, from the parent company of an unconsolidated affiliate.

Accounts receivable from the parent company of an unconsolidated affiliate were $ 2.4 million and $ 1.7 million as of June 30, 2023 and December 31, 2022, respectively.

The Company’s effective tax rates were 5.0 % and 26.4 % for the three months ended June 30, 2023 and 2022, respectively.

During the three months ended September 30, 2023 and 2022, the Company recognized revenues of $ 6.9 million and $ 4.4 million, respectively, from a parent company of an unconsolidated affiliate.

During the nine months ended September 30, 2023 and 2022, the Company recognized revenues of $ 15.2 million and $ 11.1 million, respectively, from the parent company of an unconsolidated affiliate.

Accounts receivable from the parent company of an unconsolidated affiliate were $ 2.8 million and $ 1.7 million as of September 30, 2023 and December 31, 2022, respectively.

The Company’s effective tax rates were 16.1 % and 4.7 % for the three months ended September 30, 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 the three month pretax book income/loss differences and the application of the shortfall of $ 0.8 million of stock-based compensation for the three months ended June 30, 2023, compared to the shortfall of $ 0.3 million of stock-based compensation for the three months ended June 30, 2022.

The Company’s effective tax rates were 12.7 % and 32.8 % for the six months ended June 30, 2023 and 2022, respectively.

The fluctuation in the Company’s effective tax rate was primarily due to a difference in projected book income/loss used in the annual effective tax rate, the six month pretax book income/loss differences and the application of the shortfall of $ 3.5 million of stock-based compensation for the six months ended June 30, 2023, compared to the shortfall of $ 1.4 million of stock-based compensation for the six months ended June 30, 2022.

The fluctuation in the Company’s effective tax rate was primarily due to the three month pretax book income/loss differences and the remeasurement of deferred tax liability of $ 5.0 million due to the state tax rate change for the three months ended September 30, 2022.

The Company’s effective tax rates were 13.7 % and 20.6 % for the nine months ended September 30, 2023 and 2022, respectively.

The fluctuation in the Company’s effective tax rate was primarily due to a difference in projected book income/loss used in the annual effective tax rate, the nine month pretax book income/loss differences, the application of the shortfall of $ 4.5 million of stock-based compensation for the nine months ended September 30, 2023 compared to the shortfall of $ 2.4 million of stock-based compensation for the nine months ended September 30, 2022, and the remeasurement of deferred tax liability of $ 5.0 million due to the state tax rate change for the nine months ended September 30, 2022.

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

1 unchanged sentence

The operating segments reported below are the segments of the Company for which separate financial information is available and for which segment results are evaluated regularly by the chief operating decision maker (i.e., the Company’s Chief Executive Officer) in deciding how to allocate resources and in assessing performance.

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 sales segment, the Company serves as a strategic intermediary between consumer goods manufacturers and retailer partners and performs critical merchandising 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 consumer goods manufacturers and retailers.

4 unchanged sentences

(in thousands)

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Depreciation and amortization

Operating income

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Depreciation and amortization

1 unchanged sentence

(in thousands)

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Depreciation and amortization

Operating income

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Depreciation and amortization

21 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

13 unchanged sentences

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

(in thousands, except share and per share data)

Performance Period

The measurement period is based on the twelve months of the respective fiscal year.

Measurement Period

Maximum Remaining Unrecognized Compensation Expense

Weighted-average remaining requisite service periods

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 six months ended June 30, 2023:

(in thousands, except share and per share data)

The following table summarizes the PSU activity for the nine months ended September 30, 2023:

Performance Share Units

3 unchanged sentences

PSU performance adjustment

Outstanding at June 30, 2023

Outstanding at September 30, 2023

Restricted Stock Units

1 unchanged sentence

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

During the six months ended June 30, 2023, the following activities involving RSUs occurred under the Plan:

During the nine months ended September 30, 2023, the following activities involving RSUs occurred under the Plan:

Number of RSUs

2 unchanged sentences

Outstanding at January 1, 2023

Outstanding at June 30, 2023

As of June 30, 2023, the total remaining unrecognized compensation cost related to RSUs amounted to $ 36.3 million, which is expected to be amortized over the weighted-average remaining requisite service periods of 2.3 years.

Outstanding at September 30, 2023

As of September 30, 2023, the total remaining unrecognized compensation cost related to RSUs amounted to $ 57.4 million, which is expected to be amortized over the weighted-average remaining requisite service periods of 2.8 years.

Stock Options

During the six months ended June 30, 2023, the following activities involving stock options occurred under the Plan:

During the nine months ended September 30, 2023, the following activities involving stock options occurred under the Plan:

Stock Options

2 unchanged sentences

Cancelled/Expired

Outstanding at June 30, 2023

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

Outstanding at September 30, 2023

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

September 30,

Exercise price

3 unchanged sentences

Expected term

As of June 30, 2023, the Company had approximately $ 9.0 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 3.9 years .

The aggregate intrinsic value of all outstanding options as of June 30, 2023 was $ 1.0 million.

As of September 30, 2023, the Company had approximately $ 7.1 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 3.8 years .

The aggregate intrinsic value of all outstanding options as of September 30, 2023 was $ 2.9 million.

The intrinsic value of a stock option is the amount by which the market value of the underlying common stock exceeds the exercise price of the option.

There were no options exercised during the six months ended June 30, 2023 and 2022.

There were no options exercised during the nine months ended September 30, 2023 and 2022.

Earnings Per Share

5 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

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

12 unchanged sentences

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 June 30, 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 and six months ended June 30, 2023 and 2022 did not exceed the exercise price of the warrants.

The Company had 18,578,321 warrants to purchase Class A common stock at $ 11.50 per share outstanding at September 30, 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 and nine months ended September 30, 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 1.2 million and 1.7 million weighted-average shares were outstanding for the three and six months ended June 30, 2023, respectively, 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 an immaterial number of shares assuming achievement of the Target Goals were outstanding for the six months ended June 30, 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 during the six months ended June 30, 2023 and 2022, respectively.

Stock-based awards in accordance with the treasury stock method were 8.7 million and 4.0 million during the three and nine months ended September 30, 2023, respectively, 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 7.3 million shares assuming achievement of the Target Goals were outstanding for the nine months ended September 30, 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 during the nine months ended September 30, 2023 and 2022, respectively.

Subsequent Events

In October 2023, the Company entered into an agreement and sold a business unit within its sales segment for cash consideration of $ 10.0 million subject to working capital and performance adjustments, which the transaction did not meet the criteria for held-for-sale classification as of September 30, 2023.

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

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sales and marketing.

Through our sales segment, which generated approximately 59.2% and 63.1% of our total revenues in the six months ended June 30, 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’

Through our sales segment, which generated approximately 58.6% and 63.1% of our total revenues in the nine months ended September 30, 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 are adequately stocked and properly displayed.

Through our marketing segment, which generated approximately 40.8% and 36.9% of our total revenues in the six months ended June 30, 2023 and 2022, respectively, we help brands and retailers reach consumers through two main categories within the marketing segment.

Through our marketing segment, which generated approximately 41.4% and 36.9% of our total revenues in the nine months ended September 30, 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.

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

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

Our financial performance for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 includes:

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

Our financial performance for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 includes:

Revenues increased by $45.0 million, or 4.3%, to $1,096.1 million;

Operating income decreased by $30.9 million, or 65.9%, to $16.0 million;

Net loss increased by $11.5 million, or 313.4%, to $7.8 million

Net loss increased by $45.8 million to $22.6 million

Adjusted Net Income decreased by $24.8 million, or 39.6%, to $37.9 million

Adjusted EBITDA decreased by $5.1 million, or 4.3%, to $113.1 million

Our financial performance for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 includes:

Our financial performance for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 includes:

Revenues increased by $198.1 million, or 6.7%, to $3,145.1 million;

Operating income decreased by $68.1 million, or 69.4%, to $30.0 million;

Net loss increased by $76.7 million, or 361.8% to $55.5 million;

Net loss increased by $122.5 million to $78.1 million;

Adjusted Net Income decreased by $64.4 million, or 42.2%, to $88.2 million;

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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 various internal reorganization activities, including professional fees, lease exit costs, severance, and nonrecurring compensation costs, and the changes in fair value of the contingent consideration of acquisitions and other acquisition-related costs.

Acquisition-related costs are comprised

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

Acquisition and

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

Other (Income) Expenses

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Depreciation Expense

Depreciation expense relates to the property and equipment that we own, which represented less than 1% of our total assets at June 30, 2023 and 2022, respectively.

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

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Additionally, other companies may calculate non-GAAP measures differently, or may use other measures to calculate their financial performance, and therefore our non-GAAP measures may not be directly comparable to similarly titled measures of other companies.

Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022

The following table sets forth items derived from the Company’s consolidated statements of operations for the three and six months ended June 30, 2023 and 2022 in dollars and as a percentage of total revenues.

Three Months Ended June 30,

Six Months Ended June 30,

Results of Operations for the Three and Nine Months Ended September 30, 2023 and 2022

The following table sets forth items derived from the Company’s consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022 in dollars and as a percentage of total revenues.

Three Months Ended September 30,

Nine Months Ended September 30,

(amounts in thousands)

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—Non-GAAP Financial Measures .”

Comparison of the Three Months Ended June 30, 2023 and 2022

Three Months Ended June 30,

Comparison of the Three Months Ended September 30, 2023 and 2022

Three Months Ended September 30,

(amounts in thousands)

Total revenues

Total revenues increased by $56.0 million, or 5.7%, during the three months ended June 30, 2023, as compared to the three months ended June 30, 2022.

Total revenues increased by $45.0 million, or 4.3%, during the three months ended September 30, 2023, as compared to the three months ended September 30, 2022.

Excluding revenues from divested businesses, net of acquired businesses, and unfavorable foreign exchange rates, revenues increased 5.8%.

The sales segment revenues decreased $4.3 million during the three months ended June 30, 2023 as compared to the three months ended June 30, 2022, of which $14.6 million were revenues from divested businesses, net of acquired businesses.

Excluding revenues from divested businesses and unfavorable foreign exchange rates of $0.7 million, the segment experienced an increase of $11.0 million in organic revenues primarily due to an increase in our retail merchandising services, pricing realization, and our European joint venture, partially offset by an intentional client exit.

The marketing segment revenues increased $60.3 million during the three months ended June 30, 2023 as compared to the three months ended June 30, 2022, of which $1.4 million were revenues from divested businesses.

Excluding revenues from divested businesses and unfavorable foreign exchange rates of $2.8 million, the segment experienced an increase of $64.5 million in organic revenues.

The increase in revenues was primarily due to an

increase in our in-store sampling and demonstration services from event volume and pricing realization, partially offset by a decrease in our digital services.

The sales segment revenues decreased $17.7 million during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

Excluding $19.4 million revenues from divested businesses, net of acquired businesses and favorable foreign exchange rates of $6.1 million, the segment experienced a decrease of $4.4 million in organic revenues primarily due to a decrease in our retail merchandising services as a result of an intentional client exit, partially offset by pricing realization and growth in our European joint venture.

The marketing segment revenues increased $62.7 million during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

Excluding revenues from a divested business of $2.0 million and unfavorable foreign exchange rates of $1.2 million, the segment experienced an increase of $65.9 million in organic revenues.

The increase in revenues was primarily due to an increase in our in-store sampling and

demonstration services from event volume and pricing realization, partially offset by a decrease in our digital services.

Cost of Revenues

Cost of revenues as a percentage of revenues for the three months ended June 30, 2023 was 87.2%, as compared to 85.8% for the three months ended June 30, 2022.

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

Cost of revenues as a percentage of revenues for the three months ended September 30, 2023 was 86.5%, as compared to 86.4% for the three months ended September 30, 2022, which stayed relatively consistent.

Selling, General and Administrative Expenses

Selling, general and administrative expenses as a percentage of revenues for the three months ended June 30, 2023 was 5.1%, compared to 5.4% for the three months ended June 30, 2022.

The decrease as a percentage of revenues was primarily due to $5.5 million decrease in acquisition-related expense and $3.7 million decrease in non-cash stock-based compensation expense, partially offset by $5.5 million increase in costs associated with our internal reorganization activities.

Selling, general and administrative expenses as a percentage of revenues for the three months ended September 30, 2023 was 6.9%, compared to 3.6% for the three months ended September 30, 2022.

The increase as a percentage of revenues was primarily due to $18.9 million increase in costs associated with our internal reorganization activities, largely related to professional fees and severance, coupled with increased incentive compensation and technology expenses.

Depreciation and Amortization Expense

Depreciation and amortization expense was $56.7 million for the three months ended June 30, 2023 compared to $58.4 million for the three months ended June 30, 2022.

Depreciation and amortization expense was $56.5 million for the three months ended September 30, 2023 compared to $57.8 million for the three months ended September 30, 2022.

The decrease is largely attributable to a decrease in the amortization expenses from our trade names and the divested businesses.

Operating Income

Three Months Ended June 30,

Three Months Ended September 30,

(amounts in thousands)

Total operating income

In the sales segment, the decrease in operating income during the three months ended June 30, 2023 was primarily due to the increase in costs of revenues as described above.

In the marketing segment, the increase in operating income during the three months ended June 30, 2023 was due to growth in revenues as described above.

In the sales segment, the decrease in operating income during the three months ended September 30, 2023 was primarily due to the decrease in revenues and increase in costs associated with our internal reorganization activities as described above.

In the marketing segment, the decrease in operating income during the three months ended September 30, 2023 was due to increase in costs associated with our internal reorganization activities as described above.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability was $0.1 million of non-cash gain for the three months ended June 30, 2023 compared to $4.9 million of non-cash gain resulting from a fair value adjustment to warrant liability with respect to the private placement warrants for the three months ended June 30, 2022.

Change in fair value of warrant liability was $0.6 million of non-cash loss for the three months ended September 30, 2023 compared to $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.

Interest Expense, net

Interest expense, net increased by $2.3 million, or 8.1%, to $30.5 million for the three months ended June 30, 2023, from $28.2 million for the three months ended June 30, 2022.

The increase in interest expense was primarily due to the higher interest rates, partially offset by change in fair value in our derivative instruments and gain associated with the repurchases of Term Loan Facility debt for the three months ended June 30, 2023.

Interest expense, net increased by $18.7 million, or 79.6%, to $42.3 million for the three months ended September 30, 2023, from $23.6 million for the three months ended September 30, 2022.

(Benefit from) Provision for Income Taxes

Benefit from income taxes was $0.4 million for the three months ended June 30, 2023 as compared to $1.3 million of provision for income taxes for the three months ended June 30, 2022.

The fluctuation was primarily

attributable to a pre-tax loss during the three months ended June 30, 2023 compared to a pre-tax income during the three months ended June 30, 2022.

Benefit from income taxes was $4.3 million for the three months ended September 30, 2023 as compared to $1.2 million of provision for income taxes for the three months ended September 30, 2022.

The change was

primarily attributable to a pre-tax loss during the three months ended September 30, 2023 compared to a pre-tax income during the three months ended September 30, 2022.

Net (Loss) Income

Net loss was $7.8 million for the three months ended June 30, 2023, compared to net income of $3.7 million for the three months ended June 30, 2022.

Net loss was $22.6 million for the three months ended September 30, 2023, compared to net income of $23.2 million for the three months ended September 30, 2022.

The increase in net loss was primarily driven by the decrease in operating income and the increase in interest expense as described above.

Adjusted Net Income

The decrease in Adjusted Net Income for the three months ended June 30, 2023 was attributable to the decrease in operating income and the increase in interest expense, net partially offset by the decrease in the provision for income taxes.

The decrease in Adjusted Net Income for the three months ended September 30, 2023 was attributable to the decrease in operating income and the increase in interest expense partially offset by the decrease in the provision for income taxes.

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

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Adjusted EBITDA and Adjusted EBITDA by Segment

Three Months Ended June 30,

Three Months Ended September 30,

(amounts in thousands)

Total Adjusted EBITDA

Adjusted EBITDA decreased by $4.1 million, or 3.8%, to $104.2 million for the three months ended June 30, 2023, from $108.3 million for the three months ended June 30, 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 increase was driven largely by the growth in revenues from the in-store sampling and demonstration services as described above, partially offset by continued headwinds in our higher-margin digital services.

Adjusted EBITDA decreased by $5.1 million, or 4.3%, to $113.1 million for the three months ended September 30, 2023, from $118.3 million for the three months ended September 30, 2022.

In the sales segment, the decrease was primarily attributable to decline in revenues and increase in cost of revenues, largely due to inflationary pressures, increased incentive compensation and technology expenses.

In the marketing segment, the increase was driven largely 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 “—

Non-GAAP Financial Measures .”

Comparison of the Six Months Ended June 30, 2023 and 2022

Six Months Ended June 30,

Comparison of the Nine Months Ended September 30, 2023 and 2022

Nine Months Ended September 30,

(amounts in thousands)

Total revenues

Total revenues increased by $153.2 million, or 8.1%, during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022.

Total revenues increased by $198.1 million, or 6.7%, during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022.

Excluding revenues from divested businesses, net of acquired businesses, and unfavorable foreign exchange rates, revenues increased 8.0%.

The sales segment revenues increased $17.1 million during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, of which $10.4 million were revenues from divested businesses, net of acquired businesses.

Excluding revenues from divested businesses and unfavorable foreign exchange rates of $9.1 million, the segment experienced an increase of $36.6 million in organic revenues primarily due to growth in our retail merchandising services and European joint venture, partially offset by an intentional client exit.

The marketing segment revenues increased $136.1 million during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, of which $4.8 million were revenues from acquired businesses, net of divested businesses.

The sales segment revenues decreased $0.6 million during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

Excluding $29.8 million revenues from divested businesses, net of acquired businesses and unfavorable foreign exchange rates of $3.0 million, the segment experienced an increase of $32.2 million in organic revenues primarily due to growth in our European joint venture and an increase in our retail-centric merchandising services with an increase in volume and pricing realization, partially offset by an intentional client exit.

The marketing segment revenues increased $198.7 million during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, of which $2.8 million were revenues from acquired businesses, net of a divested business.

Excluding revenues from acquired and divested businesses and unfavorable foreign exchange rates of $8.8 million, the segment experienced an increase of $204.7 million in organic revenues.

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

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

Cost of Revenues

Cost of revenues as a percentage of revenues for the six months ended June 30, 2023 was 87.5%, as compared to 85.9% for the six months ended June 30, 2022.

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

Cost of revenues as a percentage of revenues for the nine months ended September 30, 2023 was 87.1%, as compared to 86.1% for the nine months ended September 30, 2022.

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

Selling, General and Administrative Expenses

Selling, general and administrative expenses as a percentage of revenues for the six months ended June 30, 2023 was 6.3%, compared to 5.3% for the six months ended June 30, 2022.

The increase as a percentage of revenues was primarily due to $14.9 million increase in non-cash loss on disposal of assets and adjustments to assets held for sale coupled with $16.0 million increase in internal reorganization activities, partially offset by $9.9 million decrease in acquisition-related expenses.

Selling, general and administrative expenses as a percentage of revenues for the nine months ended September 30, 2023 was 6.5%, compared to 4.7% for the nine months ended September 30, 2022.

The increase as a percentage of revenues was primarily due to $34.9 million increase in internal reorganization activities, largely related to professional fees and severance, $17.4 million increase in non-cash loss on disposal of assets, coupled with increased incentive compensation, litigation expenses and technology expenese, partially offset by $12.5 million decrease in acquisition-related expenses.

Depreciation and Amortization Expense

Depreciation and amortization expense was $113.8 million for the six months ended June 30, 2023 compared to $116.2 million for the six months ended June 30, 2022.

Depreciation and amortization expense was $170.3 million for the nine months ended September 30, 2023 compared to $174.0 million for the nine months ended September 30, 2022.

The decrease is largely attributable to a decrease in the amortization expenses from our trade names and the divested businesses.

Operating Income

Six Months Ended June 30,

Nine Months Ended September 30,

(amounts in thousands)

Total operating income

The decrease in operating income during the six months ended June 30, 2023 was due to one-time charges in selling, general and administrative expenses as described above, partially offset by recovery from Take 5.

The decrease in operating income during the nine months ended September 30, 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 increased by $20.4 million due to non-cash loss for the six months ended June 30, 2022 resulting from a fair value adjustment to warrant liability with respect to the private placement warrants.

Change in fair value of warrant liability increased by $22.0 million due to non-cash gain for the nine months ended September 30, 2022 resulting from a fair value adjustment to warrant liability with respect to the private placement warrants.

Interest Expense, net

Interest expense, net increased by $37.6 million, or 93.8%, to $77.7 million for the six months ended June 30, 2023, from $40.1 million for the six months ended June 30, 2022.

Interest expense, net increased by $56.3 million, or 88.5%, to $120.0 million for the nine months ended September 30, 2023, from $63.6 million for the nine months ended September 30, 2022.

The increase in interest expense was primarily due to the higher interest rates and the change in fair value in our derivative instruments for the nine months ended September 30, 2022, partially offset by gain associated with the repurchases of Term Loan Facility debt for the nine months ended September 30, 2023.

(Benefit from) Provision for Income Taxes

Benefit from income taxes was $8.1 million for the six months ended June 30, 2023 as compared to $10.4 million of provision for income taxes for the six months ended June 30, 2022.

The fluctuation was primarily attributable to a pre-tax loss during the six months ended June 30, 2023 compared to a pre-tax income during the six months ended June 30, 2022.

Benefit from income taxes was $12.4 million for the nine months ended September 30, 2023 as compared to $11.5 million of provision for income taxes for the nine months ended September 30, 2022.

The change was primarily attributable to a pre-tax loss during the nine months ended September 30, 2023 compared to a pre-tax income during the nine months ended September 30, 2022.

Net (Loss) Income

Net loss was $55.5 million for the six months ended June 30, 2023, compared to net income of $21.2 million for the six months ended June 30, 2022.

Net loss was $78.1 million for the nine months ended September 30, 2023, compared to net income of $44.4 million for the nine months ended September 30, 2022.

The increase in net loss was primarily driven by the decrease in operating income and the increase in interest expense as described above.

Adjusted Net Income

The decrease in Adjusted Net Income for the six months ended June 30, 2023 was attributable to the increase in interest expense, net and the decrease in operating income as described above, partially offset by the benefit from income taxes.

The decrease in Adjusted Net Income for the nine months ended September 30, 2023 was attributable to the increase in interest expense, net and the decrease in operating income as described above, partially offset by the benefit from income taxes.

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

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Adjusted EBITDA and Adjusted EBITDA by Segment

Six Months Ended June 30,

Nine Months Ended September 30,

(amounts in thousands)

Total Adjusted EBITDA

Adjusted EBITDA decreased by $8.8 million, or 4.3%, to $196.3 million for the six months ended June 30, 2023, from $205.1 million for the six months ended June 30, 2022.

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

Adjusted EBITDA decreased by $13.9 million, or 4.3%, to $309.4 million for the nine months ended September 30, 2023, from $323.3 million for the nine months ended September 30, 2022.

In the sales segment, the decrease was primarily attributable to decline in revenues and increase in cost of revenues, largely due to inflationary pressures, increase in incentive compensation and technology expenses.

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

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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

We evaluate these measures in conjunction with our results according to GAAP because we believe they provide a more complete

understanding of factors and trends affecting our business than GAAP measures alone.

We evaluate these

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

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

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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Interest expense, net

(Benefit from) provision for income taxes

Provision for (benefit from) income taxes

Depreciation and amortization

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Sales Segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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Marketing Segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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Reorganization and restructuring expenses (d)

Litigation recovery (e)

Litigation expenses (recovery) (e)

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

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See Note 5—

Fair Value of Financial Instruments to our unaudited condensed financial statements for the three and six months ended June 30, 2023 and 2022.

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

Fair Value of Financial Instruments to our unaudited condensed financial statements for the three and nine months ended September 30, 2023 and 2022.

Represents fees and costs associated with activities related to our acquisitions, divestitures, and related 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.

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

Represents a gain associated with the repurchases of Term Loan Facility debt during the three and six months ended June 30, 2023.

Represents a gain associated with the repurchases of Term Loan Facility debt during the three and nine months ended September 30, 2023.

For additional information, refer to Note 4—

Debt to our unaudited condensed financial statements for the three and six months ended June 30, 2023 and 2022.

Debt to our unaudited condensed financial statements for the three and nine months ended September 30, 2023 and 2022.

Represents cash receipts from an insurance policy for claims related to the Take 5 Matter.

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Liquidity and Capital Resources

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

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

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

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

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

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Net cash used in investing activities

Net cash (used in) provided by financing activities

Net cash used in financing activities

Net effect of foreign currency fluctuations on cash

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Net Cash Provided by Operating Activities

Net cash provided by operating activities during the six months ended June 30, 2023 consisted of net loss of $55.5 million adjusted for certain non-cash items, including loss on disposal of assets and adjustments to assets held for sale of $17.7 million, gain on repurchases of Term Loan Facility debt of $5.0 million, depreciation and amortization of $113.8 million and effects of changes in working capital.

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

The increase in cash provided by operating activities during the six months ended June 30, 2023 relative to the same period in 2022 was primarily due to increased working capital requirements to stand up our services during the six months ended June 30, 2022.

Net cash provided by operating activities during the nine months ended September 30, 2023 consisted of net loss of $78.1 million adjusted for certain non-cash items, including loss on disposal of assets of $20.2 million, gain on repurchases of Term Loan Facility debt of $5.2 million, depreciation and amortization of $170.3 million and effects of changes in working capital.

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.

The increase in cash provided by operating activities during the nine months ended September 30, 2023 relative to the same period in 2022 was primarily due to increased working capital requirements to stand up our services during the nine months ended September 30, 2022, together with improvement of days sales outstanding for our accounts receivable.

Net Cash Used in Investing Activities

Net cash used in investing activities during the six months ended June 30, 2023 primarily consisted of the purchase of property and equipment of $18.6 million.

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

Net cash used in investing activities during the nine months ended September 30, 2023 primarily consisted of the purchase of property and equipment of $29.7 million, partially offset by the proceeds from divestiture.

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 Financing Activities

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

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

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

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

Cash flows used in financing activities during the six months ended June 30, 2023 were primarily related to repurchases of Term Loan Facility debt of $49.4 million, repayment of principal on our Term Loan Facility of $6.6 million, payments of contingent consideration and holdback payments of $3.5 million, partially offset by $1.4 million of proceed from a government loan for COVID-19 relief and $1.2 million related to proceeds from the issuance of Class A common stock.

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

From time to time, we may voluntarily repurchase our long-term debt to deploy capital that deleverages our balance sheet while generating a favorable rate of return.

Cash flows used in financing activities during the nine months ended September 30, 2023 were primarily related to repurchases of Term Loan Facility debt of $104.0 million, repayment of principal on our Term Loan Facility of $9.9 million, payments of contingent consideration and holdback payments of $3.5 million, partially offset by $1.3 million of proceeds from a government loan for COVID-19 relief and $2.2 million related to proceeds from the issuance of Class A common stock.

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.

Description of Credit Facilities

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

As of June 30, 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 $44.1 million of outstanding letters of credit and the borrowing base limitations for additional borrowings).

As of September 30, 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 $44.1 million of outstanding letters of credit and the borrowing base limitations for additional borrowings).

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

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

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 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.

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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The Term Loan Facility is a term loan facility denominated in U.S.

dollars in an aggregate principal amount of $1.237 billion as of June 30, 2023.

dollars in an aggregate principal amount of $1.18 billion as of September 30, 2023.

Borrowings under the Term Loan Facility amortize in equal quarterly installments in an amount equal to 1.00% per annum of $1.325 billion principal amount.

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 Term Loan Facility are 4.50% with respect to Eurodollar rate borrowings and 3.50% with respect to base rate borrowings.

Borrowings will bear interest at a floating rate of Term SOFR plus an applicable margin of 4.50% per annum, subject to additional spread adjustment on SOFR ranging from 0.11% to 0.26%.

The Borrower may voluntarily prepay loans or reduce commitments under the Term Loan Facility, in whole or in part, subject to minimum amounts, with prior notice but without premium or penalty (other than a 1.00% premium on any prepayment in connection with a repricing transaction prior to April 2022).

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Interest and maturity

Interest on the Notes is payable semi-annually in arrears on May 15 and November 15 at a rate of 6.50% per annum, commencing on May 15, 2021.

Interest on the Notes is payable semi-annually in arrears on May 15 and November 15 at a rate of 6.50% per annum.

The Notes will mature on November 15, 2028.

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Cash and Cash Equivalents Held Outside the United States

As of June 30, 2023, and December 31, 2022, $57.2 million and $81.8 million, respectively, of our cash and cash equivalents were held by foreign subsidiaries.

As of June 30, 2023, and December 31, 2022, $21.4 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 $0.9 million of withholding tax as of June 30, 2023 for unremitted earnings in Canada with respect to which we do not have an indefinite reinvestment assertion.

As of September 30, 2023, and December 31, 2022, $64.3 million and $81.8 million, respectively, of our cash and cash equivalents were held by foreign subsidiaries.

As of September 30, 2023, and December 31, 2022, $23.2 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 $0.9 million of withholding tax as of September 30, 2023 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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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 June 30, 2023, to be indefinitely reinvested and, accordingly, no provision has been made for taxes in excess of the $0.9 million noted above.

We consider the majority of the undistributed earnings of our foreign subsidiaries, as of September 30, 2023, to be indefinitely reinvested and, accordingly, no provision has been made for taxes in excess of the $0.9 million noted above.

Off-Balance Sheet Arrangements

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Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are included in our 2022 Annual Report and did not materially change during the six months ended June 30, 2023.

Our critical accounting policies and estimates are included in our 2022 Annual Report and did not materially change during the nine months ended September 30, 2023.

Recently Issued Accounting Pronouncements

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

What changed 10-Q

Item 1. Financial Statements