Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
ADVANTAGE SOLUTIONS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31,
December 31,
(in thousands, except share data)
2024
2023
ASSETS
Current assets
Cash and cash equivalents
$
112,293
$
120,839
Restricted cash
15,712
16,363
Accounts receivable, net of allowance for expected credit losses from continuing operations of $ 16,795 and $ 32,725 , respectively
649,420
685,201
Prepaid expenses and other current assets
93,845
117,649
Current assets of discontinued operations
60,858
71,982
Total current assets
932,128
1,012,034
Property and equipment, net
82,968
69,191
Goodwill
833,491
833,491
Other intangible assets, net
1,522,359
1,567,829
Investments in unconsolidated affiliates
220,445
211,393
Other assets
42,681
43,615
Other assets of discontinued operations
—
41,770
Total assets
$
3,634,072
$
3,779,323
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt
$
13,275
$
13,274
Accounts payable
190,891
177,360
Accrued compensation and benefits
90,096
163,421
Other accrued expenses
147,121
144,446
Deferred revenues
23,392
27,428
Current liabilities of discontinued operations
12,153
15,368
Total current liabilities
476,928
541,297
Long-term debt, net of current portion
1,795,878
1,848,118
Deferred income tax liabilities
203,399
204,136
Other long-term liabilities
73,684
74,915
Other liabilities of discontinued operations
—
6,780
Total liabilities
2,549,889
2,675,246
Commitments and contingencies (Note 9)
Common stock, $ 0.0001 par value, 3,290,000,000 shares authorized; 323,894,143 and 322,235,261 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
32
32
Additional paid in capital
3,447,038
3,449,261
Accumulated deficit
( 2,319,957
)
( 2,314,650
)
Loans to Karman Topco L.P.
( 6,536
)
( 6,387
)
Accumulated other comprehensive loss
( 6,662
)
( 3,945
)
Treasury stock, at cost; 6,600,075 and 3,600,075 shares as of March 31, 2024 and December 31, 2023, respectively
( 30,638
)
( 18,949
)
Total equity attributable to stockholders of Advantage Solutions Inc.
1,083,277
1,105,362
Nonredeemable noncontrolling interest
906
( 1,285
)
Total stockholders’ equity
1,084,183
1,104,077
Total liabilities, redeemable noncontrolling interest, and stockholders’ equity
$
3,634,072
$
3,779,323
See Notes to the Condensed Consolidated Financial Statements.
3
ADVANTAGE SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
Three Months Ended March 31,
(in thousands, except share and per share data)
2024
2023
Revenues
$
879,003
$
944,382
Cost of revenues (exclusive of depreciation and amortization shown separately below)
763,872
826,855
Selling, general, and administrative expenses
89,664
56,289
Depreciation and amortization
51,540
54,494
Income from unconsolidated investments
689
—
Total operating expenses
905,765
937,638
Operating (loss) income from continuing operations
( 26,762
)
6,744
Other expenses (income):
Change in fair value of warrant liability
287
( 73
)
Interest expense, net
35,761
47,165
Total other expenses
36,048
47,092
Loss from continuing operations before income taxes
( 62,810
)
( 40,348
)
Benefit from income taxes for continuing operations
( 13,703
)
( 5,978
)
Net loss from continuing operations
( 49,107
)
( 34,370
)
Net income (loss) from discontinued operations, net of tax
45,992
( 13,308
)
Net loss
( 3,115
)
( 47,678
)
Less: net income (loss) from discontinued operations attributable to noncontrolling interest
2,192
( 91
)
Net loss attributable to stockholders of Advantage Solutions Inc.
$
( 5,307
)
$
( 47,587
)
Net loss per common share:
Basic net loss per common share from continuing operations
$
( 0.15
)
$
( 0.11
)
Basic net income (loss) per common share from discontinued operations
$
0.14
$
( 0.04
)
Basic net loss per common share attributable to stockholders of Advantage Solutions Inc.
$
( 0.02
)
$
( 0.15
)
Diluted net loss per share:
Diluted net loss per common share from continuing operations
$
( 0.15
)
$
( 0.11
)
Diluted net income (loss) per common share from discontinued operations
$
0.14
$
( 0.04
)
Diluted net loss per common share attributable to stockholders of Advantage Solutions Inc.
$
( 0.02
)
$
( 0.15
)
Weighted-average number of common shares:
Basic
321,458,155
321,135,117
Diluted
321,458,155
321,135,117
Comprehensive (Loss) Income:
Net loss attributable to stockholders of Advantage Solutions Inc.
$
( 5,307
)
$
( 47,587
)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments
( 2,717
)
1,524
Total comprehensive loss attributable to stockholders of Advantage Solutions Inc.
$
( 8,024
)
$
( 46,063
)
See Notes to the Condensed Consolidated Financial Statements.
4
ADVANTAGE SOLUTIONS INC.
CONDENSED CONSOL IDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
Accumulated
Advantage
Common Stock
Treasury Stock
Additional
Loans
Other
Solutions Inc.
Nonredeemable
Total
Paid-in
Accumulated
to
Comprehensive
Stockholders'
Noncontrolling
Stockholders'
(in thousands, except share data)
Shares
Amount
Shares
Amount
Capital
Deficit
Topco
Income (Loss)
Equity
Interests
Equity
Balance at January 1, 2024
322,235,261
$
32
3,600,075
$
( 18,949
)
$
3,449,261
$
( 2,314,650
)
$
( 6,387
)
$
( 3,945
)
$
1,105,362
$
( 1,285
)
$
1,104,077
Comprehensive (loss) income
Net (loss) income
—
—
—
—
—
( 5,307
)
—
—
( 5,307
)
2,192
( 3,115
)
Foreign currency translation adjustments
—
—
—
—
—
—
—
( 2,717
)
( 2,717
)
( 1
)
( 2,718
)
Total comprehensive (loss) income
—
—
—
—
—
—
—
—
( 8,024
)
2,191
( 5,833
)
Interest on loans to Karman Topco L.P.
—
—
—
—
—
—
( 149
)
—
( 149
)
—
( 149
)
Purchase of treasury stock
( 3,000,000
)
—
3,000,000
( 11,689
)
—
—
—
—
( 11,689
)
—
( 11,689
)
Equity-based compensation of Karman Topco L.P.
—
—
—
—
390
—
—
—
390
—
390
Shares issued under 2020 Employee Stock Purchase Plan
581,954
—
—
—
1,167
—
—
—
1,167
—
1,167
Payments for taxes related to net share settlement under 2020 Incentive Award Plan
—
—
—
—
( 9,688
)
—
—
—
( 9,688
)
—
( 9,688
)
Shares issued under 2020 Incentive Award Plan
4,076,928
—
—
—
—
—
—
—
—
—
—
Stock-based compensation expense
—
—
—
—
5,908
—
—
—
5,908
—
5,908
Balance at March 31, 2024
323,894,143
$
32
6,600,075
$
( 30,638
)
$
3,447,038
$
( 2,319,957
)
$
( 6,536
)
$
( 6,662
)
$
1,083,277
$
906
$
1,084,183
Advantage
Additional
Loans
Other
Solutions Inc.
Nonredeemable
Total
Common Stock
Treasury Stock
Paid-in
Accumulated
to
Comprehensive
Stockholders'
Noncontrolling
Stockholders'
(in thousands, except share data)
Shares
Amount
Shares
Amount
Capital
Deficit
Topco
Income (Loss)
Equity
Interests
Equity
Balance at January 1, 2023
319,690,300
$
32
1,610,014
$
( 12,567
)
$
3,408,836
$
( 2,247,109
)
$
( 6,363
)
$
( 18,849
)
$
1,123,980
$
101,744
$
1,225,724
Comprehensive (loss) income
Net loss
—
—
—
—
—
( 47,587
)
—
—
( 47,587
)
( 170
)
( 47,757
)
Foreign currency translation adjustments
—
—
—
—
—
—
—
1,524
1,524
1,813
3,337
Total comprehensive (loss) income
—
—
—
—
—
—
—
—
( 46,063
)
1,643
( 44,420
)
Interest on loans to Karman Topco L.P.
—
—
—
—
—
—
( 6
)
—
( 6
)
—
( 6
)
Equity-based compensation of Karman Topco L.P.
—
—
—
—
( 2,269
)
—
—
—
( 2,269
)
—
( 2,269
)
Shares issued under 2020 Employee Stock Purchase Plan
674,976
—
—
—
1,193
—
—
—
1,193
—
1,193
Payments for taxes related to net share settlement under 2020 Incentive Award Plan
—
—
—
—
( 1,277
)
—
—
—
( 1,277
)
—
( 1,277
)
Shares issued under 2020 Incentive Award Plan
3,190,022
—
—
—
—
—
—
—
—
—
—
Stock-based compensation expense
—
—
—
—
11,078
—
—
—
11,078
—
11,078
Balance at March 31, 2023
323,555,298
$
32
1,610,014
$
( 12,567
)
$
3,417,561
$
( 2,294,696
)
$
( 6,369
)
$
( 17,325
)
$
1,086,636
$
103,387
$
1,190,023
See Notes to the Condensed Consolidated Financial Statements.
5
ADVANTAGE SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
(in thousands)
2024
2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$
( 3,115
)
$
( 47,678
)
Net income (loss) from discontinued operations, net of tax
45,992
( 13,308
)
Net loss from continuing operations
( 49,107
)
( 34,370
)
Adjustments to reconcile net loss to net cash provided by operating activities
Noncash interest income
( 4,165
)
1,885
Amortization of deferred financing fees
1,800
2,109
Depreciation and amortization
51,540
54,494
Change in fair value of warrant liability
287
( 73
)
Fair value adjustments related to contingent consideration
689
4,292
Deferred income taxes
( 423
)
( 16,448
)
Equity-based compensation of Karman Topco L.P.
390
( 2,269
)
Stock-based compensation
7,220
11,210
Equity in earnings of unconsolidated affiliates
689
—
Distribution received from unconsolidated affiliates
1,282
588
Gain on repurchases of Senior Secured Notes
( 2,669
)
—
Gain on disposal of property and equipment
469
—
Changes in operating assets and liabilities, net of effects from divestitures and purchases of businesses:
Accounts receivable, net
34,472
63,590
Prepaid expenses and other assets
19,743
22,290
Accounts payable
8,877
( 45,410
)
Accrued compensation and benefits
( 72,751
)
( 53,086
)
Deferred revenues
( 3,935
)
11,084
Other accrued expenses and other liabilities
( 3,302
)
21,510
Net cash (used in) provided by operating activities from continuing operations
( 8,894
)
41,396
Net cash provided by operating activities from discontinued operations
1,060
1,690
Net cash (used in) provided by operating activities
( 7,834
)
43,086
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment in unconsolidated affiliates
( 2,500
)
—
Purchase of property and equipment
( 16,155
)
( 5,988
)
Proceeds from divestitures
87,370
—
Net cash provided by (used in) investing activities from continuing operations
68,715
( 5,988
)
Net cash used in investing activities from discontinued operations
( 1,010
)
( 1,290
)
Net cash provided by (used in) investing activities
67,705
( 7,278
)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under lines of credit
—
56,843
Payments on lines of credit
—
( 56,033
)
Principal payments on long-term debt
( 3,318
)
( 3,317
)
Repurchases of Senior Secured Notes and Term Loan Facility debt
( 47,899
)
( 1,725
)
Proceeds from issuance of common stock
1,167
1,193
Payments for taxes related to net share settlement under 2020 Incentive Award Plan
( 3,292
)
( 1,277
)
Contingent consideration payments
( 1,851
)
( 1,101
)
Holdback payments
—
( 1,380
)
Purchase of treasury stock
( 11,689
)
—
Net cash used in financing activities from continuing operations
( 66,882
)
( 6,797
)
Net cash used in financing activities from discontinued operations
( 73
)
( 81
)
Net cash used in financing activities
( 66,955
)
( 6,878
)
Net effect of foreign currency changes on cash from continuing operations
( 2,136
)
1,311
Net effect of foreign currency changes on cash from discontinued operations
( 310
)
( 10
)
Net effect of foreign currency changes on cash
( 2,446
)
1,301
Net change in cash, cash equivalents and restricted cash
( 9,530
)
30,231
Cash, cash equivalents and restricted cash, beginning of period
142,842
138,532
Cash, cash equivalents and restricted cash, end of period
133,312
168,763
Less: Cash, cash equivalents and restricted cash of discontinued operations
5,307
3,010
Cash, cash equivalents and restricted cash, end of period
$
128,005
$
165,753
SUPPLEMENTAL CASH FLOW INFORMATION
(Gain) loss on divestitures from discontinued operations
$
( 57,016
)
$
16,497
Purchase of property and equipment recorded in accounts payable and accrued expenses
$
5,238
$
2,105
See Notes to the Condensed Consolidated Financial Statements.
6
ADVANTAGE SOLUTIONS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Significant Accounting Policies
Advantage Solutions Inc. (the “Company”) is a provider of outsourced solutions to consumer goods companies and retailers. The Company’s Class A common stock is listed on the Nasdaq Global Select Market under the symbol “ADV” and warrants to purchase the Class A common stock at an exercise price of $ 11.50 per share are listed on the Nasdaq Global Select Market under the symbol “ADVWW”.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. The unaudited condensed consolidated financial statements do not include all of the information required by accounting principles generally accepted in the United States (“GAAP”). The Condensed Consolidated Balance Sheet at December 31, 2023 was derived from the audited Consolidated Balance Sheet at that date and does not include all the disclosures required by GAAP. In the opinion of management, all adjustments which are of a normal recurring nature and necessary for a fair statement of the results as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 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, 2023 and the related footnotes thereto. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.
As of March 31, 2024, the Company determined that certain businesses that have been disposed of and businesses classified as held for sale as of March 31, 2024 met the criteria for discontinued operations presentation. For all periods presented, the operating results associated with the businesses disposed of and classified as held for sale have been reclassified into net income (loss) from discontinued operations, net of income taxes and net income (loss) from discontinued operations attributable to non-controlling interest in the Consolidated Statements of Operations. The assets and liabilities associated with these businesses have been reflected as current and long-term assets and liabilities of discontinued operations in the Consolidated Balance Sheets, and the Cash flows from the Company’s discontinued operations are presented in the Consolidated Statements of Cash Flows for all periods presented Refer to Note 2— Held for Sale, Divestitures and Discontinued Operations for additional information on the Company’s assets and liabilities classified as held for sale and the Company's discontinued operations.
Certain prior period balances related to the Company's reportable segments and discontinued operations have been reclassified to conform to the current presentation in the financial statements and accompanying notes. The notes to the condensed consolidated financial statements are presented on a continuing operations basis unless otherwise noted. Refer to Note 8— Segments for additional information on the Company’s reportable segments. Refer to Note 2— Held for Sale, Divestitures and Discontinued Operations for additional information on the Company’s discontinued operations.
Reportable Segments
Effective January 1, 2024, Advantage Solutions Inc. revised its reportable segments to align with the Company's business strategy, and the manner in which the Chief Executive Officer, the Company's chief operating decision maker, assesses performance and makes decisions regarding the allocation of resources for the Company. The Company’s revised operating and reportable segments consist of Branded Services, Experiential Services, and Retailer Services. This change had no impact on the Company’s Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations and Comprehensive Loss, and Condensed Consolidated Statements of Stockholders' Equity. Prior period segment results have been reclassified to reflect the Company’s new reportable segments on a continuing operations basis. Refer to Note 8— Segments for additional information on the Company’s reportable segments.
7
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired in an acquisition. The Company tests for impairment of goodwill at the reporting unit level. The Company generally combines components that have similar economic characteristics, nature of services, types of clients, distribution methods and regulatory environment. In connection with the Company’s reorganization and the associated change in operating segments, the Company reassessed its reporting units and concluded that it has five reporting units (Branded Services, Branded Agencies, Experiential Services, Merchandising and Retailer Agencies). As a result, the Company performed the required impairment assessments directly before and immediately after the change in reporting units as of January 1, 2024. The assets and liabilities were reassigned to the applicable reporting units and allocated goodwill using the relative fair value approach. The estimated fair value of the underlying reporting units was determined based on a combination of the income and market approaches. The income approach utilizes estimates of discounted cash flows for the underlying business, which requires assumptions for growth rates, EBITDA margins, terminal growth rate, discount rate, and incremental net working capital, all of which require significant management judgment. The market approach applies market multiples derived from historical earnings data of selected guideline publicly traded companies that are first screened by industry group and then further narrowed on the reporting units' business descriptions, markets served, competitors, EBITDA margins and revenue size. The Company compared a weighted average of the output from the income and market approaches to compute the fair value of the reporting units. The assumptions in the income and market approach are based on significant inputs not observable in the market and thus represent Level three measurements within the fair value hierarchy.
In conjunction with the tests performed as of January 1, 2024, each of the fair values for the reporting units tested was in excess of its carrying amount. The fair values of the Branded Agencies and Experiential Services reporting units exceeded their respective carrying values by less than 20 %. As of March 31, 2024, there were no indicators of goodwill impairment.
Indefinite Lived Intangible Assets
Intangible assets with indefinite useful lives are not amortized but tested annually, at the beginning of the fourth quarter, for impairment or more often if events occur or circumstances change that would create a triggering event. Prior to the segment change, the Company went to market with the Advantage Trade Name being specifically used and assessed for impairment in the Sales and Marketing businesses. As a result of the change in the Company's reportable segments effective as of January 1, 2024, the Company determined, based on the change in the planned use of the Advantage Trade Name intangible asset, that the Advantage Trade Name should be considered an entity-wide asset for reporting and impairment testing purposes. As of January 1, 2024, the Company concluded there was a triggering event for an interim impairment assessment due to the change in unit of account of the indefinite-lived intangibles. Based on the interim impairment assessment, the estimated fair values exceeded their carrying values, thus no impairment was recorded.
Revenue Recognition
The Company recognizes revenue when control of promised goods or services is transferred to the client in an amount that reflects the consideration that the Company expects to be entitled to in exchange for such goods or services. 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 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.
Revenues related to the Branded Services segment are primarily recognized in the form of commissions, fee-for-service and cost-plus fees for providing headquarter relationship management, execution of merchandising strategies and omni-commerce marketing services.
Revenues within the Branded Services segment are further disaggregated between brokerage services, branded merchandising services, omni-commerce marketing services, and revenues related to the Company's international joint venture (prior to the deconsolidation during fiscal year 2023). Brokerage services revenues are primarily outsourced
8
sales and services for branded consumer goods manufacturers at retailer headquarters, in-store and online. Branded merchandising services relate to merchandising in-store and online for branded consumer goods manufacturers. Omni-commerce marketing services primarily relate to digital and field marketing services.
Experiential Services segment revenues are primarily recognized in the form of fee-for-service and cost-plus fees for providing in-store, digital sampling and demonstrations, where the Company manages highly customized, large-scale sampling programs for leading brands and retailers.
Retailer Services segment revenues are primarily recognized in the form of commissions, fee-for-service and cost-plus fees for providing consulting services related to private brand development, the execution of merchandising strategies and marketing strategies within retailer locations, including retail media networks and analyzing shopper behavior.
Revenues within the Retailer Services segment are further disaggregated between advisory services, retailer merchandising services and agency services to retailers. Advisory services primarily consist of consulting services related to private brand development. Retailer merchandising services primarily relate to the execution of merchandising strategies. Agency services primarily consist of providing marketing strategies within retail locations.
Disaggregated revenues were as follows:
Three Months Ended March 31,
(in thousands)
2024
2023
Branded Services
Omni-commerce marketing services
$
112,360
$
112,927
Brokerage services
127,022
131,665
Branded merchandising services
105,147
106,863
International joint venture
—
93,407
Total Branded Services revenue
344,529
444,862
Experiential Services
Experiential services
307,351
257,167
Total Experiential Services revenue
307,351
257,167
Retailer Services
Agency services
16,824
14,232
Advisory services
38,712
39,067
Retailer merchandising services
171,587
189,054
Total Retailer Services revenue
227,123
242,353
Total revenues
$
879,003
$
944,382
Contract liabilities represent deferred revenues, which are cash payments that are received in advance of the Company’s satisfaction of the applicable obligation and are included in Deferred revenues in the Condensed Consolidated Balance Sheets. Deferred revenues are recognized as revenues when the related services are performed for the client. Revenues recognized during the three months ended March 31, 2024 included in Deferred revenues as of December 31, 2023 were $ 13.3 million. Revenues recognized during the three months ended March 31, 2023 included in Deferred revenues as of December 31, 2022 were $ 12.8 million.
Accounting Standards Recently Issued but Not Yet Adopted by the Company
In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires entities to expand their existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for the Company beginning in fiscal year 2025, with early adoption permitted. The new standard is expected to be applied prospectively, but retrospective application is permitted. The Company is currently evaluating the impact of ASU 2023-09 on the consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires entities to disclose incremental segment information on an annual and interim
9
basis, including significant segment expenses and measures of profit or loss that are regularly provided to the chief operating decision maker (“CODM”). The standard is effective for the Company beginning in fiscal year 2024 and interim periods within fiscal year 2025, with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-07 on the consolidated financial statements and related disclosures and expects to adopt the new standard using a retrospective approach.
In March 2024, the Securities Exchange Commission (“SEC”) adopted final climate-related disclosure rules under SEC Release Nos. 33-11275 and 34-99678, The Enhancement and Standardization of Climate-Related Disclosures for Investors . The rules require disclosure of governance, risk management and strategy related to material climate-related risks as well as disclosure of material greenhouse gas emissions in registration statements and annual reports. In addition, the rules require presentation of certain material climate-related disclosures in the annual consolidated financial statements. On April 4, 2024, the SEC voluntarily stayed the effective date of the final rules pending completion of judicial review following legal challenges. The disclosure requirements will apply to the Company's fiscal year reporting beginning October 4, 2025, pending resolution of the stay. The Company is currently evaluating the impact of the rules on the consolidated financial statements and related disclosures.
Other new accounting pronouncements recently issued or newly effective were not applicable to the Company, did not have a material impact on the condensed consolidated financial statements or are not expected to have a material impact on the condensed consolidated financial statements.
2. Held for Sale, Divestitures and Discontinued Operations
Held for Sale
As of March 31, 2024, and December 31 2023, the Company classified certain assets and liabilities as held for sale in the condensed consolidated balance sheet, primarily relating assets and liabilities to be disposed of by sale (“disposal groups”) which are “held for sale” if their carrying amounts are principally expected to be recovered through a sale transaction rather than through continuing use. Assets and liabilities to be disposed of by 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. When the criteria are met and the proceeds from the sale will not be utilized to pay down long-term borrowings, the Company classifies these assets and liabilities held for sale as current. 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 met the criteria for classification as discontinued operations as discussed below. The assets and liabilities related to these businesses are included in the discontinued operations captions in the Condensed Consolidated Balance Sheets.
In May 2024, the Company entered into an agreement and sold a branded marketing agency that was held for sale as of March 31, 2024. The Company received approximately $ 42.5 million less estimated working capital adjustments. The Company is currently in the process of finalizing the accounting for this transaction and has determined that the gain or loss on this sale is impractical to report as of the date of this filing.
2023 Divestitures
In April 2023, the Company entered into an agreement to sell certain assets and liabilities classified as held for sale as of March 31, 2023 (collectively, the “2023 Divestitures”). The Company determined that the disposal groups classified as held for sale did not meet the criteria for classification as discontinued operations as of March 31, 2023. 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 and a loss of $ 4.8 million loss on divestitures as a component of “Net income (loss) from discontinued operations, net of tax” in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
10
2024 Divestitures
On January 31, 2024, the Company sold a collection of foodservice businesses, previously classified as held for sale (as current assets) as of December 31, 2023 (collectively the 2024 “Divestitures”) . As part of the sale, the foodservice businesses were combined with an entity owned by the buyer, with the Company receiving approximately $ 91.0 million, subject to working capital adjustments and an ongoing 7.5 % interest in the combined business. The ongoing ownership interest represents a continuing involvement which the Company has determined represents an equity method investment. Upon the close of the transaction, the retained 7.5 % interest was recognized at fair value of $ 8.4 million, valued using unobservable inputs (i.e., Level 3 inputs), primarily discounted cash flow. During the three months ended March 31, 2024, the Company recorded a gain on the divestiture of the collection of foodservice businesses of $ 56.6 million reported as a component of “Net income (loss) from discontinued operations, net of tax” in the Condensed Consolidated Statements of Operations and Comprehensive Loss. Proceeds from the sale were classified as cash provided by investing activities from continuing operations in the Condensed Consolidated Statements of Cash Flows.
Effective February 1, 2024, the Company’s investment in the combined foodservice business is accounted for under the equity method of accounting, with the investment reported in “Investments in unconsolidated affiliates” on the Condensed Consolidated Balance Sheets and an immaterial amount of equity income (loss) reported in “Income from unconsolidated investments” on the Condensed Consolidated Statements of Operations and Other Comprehensive Loss for the three months ended March 31, 2024. Transactions between the Company and the combined foodservice entity are considered to be related-party transactions subsequent to the divesture.
Discontinued Operations
The Company classifies a business that has been disposed of or is classified as held for sale as a discontinued operation when the criteria prescribed by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205, Presentation of Financial Statements are met. While the 2023 Divestitures did not previously qualify for presentation as discontinued operations, the Company concluded that, in the aggregate, the sales of these businesses along with the 2024 Divestitures and businesses held for sale as of March 31, 2024 met the criteria for discontinued operations presentation during the three months ended March 31, 2024 (collectively, the “discontinued operations”), which are part of a single disposal plan. As a result, each of these businesses has been reclassified to discontinued operations in the Condensed Consolidated Statements of Operations and Condensed Consolidated Balance sheets for all periods presented.
As part of the agreements for the 2023 Divestitures and 2024 Divestitures, the Company has agreed to provide certain transitional services as defined within the respective Transition Services Agreement for a period of time after sale. Income and expenses related to these transitional services are immaterial and are reported in “Net loss from continuing operations” on the Condensed Consolidated Statements of Operations and Other Comprehensive Loss.
11
The following table presents the summarized balance sheets of discontinued operations.
(in thousands)
March 31, 2024
December 31, 2023
Carrying amounts of major classes of assets
Cash and cash equivalents
$
5,307
$
5,641
Accounts receivable, net of allowance for expected credit losses of $ 2,181 and $ 2,082 , respectively
15,652
31,146
Prepaid and other current assets
616
5,112
Property and equipment, net
5,292
5,762
Goodwill
21,900
37,100
Other intangible assets, net
11,938
25,024
Other assets
153
3,967
Total assets of discontinued operations (1)
60,858
113,752
Carrying amounts of major classes of liabilities
Current portion of long-term debt
$
285
$
306
Accounts payable
2,952
5,271
Accrued compensation and benefits
2,027
3,756
Other accrued expenses
28
3,181
Deferred revenues
587
2,306
Long-term debt, net of current portion
4,557
4,666
Other liabilities
1,717
2,662
Total liabilities of discontinued operations (1)
$
12,153
$
22,148
Total net assets of the disposal group classified as discontinued operations
$
48,705
$
91,604
(1) Certain assets and liabilities from discontinued operations are classified as noncurrent at December 31, 2023 as they did not previously meet the held-for-sale criteria at that date.
The following table presents the summarized statements of operations of discontinued operations.
Three Months Ended March 31,
(in thousands)
2024
2023
Revenues
$
27,043
$
67,601
Cost of revenues (exclusive of depreciation and amortization shown separately below)
23,190
61,185
Selling, general, and administrative expenses
1,954
2,309
Depreciation and amortization
816
2,610
(Gain) loss on divestitures
( 57,016
)
16,497
Total operating (income) expenses
( 31,056
)
82,601
Operating income (loss) from discontinued operations
58,099
( 15,000
)
Other expenses:
Interest expense, net
32
26
Total other expenses
32
26
Income (loss) before income taxes from discontinued operations, net of tax
58,067
( 15,026
)
Provision for (benefit from) income taxes from discontinued operations
12,075
( 1,718
)
Net income (loss) from discontinued operations
45,992
( 13,308
)
Less: net income (loss) from discontinued operations attributable to noncontrolling interest
2,192
( 91
)
Net income (loss) from discontinued operations attributable to stockholders of Advantage Solutions Inc.
$
43,800
$
( 13,217
)
12
3. Goodwill and Intangible Assets
The following tables set forth information for goodwill by reportable segment:
(in thousands)
Branded Services
Retailer Services
Experiential Services
Total
Balance at December 31, 2023
$
376,109
$
217,955
$
239,427
$
833,491
Balance at March 31, 2024
$
376,109
$
217,955
$
239,427
$
833,491
Accumulated impairment losses related to goodwill were $ 2.0 billion as of March 31, 2024 and December 31, 2023.
The following tables set forth information for intangible assets:
March 31, 2024
(amounts in thousands)
Weighted Average Useful Life
Gross Carrying
Value
Accumulated
Amortization
Accumulated
Impairment Charges
Net Carrying
Value
Finite-lived intangible assets:
Client relationships
14 years
$
2,313,682
$
1,477,634
$
—
$
836,048
Trade names
10 years
88,600
55,708
—
32,892
Developed technology
7 years
3,100
1,181
—
1,919
Total finite-lived intangible assets
2,405,382
1,534,523
—
870,859
Indefinite-lived intangible assets:
Trade name
1,480,000
—
828,500
651,500
Total other intangible assets
$
3,885,382
$
1,534,523
$
828,500
$
1,522,359
December 31, 2023
(amounts in thousands)
Weighted Average Useful Life
Gross Carrying
Value
Accumulated
Amortization
Accumulated
Impairment Charges
Net Carrying
Value
Finite-lived intangible assets:
Client relationships
14 years
$
2,313,792
$
1,434,600
$
—
$
879,192
Trade names
10 years
88,600
53,493
—
35,107
Developed technology
7 years
7,500
5,470
—
2,030
Total finite-lived intangible assets
2,409,892
1,493,563
—
916,329
Indefinite-lived intangible assets:
Trade name
1,480,000
—
828,500
651,500
Total other intangible assets
$
3,889,892
$
1,493,563
$
828,500
$
1,567,829
Amortization of intangible assets was $ 45.8 million an d $ 49.7 million for the three months ended March 31, 2024 and 2023, respectively.
As of March 31, 2024, estimated future amortization expense of the Company’s finite-lived intangible assets are as follows:
(in thousands)
Remainder of 2024
$
135,889
2025
175,582
2026
172,073
2027
170,382
2028
134,947
Thereafter
81,986
Total amortization expense
$
870,859
13
4. Debt
March 31,
December 31,
(in thousands)
2024
2023
Term Loan Facility
$
1,145,744
$
1,149,057
Senior Secured Notes
692,000
743,000
Other notes
119
426
Total long-term debt
1,837,863
1,892,483
Less: current portion
13,275
13,274
Less: debt issuance costs
28,710
31,091
Long-term debt, net of current portion
$
1,795,878
$
1,848,118
As of March 31, 2024 , the Company had $ 1.1 billion of debt outstanding under the Term Loan Facility and $ 692.0 million of debt outstanding under the Notes (both as defined in the Annual Report on Form 10-K filed March 1, 2024 for the year ended D ecember 31, 2023 (the “2023 Annual Report”) with maturity dates of October 28, 2027 and November 15, 2028 , respectively. The Term Loan Facility bears interest at a floating rate of Term SOFR plus an applicable margin of 4.50 % per annum, subject to an 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 March 31, 2024 . In addition, the Company is required to repay the principal under the Term Loan Facility in the greater amount of its excess cash flow, as such term is defined in the agreement governing the Term Loan Facility, or $ 13.3 million, per annum, in quarterly payments. The Company made the minimum quarterly principal payments of $ 3.3 million during the three months ended March 31, 2024 and 2023. No payments under the excess cash flow calculation were required in such periods. In May 2023 (the “Second Lien Amendment Effective Date”), the Company amended the Term Loan Facility to replace the U.S. Dollar LIBOR provisions with SOFR, effective June 30, 2023.
The Company voluntarily repurchased an aggregate of $ 51.0 million principal amount of its Senior Secured Notes during the three months ended March 31, 2024. The Company recognized a gain on the repurchase of the Senior Secured Notes of $ 2.7 million for the three months ended March 31, 2024, as a component of “Interest expense, net” in the Condensed Consolidated Statements of Operations and Comprehensive Loss. The Company voluntarily repurchased an aggregate of $ 1.7 million principal amount from the Term Loan Facility during the three months ended March 31, 2023. The Company recognized a gain on the repurchase from the Term Loan Facility of $ 0.3 million for the three months ended March 31, 2023, as a component of “Interest expense, net” in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
As of March 31, 2024, the Company had no borrowings under the Revolving Credit Facility (as defined in the 2023 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 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.
In April 2024, the Company's Term Loan Facility was further amended to (I) reduce the applicable interest rate margin on the term loan by 0.25 % (a) from 4.50 % to 4.25 % for SOFR loans or (b) from 3.50 % to 3.25 % for base rate loans; and (II) reset the period for six months in which a 1.00 % prepayment premium shall apply to any prepayment of the term loans in connection with certain events.
5. Fair Value of Financial Instruments
The Company measures fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in
14
active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.
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.
March 31, 2024
(in thousands)
Fair Value
Level 1
Level 2
Level 3
Assets measured at fair value
Derivative financial instruments
$
22,540
$
—
$
22,540
$
—
Total assets measured at fair value
$
22,540
$
—
$
22,540
$
—
Liabilities measured at fair value
Warrant liability
$
953
$
—
$
953
$
—
Contingent consideration liabilities
12,502
—
—
12,502
Total liabilities measured at fair value
$
13,455
$
—
$
953
$
12,502
December 31, 2023
(in thousands)
Fair Value
Level 1
Level 2
Level 3
Assets measured at fair value
Derivative financial instruments
$
26,344
$
—
$
26,344
$
—
Total assets measured at fair value
$
26,344
$
—
$
26,344
$
—
Liabilities measured at fair value
Warrant liability
$
667
$
—
$
667
$
—
Contingent consideration liabilities
18,472
—
—
18,472
Total liabilities measured at fair value
$
19,139
$
—
$
667
$
18,472
Interest Rate Cap Agreements
The Company had interest rate cap and collar contracts with an aggregate notional value of principal of $ 950.0 million as of March 31, 2024 and December 31, 2023 from various financial institutions to manage the Company’s exposure to interest rate movements on variable rate credit facilities. The interest rate cap and collar contracts will mature on December 16, 2024 and April 5, 2026, respectively.
The fair value of the Company’s outstanding interest rate caps and collars of $ 22.5 million and $ 26.3 million, respectively, were included in “Prepaid expenses and other current assets” in the Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023, respectively, with changes in fair value recognized as a component of “Interest expense, net” in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
During the three months ended March 31, 2024 and 2023, the Company recorded a gain o f $ 4.2 million and a gain of $ 1.9 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 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.
15
As of March 31, 2024 , the maximum potential payment outcomes were $ 44.2 million . The following table summarizes the changes in the carrying value of estimated contingent consideration liabilities:
March 31,
(in thousands)
2024
2023
Beginning of the period
$
18,472
$
20,334
Changes in fair value
689
4,292
Payments
( 6,659
)
( 1,572
)
End of the period
$
12,502
$
23,054
Long-term Debt
The following tables set forth the carrying values and fair values of the Company’s financial liabilities measured on a recurring basis, categorized by input level within the fair value hierarchy:
(in thousands)
Carrying Value
Fair Value
(Level 2)
Balance at March 31, 2024
Term Loan Facility
$
1,145,744
$
1,229,317
Senior Secured Notes
692,000
681,628
Other notes
119
119
Total long-term debt
$
1,837,863
$
1,911,064
(in thousands)
Carrying Value
Fair Value
(Level 2)
Balance at December 31, 2023
Term Loan Facility
$
1,149,057
$
1,221,012
Senior Secured Notes
743,000
745,223
Other notes
426
100
Total long-term debt
$
1,892,483
$
1,966,335
6. 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 $ 1.3 million and $ 0.8 million of revenues from such client during the three months ended March 31, 2024 and 2023, respectively. Accounts receivable from this client were $ 0.6 million and $ 0.6 million as of March 31, 2024 and December 31, 2023, respectively.
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 $ 1.6 million of revenues from such client during the three months ended March 31, 2024. Accounts receivable from this client were $ 0.3 million and $ 0.5 million as of March 31, 2024 and December 31, 2023, respectively.
Investments in Unconsolidated Affiliates
During the three months ended March 31, 2024 and 2023 , the Company recognized revenues of $ 6.5 million and $ 3.7 million, respectively, from its investment in unconsolidated affiliates. Accounts receivable from investment in unconsolidated affiliates were $ 3.1 million and $ 3.7 million as of March 31, 2024 and December 31, 2023 , respectively.
7. Income Taxes
The Company’s effective tax rates were 21.8 % and 15.0 % for the three months ended March 31, 2024 and 2023, 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/loss used in the annual effective tax rate, the application of the windfall of $ 0.7 million of stock based compensation for the three months ended March 31, 2024, as compared to a $ 2.3 million
16
shortfall for the three months ended March 31, 2023, and the release of the valuation allowance of $ 1.1 million related to one of the Company’s investments for the three months ended March 31, 2024.
The income tax expense from discontinued operations was $ 12.1 million for the three months ended March 31, 2024, while the income tax benefit from discontinued operations was $ 1.7 million for the three months ended March 31, 2023. The income tax expense for the three months ended March 31, 2024 was impacted primarily by the sale of the company’s foodservice businesses. The income tax benefit for the three months ended March 31, 2023 was primarily the result of pre-tax loss.
8. Segments
Effective January 1, 2024, the Company revised its reportable segments to align with the Company’s business strategy, and the manner in which the Chief Executive Officer, the Company's chief operating decision maker, assesses the performance and makes decisions regarding the allocation of resources for the Company. The Company’s revised reportable segments consist of Branded Services, Experiential Services, and Retailer Services. The reportable 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 in deciding how to allocate resources and in assessing performance. Through the Company's Branded Services segment, the Company offers capabilities in brokerage, branded merchandising and omni-commerce marketing services to consumer goods manufacturers. Through the Company's Experiential Services segment, the Company expands the reach of consumer brands and retailer products to convert shoppers into buyers through sampling and product demonstration programs executed in-store and online. Through the Company's Retailer Services segment, the Company provides retailers with end-to-end advisory, retailer merchandising, and agency expertise to drive sales. 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 (loss) income.
D iscontinued operations are not included in the applicable reportable segments. Refer to Note 2— Held for Sale, Divestitures and Discontinued Operations.
(in thousands)
Branded Services
Retailer Services
Experiential Services
Total
Three Months Ended March 31, 2024
Revenues
$
344,529
$
227,123
$
307,351
$
879,003
Depreciation and amortization
$
33,763
$
7,858
$
9,919
$
51,540
Income from unconsolidated investments
$
689
$
—
$
—
$
689
Operating loss from continuing operations
$
( 16,776
)
$
( 4,959
)
$
( 5,027
)
$
( 26,762
)
Three Months Ended March 31, 2023
Revenues
$
444,862
$
242,353
$
257,167
$
944,382
Depreciation and amortization
$
37,492
$
7,939
$
9,063
$
54,494
Operating income (loss) from continuing operations
$
6,176
$
5,246
$
( 4,678
)
$
6,744
Three Months Ended March 31,
(amounts in thousands)
2024
2023
Branded Services
$
19,171
$
62,740
Experiential Services
5,984
3,007
Retailer Services
1,888
1,854
Total revenues from discontinued operations
$
27,043
$
67,601
9 . Commitments and Contingencies
Litigation
17
The Company is involved in various legal matters that arise in the ordinary course of its business. Some of these legal matters purport or may be determined to be class and/or representative actions, or seek substantial damages, or penalties. The Company has accrued amounts in connection with certain legal matters, including with respect to certain of the matters described below. There can be no assurance, however, that these accruals will be sufficient to cover such matters or other legal matters or that such matters or other legal matters will not materially or adversely affect the Company’s financial position, liquidity, or results of operations.
The Company is involved in various litigation and arbitration matters, including purported class or representative actions with respect to matters arising under the California Labor Code and Private Attorneys General Act, and commercial disputes with clients, vendors and third-party sellers of businesses.
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 Take 5 in July 2019 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. In October 2022, an arbitrator made a final award in favor of the Company. The Company is actively pursuing the collection of this award in state court in Florida. The Company is currently unable to estimate if or when it will be able to collect any amounts associated with this arbitration. 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 Company cannot assure that the insurance will be sufficient to cover any potential liability or expenses associated with the Take 5 Matter.
10. Stock-Based Compensation
The Company has issued nonqualified stock options, restricted stock units (“RSUs”), and performance restricted stock units (“PSUs”) under the Advantage Solutions Inc. 2020 Incentive Award Plan (the “Plan”). The Company’s restricted stock units and performance restricted stock units, as described below, are expensed based on the fair value at the grant date. The Company recognized stock-based compensation expense and equity-based compensation expense associated with the Common Series C Units of Karman Topco L.P. as follows:
Three Months Ended March 31,
(in thousands)
2024
2023
Restricted stock-based unit awards
$
3,136
$
6,938
Other share-based awards
4,084
2,154
Total stock-based compensation before tax
7,220
9,092
Tax benefit
( 929
)
( 2,001
)
Total stock-based compensation expense included in net income
$
8,149
$
11,093
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. Details for each aforementioned defined term for each grant have been provided in the table below.
18
During the three months ended March 31, 2024, the Compensation Committee determined that the achievement of the performance objectives applicable to the 2023 PSU EBITDA and 2023 PSU Revenues objectives were 150 % of Target Goals. The value of these PSU awards above the Target Goals remain subject to additional performance requirements (i.e., the above target performance must be maintained in 2024 and 2025, respectively) and service-based vesting conditions. The performance period for those PSU awards up to the Target Goals ended on December 31, 2023, but remain subject to service-based vesting conditions.
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. The measurement period is based on the twelve months of the respective fiscal year.
Measurement Period
Number of
Shares
Threshold
Number of
Shares
Target
Number of
Shares
Maximum
Weighted
Average Fair
Value per
Share
Maximum Remaining Unrecognized Compensation Expense
Weighted-average remaining requisite service periods
(in thousands, except share and per share data)
2023
2,326,288
4,652,576
6,978,888
$
2.08
$
9,846,207
2.1 years
2022
136,532
273,064
273,064
$
4.94
$
408,050
1.1 years
2021
9,851
19,702
26,738
$
10.14
$
14,723
0.5 years
The following table summarizes the PSU activity for the three months ended March 31, 2024:
Performance Share Units
Weighted Average Grant
Date Fair Value
Outstanding at January 1, 2024
7,339,129
$
2.60
Granted
—
$
—
Distributed
( 1,710,061
)
$
3.66
Forfeited
( 676,690
)
$
2.28
PSU performance adjustment
2,326,312
$
2.08
Outstanding at March 31, 2024
7,278,690
$
2.22
Restricted Stock Units
RSUs are subject to the recipient’s continued service to the Company. RSUs are generally scheduled to vest over three years and are subject to the provisions of the agreement under the Plan.
During the three months ended March 31, 2024, the following activities involving RSUs occurred under the Plan:
Number of RSUs
Weighted Average Grant
Date Fair Value
Outstanding at January 1, 2024
18,238,623
$
2.92
Granted
32,358
$
3.84
Distributed
( 4,763,404
)
$
3.64
Forfeited
( 1,500,143
)
$
2.77
Outstanding at March 31, 2024
12,007,434
$
2.65
As of March 31, 2024 , the total remaining unrecognized compensation cost related to RSUs amounted to $ 23.0 million, net of forfeitures, which is expected to be amortized over the weighted-average remaining requisite service periods of 1.9 years.
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Stock Options
During the three months ended March 31, 2024, the following activities involving stock options occurred under the Plan:
Stock Options
Weighted Average Exercise Price
Outstanding at January 1, 2024
17,375,000
$
6.00
Granted
—
$
—
Forfeited
—
$
—
Cancelled/Expired
—
$
—
Outstanding at March 31, 2024
17,375,000
$
6.00
As of March 31, 2024 , the Company had approximately $ 5.1 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 2.7 years. The weighted average remaining contractual term of all options outstanding as of March 31, 2024 was 8.7 years. The intrinsic value of all outstanding options as of March 31, 2024 was $ 10.6 million based on the market price of the Company's common stock of $ 4.33 per share. There were no options exercised during the three months ended March 31, 2024 and 2023 .
11. Earnings Per Share
The Company calculates earnings per share using a dual presentation of basic and diluted earnings per share. Basic earnings per share is calculated by dividing net income attributable to stockholders of the Company by the weighted-average shares of common stock outstanding without the consideration for potential dilutive shares of common stock. Diluted earnings per share represents basic earnings per share adjusted to include the potentially dilutive effect of performance stock units, restricted stock units, public and private placement warrants, the employee stock purchase plan and stock options. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding and the potential dilutive shares of common stock for the period determined using the treasury stock method. During periods of net loss, diluted loss per share is equal to basic loss per share because the antidilutive effect of potential common shares is disregarded.
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The following is a reconciliation of basic and diluted net earnings per common share:
Three Months Ended March 31,
(in thousands, except share and earnings per share data)
2024
2023
Basic earnings per share computation:
Numerator:
Net loss from continuing operations
$
( 49,107
)
$
( 34,370
)
Net income (loss) from discontinued operations, net of tax
$
45,992
$
( 13,308
)
Less: net income (loss) from discontinued operations attributable to noncontrolling interest
2,192
( 91
)
Net income (loss) from discontinued operations attributable to stockholders of Advantage Solutions Inc.
$
43,800
$
( 13,217
)
Denominator:
Weighted average common shares - basic
321,458,155
321,135,117
Basic net loss per common share from continuing operations
$
( 0.15
)
$
( 0.11
)
Basic net income (loss) per common share from discontinued operations
$
0.14
$
( 0.04
)
Basic net loss per common share attributable to stockholders of Advantage Solutions Inc.
$
( 0.02
)
$
( 0.15
)
Basic earnings (loss) per common share from discontinued operations attributable to stockholders of Advantage Solutions Inc.
$
0.14
$
( 0.04
)
Diluted earnings per share computation:
Numerator:
Net loss from continuing operations
$
( 49,107
)
$
( 34,370
)
Net income (loss) from discontinued operations, net of tax
$
45,992
$
( 13,308
)
Less: net income (loss) from discontinued operations attributable to noncontrolling interest
2,192
( 91
)
Net income (loss) from discontinued operations attributable to stockholders of Advantage Solutions Inc.
$
43,800
$
( 13,217
)
Denominator:
Weighted average common shares outstanding
321,458,155
321,135,117
Performance stock units
—
—
Restricted stock units
—
—
Employee stock purchase plan and stock options
—
—
Weighted average common shares - diluted
321,458,155
321,135,117
Diluted net loss per common share from continuing operations
$
( 0.15
)
$
( 0.11
)
Diluted net income (loss) per common share from discontinued operations
$
0.14
$
( 0.04
)
Diluted net loss per common share attributable to stockholders of Advantage Solutions Inc.
$
( 0.02
)
$
( 0.15
)
Diluted earnings (loss) per common share from discontinued operations attributable to stockholders of Advantage Solutions Inc.
$
0.14
$
( 0.04
)
The Company had 18,578,321 warrants to purchase Class A common stock at $ 11.50 per share outstanding at March 31, 2024 and 2023, 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, 2024 and 2023 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 20.2 million weighted-average shares were outstanding for the three months ended March 31, 2024 , but were not included in the computation of diluted (loss) earnings per common share because the net loss position of the Company made them 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
21
position of the Company made them antidilutive. In addition, PSUs related to 4.8 million shares assuming achievement of the Target Goals were outstanding for the three months ended March 31, 2023, but were not included in the computation of diluted loss per common share attributable, as the performance targets were not yet met during the three months ended March 31, 2023 .
12. Subsequent Events
In April 2024, the Company granted 5.3 million RSUs, 1.1 million PSUs and 3.0 million of stock options, with an estimated aggregate grant date fair value of $ 23.2 million, $ 4.6 million and $ 5.5 million, respectively.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.