What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-09 · 258 added, 229 removed, 433 unchanged (53% of the section changed)

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In addition to the business units already disposed of, there are certain other business units which are part of the overall reorganization plan that have not yet been disposed of or abandoned.

We have determined that the other business units not yet disposed of met the held for sale and discontinued operations accounting criteria as of June 30, 2024 as their dispositions represent a strategic shift that has had a major effect on our operations and financial results.

We have determined that the business units disposed of met the discontinued operations accounting criteria as their dispositions represent a strategic shift that has had a major effect on our operations and financial results.

Refer to Note 2— Held for Sale, Divestitures and Discontinued Operations.

We continue to evaluate opportunities to further simplify our operations so we can focus more resources on our core businesses.

Through our Branded Services segment, which generated approximately 37.5% and 46.4% of our revenues in the six months ended June 30, 2024 and 2023, respectively, we provide services to branded consumer goods manufacturers through three main categories:

Through our Branded Services segment, which generated approximately 36.8% and 45.6% of our revenues in the nine months ended September 30, 2024 and 2023, respectively, we provide services to branded consumer goods manufacturers through three main categories:

brokerage, branded merchandising and omni-commerce marketing services.

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Additionally, we lead with insights to execute branded merchandising strategies for branded consumer goods manufacturers related to merchandising in-store and online to drive product sales.

Our omni-commerce marketing services primarily relate to digital and field marketing services, including shopper marketing,

targeted advertising, interactive design and development, inventory management, application development and content management solutions.

Through our Experiential Services segment, which generated approximately 36.1% and 28.7% of our revenues in the six months ended June 30, 2024 and 2023, respectively, we help brands and retailers reach consumers and convert shoppers into buyers through in-store and online sampling and demonstrations.

Our omni-commerce marketing services primarily relate to digital and field marketing services,

including shopper marketing, targeted advertising, interactive design and development, inventory management, application development and content management solutions.

Through our Experiential Services segment, which generated approximately 36.3% and 29.3% of our revenues in the nine months ended September 30, 2024 and 2023, respectively, we help brands and retailers reach consumers and convert shoppers into buyers through in-store and online sampling and demonstrations.

We manage highly customized, large-scale sampling programs for leading brands and retailers.

We also manage, organize and execute special events for brands and retailers, including large-scale meetings, mobile tours, summits and festivals.

Through our Retailer Services segment, which generated approximately 26.3% and 24.9% of our revenues in the six months ended June 30, 2024 and 2023, respectively, we provide end-to-end advisory, retailer merchandising and agency services to retailers.

Through our Retailer Services segment, which generated approximately 27.0% and 25.1% of our revenues in the nine months ended September 30, 2024 and 2023, respectively, we provide end-to-end advisory, retailer merchandising and agency services to retailers.

Advisory services primarily consist of consulting services related to private brand development, including coordination related to the sourcing, manufacturing, branding and distribution of private label products to the end retailer.

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Agency services primarily consist of providing marketing strategies within retail locations, including retail media networks, and analyzing shopper behavior to offer planning, execution and measurement of insight-based, retailer-specific promotions that target retailers' specific shopper base to drive product sales.

Our financial performance for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 includes:

Our financial performance for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 includes:

• Revenues decreased by $80.4 million, or 7.9%, to $939.3 million;

• Operating loss from continuing operations increased by $106.5 million to $91.3 million;

• Operating income from continuing operations decreased by $9.9 million to an operating loss of $3.2 million;

• Net loss from continuing operations increased by $7.7 million to $37.3 million;

• Adjusted Net Income decreased by $1.1 million, or 4.4%, to $23.7 million;

• Adjusted EBITDA from Continuing Operations remained flat at $89.9 million.

Our financial performance for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 includes:

• Adjusted EBITDA from Continuing Operations increased by $7.6 million or 8.1%, to $100.9 million.

Our financial performance for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 includes:

• Revenues decreased by $234.2 million, or 8.1%, to $2,674.0 million;

• Operating loss from continuing operations increased by $140.5 million to $121.2 million;

• Operating income from continuing operations decreased by $150.3 million to an operating loss of $124.4 million;

• Net loss from continuing operations increased by $122.0 million to $200.5 million;

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

Many of our acquisition agreements include contingent consideration arrangements,

which are described below.

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

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

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We also continue to evaluate our service offerings to ensure more focus on our mission of converting shoppers into buyers for consumer goods companies and retailers.

To that end, we have disposed of certain businesses and classified others as held for sale.

To that end, we have disposed of certain businesses.

As part of the sales agreements for certain divestitures, we have agreed to provide certain transitional services as defined within the respective transition services agreements for a period of time after sale.

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In such cases, we consider revenues generated by such a business during the 12 months following its acquisition to be acquired revenues.

For example, if we completed an acquisition on July 1, 2023 for a business that included a contingent consideration arrangement, we would consider revenues from the acquired business from July 1, 2023 to June 30, 2024 to be acquired revenues.

For example, if we completed an acquisition on July 1, 2023 for a business that included a contingent consideration arrangement, we would consider revenues from the acquired business from October 1, 2023 to September 30, 2024 to be acquired revenues.

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

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

For example, if we completed an acquisition on July 1, 2023 for a business that did not include a contingent consideration arrangement, we would consider the amount of revenues from the acquired business from July 1, 2022 to June 30, 2023 to be acquired revenues during the period from July 1, 2023 to June 30, 2024, with any differences from that amount actually generated during the latter period to be organic revenues.

For example, if we completed an acquisition on October 1, 2023 for a business that did not include a contingent consideration arrangement, we would consider the amount of revenues from the acquired business from October 1, 2022 to September 30, 2023 to be acquired revenues during the period from October 1, 2023 to September 30, 2024, with any differences from that amount actually generated during the latter period to be organic revenues.

All revenues generated by our acquired businesses are considered to be organic revenues after the 12-month anniversary of the date of acquisition.

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

For example, if we completed a divestiture on July 1, 2023 for a business, we would consider the amount of revenues from the divested business from July 1, 2022 to June 30, 2023 to be subtracted from acquired revenues during the period from July 1, 2023 to June 30, 2024.

For example, if we completed a divestiture on October 1, 2023 for a business, we would consider the amount of revenues from the divested business from October 1, 2022 to September 30, 2023 to be subtracted from acquired revenues during the period from October 1, 2023 to September 30, 2024.

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

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We also incur expenses operating as a public company, including expenses necessary to comply with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance and reporting obligations pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), as well as higher expenses for general and director and officer insurance, investor relations, and related professional services.

Additionally, included in selling, general, and administrative expenses are costs associated with the changes in fair value of the contingent consideration of acquisitions and other costs related to our internal reorganization activities, acquisition and divestiture transactions.

These transaction-related costs are comprised of fees related to change of equity ownership, professional fees, due diligence and integration or divestitures activities.

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The fair values of the Branded Agencies and Experiential Services reporting units exceeded their respective carrying values by less than 20%.

During the three months ended June 30, 2024, the Company determined a triggering event occurred and an impairment assessment was warranted for the Branded Agencies reporting unit goodwill due to the pending sale of one of the businesses that comprised a substantial portion of the Branded Agencies reporting unit.

As a result, the Company recognized a non-cash goodwill impairment charge of $99.7 million related to the Company's Branded Agencies reporting unit goodwill during the three months ended June 30, 2024, which has been reflected in “Impairment of goodwill” in the Condensed Consolidated Statements of Comprehensive (Loss) Income.

During the second quarter of fiscal year 2024, the Company determined a triggering event occurred and an impairment assessment was warranted for the Branded Agencies reporting unit goodwill due to the pending sale of one of the businesses that comprised a substantial portion of the Branded Agencies reporting unit.

As a result, the Company recognized a non-cash goodwill impairment charge of $99.7 million related to the Company's Branded Agencies reporting unit goodwill during the nine months ended September 30, 2024, which has been reflected in “Impairment of goodwill” in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

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, 2024 and 2023, respectively.

Depreciation expense relates to the property and equipment that we own, which represented less than 1% of our total assets at September 30, 2024 and 2023, respectively.

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

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Our principal uses of cash are operating expenses, working capital requirements, investments in our technology platforms, acquisitions and repayment of debt.

During the six months ended June 30, 2024, we sold five businesses.

Additionally, we classified certain assets and liabilities which are expected to be recovered through a sale transaction rather than through continuing use as held for sale as of June 30, 2024.

During the nine months ended September 30, 2024, we sold five businesses.

Additionally, we classified certain assets and liabilities which are expected to be recovered through a sale transaction rather than through continuing use as held for sale as of September 30, 2024.

We expect to use the divestiture proceeds to invest in our business, reduce debt, create financial flexibility for opportunistic share repurchases or potential future acquisitions.

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divestiture related expenses, (viii) reorganization expenses, (ix) litigation expenses, (x) (gain) loss on divestitures, (xi) amortization of intangible assets, (xii) costs associated with COVID-19, net of benefits received, (xiii) gain on repurchases of Term Loan Facility and Senior Secured Notes debt, (xiv) costs associated with (recovery from) the Take 5 Matter, (xv) other adjustments that management believes are helpful in evaluating our operating performance, and (xvi) related tax adjustments.

divestiture related expenses, (viii) restructuring expenses, (ix) reorganization expenses, (x) litigation expenses, (xi) amortization of intangible assets, (xii) costs associated with COVID-19, net of benefits received, (xiii) gain on repurchases of Term Loan Facility and Senior Secured Notes debt, (xiv) costs associated with (recovery from) the Take 5 Matter, (xv) other adjustments that management believes are helpful in evaluating our operating performance, and (xvi) related tax adjustments.

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

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Adjusted EBITDA from Continuing Operations, Adjusted EBITDA from Discontinued Operations and Adjusted EBITDA by Segment are supplemental non-GAAP financial measures of our operating performance.

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

Adjusted EBITDA by Segment means, with respect to each segment, operating income (loss) from continuing operations before (i) depreciation, (ii) amortization of intangible assets, (iii) impairment of goodwill, (iv) stock-based compensation expense, (v) equity-based compensation of Karman Topco L.P., (vi) fair value adjustments of contingent consideration related to acquisitions, (vii) acquisition and divestiture related expenses, (viii) reorganization expenses, (ix) litigation expenses (recovery), (x) costs associated with COVID-19, net of benefits received, (xi) costs associated with (recovery from) the Take 5 Matter, (xii) EBITDA for economic interests in investments and (xiii) other adjustments that management believes are helpful in evaluating our operating performance, in each case, attributable to such segment.

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

Adjusted EBITDA by Segment means, with respect to each segment, operating income (loss) from continuing operations before (i) depreciation, (ii) amortization of intangible assets, (iii) impairment of goodwill, (iv) stock based compensation expense, (v) equity-based compensation of Karman Topco L.P., (vi) fair value adjustments of contingent consideration related to acquisitions, (vii) acquisition and divestiture related expenses, (viii) restructuring expenses, (ix) reorganization expenses, (x) litigation expenses (recovery), (xi) costs associated with COVID-19, net of benefits received, (xii) costs associated with (recovery from) the Take 5 Matter, (xiii) EBITDA for economic interests in investments and (xiv) other adjustments that management believes are helpful in evaluating our operating performance, in each case, attributable to such segment.

We present Adjusted EBITDA from Continuing Operations, Adjusted EBITDA from Discontinued Operations and Adjusted EBITDA by Segment because they are key operating measures used by us to assess our financial performance.

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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.

Reorganization Charges

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

We recorded severance expenses of $4.5 million and $14.1 million included in “Selling, general, and administrative expenses” in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2024, respectively.

In July 2024, we announced a reorganization plan as part of our continued transformation strategy to improve our cost structure and intend to implement various other efforts to improve operating efficiency.

The reorganization plan was designed to simplify the organization that supports the new segments after the divestitures and related transitions.

Transformation Strategy

In July 2024, we announced a restructuring plan as part of our continued transformation strategy to improve our cost structure and intend to implement various other efforts to improve operating efficiency.

The restructuring plan was designed to simplify the organization that supports the new segments after the divestitures and related transitions.

The overall project is expected to be substantially completed by the end of 2024.

Results of Operations for the Three and Six Months Ended June 30, 2024 and 2023

The following table sets forth items derived from the Company’s consolidated statements of operations for the three and six months ended June 30, 2024 and 2023 in dollars and as a percentage of total revenues.

Three Months Ended June 30,

Six Months Ended June 30,

Reorganization expenses

Beginning in the first quarter of 2023, the Company engaged third-party professional service consultants to assist in identifying and implementing operational efficiencies and cost-saving strategies.

These efforts focused on internal process optimization and workforce alignment to the Company’s cost structure with current business needs.

During the three and nine months ended September 30, 2024, the Company incurred $18.6 million and $74.0 million, respectively, in reorganization expenses related to various internal reorganization activities, including professional fees, lease exit costs, severance, and nonrecurring compensation costs, compared to $21.4 million and $38.3 million during three and nine months ended September 30, 2023.

These amounts were recognized in "Selling, general, and administrative expenses" in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

The reorganization plan was designed to simplify the organization that supports the new segments after the divestitures and related transitions.

Restructuring expenses

In the third quarter of 2024, the Company implemented restructuring plans as a result of the overall reorganization.

During the third quarter of fiscal year 2024, the Company offered a Voluntary Early Retirement Program (“VERP”) to certain eligible U.S.-based associates.

During the three and nine months ended September 30, 2024, the Company recorded $21.4 million of settlement charges and special termination benefits in “Selling, general, and administrative expenses” in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

In connection with our reorganization initiatives, in September 2024, the Company announced a cost savings program to improve operational performance and align cost structures consistent with revenue levels associated with business changes, which includes employee termination benefits associated with a reduction-in-force (“2024 RIF”) and other optimization initiatives expected to be completed in Fiscal 2024.

Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

The following table sets forth items derived from the Company’s consolidated statements of operations for the three and nine months ended September 30, 2024 and 2023 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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Selling, general, and administrative expenses

Impairment of goodwill

Impairment of goodwill and indefinite-lived assets

Depreciation and amortization

Income (loss) from unconsolidated investments

Loss from equity method investments

Total operating expenses

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Loss from continuing operations before income taxes

Benefit from income taxes for continuing operations

Benefit from income taxes from continuing operations

Net loss from continuing operations

net income (loss) from discontinued operations, net of tax

net income from continuing operations attributable to noncontrolling interest

net income (loss) from discontinued operations attributable to noncontrolling interest

Net (loss) income from discontinued operations, net of tax

net (loss) from continuing operations attributable to noncontrolling interest, net of tax

net (loss) from discontinued operations attributable to noncontrolling interest, net of tax

Net loss attributable to stockholders of Advantage Solutions Inc.

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For a discussion of our presentation of Adjusted Net Income and Adjusted EBITDA from Continuing Operations and reconciliations of Net income to Adjusted Net Income and Adjusted EBITDA from Continuing Operations, see “ —Non-GAAP Financial Measures .”

Comparison of the Three Months Ended June 30, 2024 and 2023

Three Months Ended June 30,

Comparison of the Three Months Ended September 30, 2024 and 2023

Three Months Ended September 30,

(amounts in thousands)

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Total revenues

Total revenues decreased by $90.4 million, or 9.4%, during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023.

Total revenues decreased by $80.4 million, or 7.9%, during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.

Excluding $104.8 million revenues from the deconsolidation of our European joint venture, revenues increased 2.4%.

The Branded Services segment revenues decreased $124.9 million during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Excluding $100.6 million revenues from the deconsolidation of our European joint venture, the segment experienced a decrease of $24.3 million in revenues primarily due to an intentional client resignation and softness in our omni-commerce marketing services.

The Experiential Services segment revenues increased $34.3 million during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

The Branded Services segment revenues decreased $119.8 million during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Excluding $104.8 million revenues from the

deconsolidation of our European joint venture, the segment experienced a decrease of $15.0 million in revenues primarily due to an intentional client resignation and a weaker economic environment for our consumer packaged goods clients.

The Experiential Services segment revenues increased $34.4 million during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

The increase in revenues was primarily due to an increase in our events per day volume.

The Retailer Services segment revenues remained relatively unchanged during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

The Retailer Services segment revenues remained relatively unchanged during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Cost of Revenues

Cost of revenues as a percentage of revenues for the three months ended June 30, 2024 was 86.0%, as compared to 87.9% for the three months ended June 30, 2023.

The decrease as a percentage of revenues was largely attributable to the change in the revenue mix of our services.

Cost of revenues as a percentage of revenues for the three months ended September 30, 2024 was 84.6%, as compared to 87.5% for the three months ended September 30, 2023.

The decrease as a percentage of revenues was largely attributable to the change in the revenue mix of our services primarily related to the deconsolidation of our European joint venture, one time litigation expense in the prior year with recovery in the current year and decreased incentive compensation expense.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses as a percentage of revenues for the three months ended June 30, 2024 was 7.2%, compared to 5.0% for the three months ended June 30, 2023.

The increase as a percentage of revenues was primarily due to the $14.5 million increase in costs associated with our internal reorganization activities, largely related to professional fees and severance and continued investment in our support services, including our technology solutions.

Impairment of Goodwill

We recognized a $99.7 million non-cash goodwill impairment charge during the three months ended June 30, 2024.

The impairment charges were due to the pending sale of one of the businesses that comprised a substantial portion of the Branded Agencies reporting unit.

Selling, general, and administrative expenses as a percentage of revenues for the three months ended September 30, 2024 was 10.5%, compared to 6.7% for the three months ended September 30, 2023.

The increase as a percentage of revenues was primarily due to a $21.2 million increase in costs associated with our internal reorganization and restructuring activities, largely related to professional fees and severance and continued investment in our support services, including our technology solutions.

Depreciation and Amortization Expense

Depreciation and amortization expense was $51.3 million for the three months ended June 30, 2024 compared to $52.5 million for the three months ended June 30, 2023.

The decrease is primarily attributable to a decrease in the depreciation and amortization expenses from the deconsolidation of our European joint venture.

Depreciation and amortization expense was $51.9 million for the three months ended September 30, 2024 compared to $52.4 million for the three months ended September 30, 2023.

Operating Income (Loss) from Continuing Operations

Three Months Ended June 30,

Three Months Ended September 30,

(amounts in thousands)

Branded Services

Not Meaningful

Experiential Services

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Total operating (loss) income from continuing operations

In the Branded Services segment, the decrease in operating income during the three months ended June 30, 2024 was primarily due to the goodwill impairment and the decrease in revenue noted above and an increase in costs associated with our internal reorganization activities combined with continued investment in our support services, including our technology solutions.

In the Experiential Services segment, the increase in operating income during the three months ended June 30, 2024 was due to increase in revenues as described above, partially offset by an increase in costs associated with our internal reorganization activities combined with continued investment in our support services, including our technology solutions.

In the Retailer Services segment, the increase in operating income during the three months ended June 30, 2024 was due to improved margins in our services partially offset by an increase in costs associated with our internal reorganization activities combined with continued investment in our support services, including our technology solutions.

In the Branded Services segment, the decrease in operating income during the three months ended September 30, 2024 was primarily due to the decrease in revenue noted above combined with an increase in costs associated with our internal reorganization activities and continued investment in our support services, including our technology solutions.

In the Experiential Services segment, the decrease in operating income during the three months ended September 30, 2024 was due to the increase in revenues as described above, partially offset by an increase in costs associated with our internal reorganization activities and continued investment in our support services, including our technology solutions.

In the Retailer Services segment, the increase in operating income during the three months ended September 30, 2024 was due to improved margins in our services, partially offset by an increase in costs associated with our internal reorganization activities and continued investment in our support services, including our technology solutions.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability was $0.7 million of non-cash gain for the three months ended June 30, 2024 compared to $0.1 million of non-cash expense resulting from a fair value adjustment to warrant liability with respect to the private placement warrants for the three months ended June 30, 2023.

Change in fair value of warrant liability was an immaterial non-cash expense for the three months ended September 30, 2024 compared to $0.6 million of non-cash expense resulting from a fair value adjustment to warrant liability with respect to the private placement warrants for the three months ended September 30, 2023.

Interest Expense, net

Interest expense, net increased by $9.3 million, or 30.6%, to $39.8 million for the three months ended June 30, 2024, from $30.5 million for the three months ended June 30, 2023.

The increase in interest expense was primarily due to changes in the fair value of our derivative instruments during the three months ended June 30, 2024, partially offset by lower debt balance as a result of repurchases of Term Loan Facility and Senior Secured Notes as further described in “ Liquidity and Capital Resources—Description of Credit Facilities—Senior Secured Notes .”

(Benefit from) Provision for Income Taxes

Benefit from income taxes was $17.3 million for the three months ended June 30, 2024 as compared to $2.2 million of benefit from income taxes for the three months ended June 30, 2023.

The fluctuation was primarily attributable to a larger pre-tax loss during the three months ended June 30, 2024 compared to a smaller pre-tax loss during the three months ended June 30, 2023.

Also contributing to the variance was the application of a windfall of $0.4 million of stock based compensation for the three months ended June 30, 2024, as compared to a $0.9 million shortfall for the three months ended June 30, 2023.

Benefit from income taxes from discontinued operations was $2.4 million for the three months ended June 30, 2024, while the income tax provision from discontinued operations was $1.8 million for the three months ended June 30, 2023.

The benefit from income tax for the three months ended June 30, 2024 was impacted primarily by the result of pre-tax income and the sale of divested entities.

Interest expense, net decreased by $3.3 million, or 7.8%, to $39.0 million for the three months ended September 30, 2024, from $42.3 million for the three months ended September 30, 2023.

The decrease in interest expense was primarily due to lower debt balance as a result of repurchases of Term Loan Facility and Senior Secured Notes as further described in “ Liquidity and Capital Resources—Description of Credit Facilities—Senior Secured Notes .”

Benefit from Income Taxes

Benefit from income taxes was $4.9 million for the three months ended September 30, 2024 as compared to $6.6 million of benefit from income taxes for the three months ended September 30, 2023.

The fluctuation was primarily attributable to the application of a shortfall of $0.3 million of stock-based compensation for the three months ended September 30, 2024, as compared to a $1.0 million shortfall for stock-based compensation for the three months ended September 30, 2023 and $2.6 million of tax expense from return to provision adjustments during the three months ended September 30, 2024.

Provision for income taxes from discontinued operations was $29.5 million for the three months ended September 30, 2024, while the income tax provision from discontinued operations was $2.3 million for the three months ended September 30, 2023.

The income tax expense for the three months ended September 30, 2024 and 2023 was impacted primarily by the result of pre-tax income and divested entities.

Net Loss from Continuing Operations

Net loss from continuing operations was $113.0 million for the three months ended June 30, 2024, compared to net loss from continuing operations of $13.0 million for the three months ended June 30, 2023.

The increase in net loss from continuing operations was primarily driven by $99.7 million goodwill impairment.

Net loss from continuing operations was $37.3 million for the three months ended September 30, 2024, compared to net loss from continuing operations of $29.6 million for the three months ended September 30, 2023.

The increase in net loss from continuing operations was primarily driven by a reduction in cost of sales as a percentage of revenue and a $3.3 million decrease in interest expense, partially offset by a $21.2 million increase in costs associated with our internal reorganization and restructuring activities, largely related to professional fees and severance and a $1.7 million decrease in the benefit from income taxes from continuing operations.

Net Income (Loss) from Discontinued Operations

Net income from discontinued operations was $12.2 million for the three months ended June 30, 2024, compared to net income from discontinued operations of $5.2 million for the three months ended June 30, 2023.

Net loss from discontinued operations was $5.5 million for the three months ended September 30, 2024, compared to net income from discontinued operations of $7.1 million for the three months ended September 30, 2023.

Adjusted Net Income

The increase in Adjusted Net Income for the three months ended June 30, 2024 was primarily attributable to increases in selling, general, and administrative expenses and interest expense partially offset by the increase in the benefit from income taxes.

Adjusted Net Income for the three months ended September 30, 2024 remained relatively unchanged from the three months ended September 30, 2023.

For a reconciliation of Adjusted Net Income to Net income, see “ — Non-GAAP Financial Measures.”

Adjusted EBITDA from Continuing Operations and Adjusted EBITDA by Segment

Three Months Ended June 30,

Three Months Ended September 30,

(amounts in thousands)

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Total Adjusted EBITDA from Continuing Operations

Adjusted EBITDA from Continuing Operations remained relatively unchanged for the three months ended June 30, 2024 from the three months ended June 30, 2023.

In the Branded Services segment, the decrease was primarily attributable to the decline in revenues as described above.

In the Retailer Services segment, the increase was primarily attributable to increase in margins driven by price.

Adjusted EBITDA from Continuing Operations was $100.9 million for the three months ended September 30, 2024, compared to $93.3 million for the three months ended September 30, 2023.

The increase in Adjusted EBITDA was primarily attributable to an increase in the Experiential Services segment.

In the Branded Services segment, the decrease was primarily attributable to the decline in revenues offset by the decline in cost of revenues as described above.

In the Experiential Services segment, the increase was driven largely by the growth in revenues from the in-store sampling and demonstration services as described above offset by continued investment in our support services including our technology solutions.

In the Retailer Services segment, the increase was primarily attributable to increase in margins driven by price.

For a reconciliation of Adjusted EBITDA from Continuing Operations to Net income, see “—Non-GAAP Financial Measures.”

Comparison of the Six Months Ended June 30, 2024 and 2023

Six Months Ended June 30,

Comparison of the Nine Months Ended September 30, 2024 and 2023

Nine Months Ended September 30,

(amounts in thousands)

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Total revenues

Total revenues decreased by $153.7 million, or 8.1%, during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023.

Total revenues decreased by $234.2 million, or 8.1%, during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.

Excluding revenues from the deconsolidation of our European joint venture, revenues increased 2.2%.

The Branded Services segment revenues decreased by $224.6 million during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Excluding $194.0 million revenues from the deconsolidation of our European joint venture, the segment experienced a decrease of $30.6 million in revenues primarily due to an intentional client resignation.

The Experiential Services segment revenues increased by $84.5 million during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

The Branded Services segment revenues decreased by $344.4 million during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Excluding $298.8 million revenues from the deconsolidation of our European joint venture, the segment experienced a decrease of $45.6 million in revenues primarily due to an intentional client resignation and a weaker economic environment for our consumer package goods clients.

The Experiential Services segment revenues increased by $118.9 million during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

The increase in revenues was primarily due to an increase in our events per day volume.

The Retailer Services segment revenues decreased by $13.7 million during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

The decrease in revenues was primarily due to a decrease in merchandising projects that were completed in the first quarter of the prior year, partially offset by an increase in our agency services and price realization.

The Retailer Services segment revenues remained relatively unchanged during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

Cost of Revenues

Cost of revenues as a percentage of revenues for the six months ended June 30, 2024 was 86.7%, as compared to 87.9% for the six months ended June 30, 2023, which stayed relatively consistent.

Cost of revenues as a percentage of revenues for the nine months ended September 30, 2024 was 85.9%, as compared to 87.8% for the nine months ended September 30, 2023.

The decrease as a percentage of revenues was largely attributable to the change in the revenue mix of our services primarily the related to the deconsolidation of our European joint venture, one time litigation expense in the prior year with recovery in the current year and decreased incentive compensation expense.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses as a percentage of revenues for the six months ended June 30, 2024 was 8.8%, compared to 5.5% for the six months ended June 30, 2023.

Selling, general, and administrative expenses as a percentage of revenues for the nine months ended September 30, 2024 was 9.4%, compared to 5.9% for the nine months ended September 30, 2023.

The increase as a percentage of revenues was primarily due to a $57.4 million increase in costs associated with our internal reorganization activities, largely related to professional fees and severance and the continued investment in our support services including our technology solutions.

Impairment of Goodwill

We recognized a $99.7 million non-cash goodwill impairment charge during the six months ended June 30, 2024.

We recognized a $99.7 million non-cash goodwill impairment charge during the nine months ended September 30, 2024.

The impairment charges were due to the pending sale of one of the businesses that comprised a substantial portion of the Branded Agencies reporting unit.

Depreciation and Amortization Expense

Depreciation and amortization expense was $101.1 million for the six months ended June 30, 2024 compared to $105.0 million for the six months ended June 30, 2023.

Depreciation and amortization expense was $152.9 million for the nine months ended September 30, 2024 compared to $157.4 million for the nine months ended September 30, 2023.

The decrease is largely attributable to a decrease in the depreciation and amortization from the deconsolidation of our European joint venture.

Operating Income (Loss) from Continuing Operations

Six Months Ended June 30,

Nine Months Ended September 30,

(amounts in thousands)

Branded Services

Not Meaningful

Experiential Services

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Total operating (loss) income from continuing operations

In the Branded Services segment, the decrease in operating income during the six months ended June 30, 2024 was primarily due to the goodwill impairment and the decrease in revenue noted above and an increase in costs associated with our internal reorganization activities combined with continued investment in our support services including our technology solutions.

In the Experiential Services segment, the increase in operating income during the six months ended June 30, 2024 was due to the increase in revenues as described above, partially offset by an increase in costs associated with our internal reorganization activities combined with continued investment in our support services including our technology solutions.

In the Retailer Services segment, the decrease in operating income during the six months ended June 30, 2024 was due to an increase in costs associated with our internal reorganization activities combined with continued investment in our support services including our technology solutions, partially offset by improved margins in our services.

In the Branded Services segment, the decrease in operating income during the nine months ended September 30, 2024 was primarily due to the goodwill impairment and the decrease in revenue noted above and an increase in costs associated with our internal reorganization activities combined with continued investment in our support services including our technology solutions.

In the Experiential Services segment, the increase in operating income during the nine months ended September 30, 2024 was due to the increase in revenues as described above, partially offset by an increase in costs associated with our internal reorganization activities combined with continued investment in our support services including our technology solutions.

In the Retailer Services segment, the increase in operating income during the nine months ended September 30, 2024 was due to improved margins in our services partially offset by an increase in costs associated with our internal reorganization activities and continued investment in our support services including our technology solutions.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability was $0.4 million of non-cash gain for the six months ended June 30, 2024, whereas the six months ended June 30, 2023 did not have a non-cash gain or loss.

Change in fair value of warrant liability was $0.4 million of non-cash gain for the nine months ended September 30, 2024, whereas the nine months ended September 30, 2023 had a non-cash loss of $0.6 million.

Interest Expense, net

Interest expense, net decreased by $2.1 million, or 2.7%, to $75.5 million for the six months ended June 30, 2024, from $77.6 million for the six months ended June 30, 2023.

The decrease in interest expense was primarily due to lower debt balances as a result of repurchases of Term Loan Facility and Senior Secured Notes as further described in “ Liquidity and Capital Resources—Description of Credit Facilities—Senior Secured Notes ”, partially offset by changes in the fair value of our derivative instruments during the six months ended June 30, 2024.

(Benefit from) Provision for Income Taxes

Benefit from income taxes was $33.2 million for the six months ended June 30, 2024 as compared to $9.4 million of benefit from income taxes for the six months ended June 30, 2023.

The fluctuation was primarily attributable to a larger pre-tax loss, the application of the windfall of $1.1 million of stock based compensation as compared to a $3.1 million shortfall in the prior year, and the release of the valuation allowance of $1.1 million that was determined not to be necessary for the six months ended June 30, 2024.

Income tax expense from discontinued operations was $11.9 million for the six months ended June 30, 2024, while the income tax expense from discontinued operations was $1.3 million for the six months ended June 30, 2023.

The income tax expense for the six months ended June 30, 2024 was impacted primarily by the sale of divested entities.

The income tax benefit for the six months ended June 30, 2023 was primarily the result of pre-tax loss.

Interest expense, net decreased by $5.4 million, or 4.5%, to $114.5million for the nine months ended September 30, 2024, from $119.9 million for the nine months ended September 30, 2023.

Benefit from Income Taxes

Benefit from income taxes was $38.0 million for the nine months ended September 30, 2024 as compared to $16.0 million of benefit from income taxes for the nine months ended September 30, 2023.

The fluctuation was primarily attributable to a larger pre-tax loss during the nine months ended September 30, 2024 compared to a smaller pre-tax loss during the nine months ended September 30, 2023 and $2.6 million of tax expense from return to provision adjustments during the nine months ended September 30, 2024.

Also contributing to the variance was the application of the windfall of $0.8 million of stock-based compensation for the nine months ended September 30, 2024, as compared to a $4.1

million shortfall for stock-based compensation for the nine months ended September 30, 2023 and the release of the valuation allowance of $1.1 million that was determined not to be necessary for the nine months ended September 30, 2024.

Provision for income taxes from discontinued operations was $41.4 million for the nine months ended September 30, 2024, while the income tax provision from discontinued operations was $3.6 million for the nine months ended September 30, 2023.

The income tax expense for the nine months ended September 30, 2024 and 2023 was impacted primarily by the result of pre-tax income and divested entities.

Net Loss from Continuing Operations

Net loss from continuing operations was $163.1 million for the six months ended June 30, 2024, compared to net loss from continuing operations of $48.9 million for the six months ended June 30, 2023.

Net loss from continuing operations was $200.5 million for the nine months ended September 30, 2024, compared to net loss from continuing operations of $78.5 million for the nine months ended September 30, 2023.

The increase in net loss from continuing operations was primarily driven by goodwill impairment recorded in 2024.

Net Income (Loss) from Discontinued Operations

Net income from discontinued operations was $59.2 million for the six months ended June 30, 2024, compared to net loss from discontinued operations of $6.6 million for the six months ended June 30, 2023.

The increase in net income from discontinued operations was primarily driven by the $70.2 million gain on divestitures for the six months ended June 30, 2024.

Net income from discontinued operations was $53.7 million for the nine months ended September 30, 2024, compared to net loss from discontinued operations of $0.4 million for the nine months ended September 30, 2023.

The increase in net income from discontinued operations was primarily driven by the $95.3 million gain on divestitures for the nine months ended September 30, 2024.

Adjusted Net Income

The decrease in Adjusted Net Income for the six months ended June 30, 2024 was primarily attributable to an increase in selling, general and administrative expenses, partially offset by an increase in the benefit from income taxes.

The decrease in Adjusted Net Income for the nine months ended September 30, 2024 was primarily attributable to increases in selling, general, and administrative expenses, partially offset by an increase in the benefit from income taxes.

For a reconciliation of Adjusted Net Income to Net income, see “ — Non-GAAP Financial Measures.”

Adjusted EBITDA from Continuing Operations and Adjusted EBITDA by Segment

Six Months Ended June 30,

Nine Months Ended September 30,

(amounts in thousands)

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Total Adjusted EBITDA from Continuing Operations

Adjusted EBITDA from Continuing Operations decreased by $11.6 million, or 6.7%, to $160.5 million for the six months ended June 30, 2024, from $172.1 million for the six months ended June 30, 2023.

Adjusted EBITDA from Continuing Operations decreased by $3.9 million, or 1.5%, to $261.5 million for the nine months ended September 30, 2024, from $265.4 million for the nine months ended September 30, 2023.

In the Branded Services segment, the decrease was primarily attributable to the decline in revenues as described above.

In the Retailer Services

segment, Adjust EBITDA was relatively unchanged.

In the Experiential Services segment, the increase was driven largely by the growth in revenues from the in-store sampling and demonstration services as described above.

In the Retailer Services segment, Adjusted EBITDA was relatively unchanged.

All three of our segments experienced increased costs from continued investment in our support services including our technology solutions.

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Adjusted Net Income is a non-GAAP financial measure.

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

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

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

Adjusted Net Income

A reconciliation of Adjusted Net Income to Net loss 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)

Net loss from continuing operations

Net (loss) income attributable to noncontrolling interests

Impairment of goodwill

Equity-based compensation of Karman Topco L.P (a)

Change in fair value of warrant liability

net income attributable to noncontrolling interests

Impairment of goodwill and indefinite-lived assets

Equity-based compensation of Karman Topco L.P.

Changes in fair value of warrant liability

Fair value adjustments related to contingent consideration related to acquisitions (b)

Acquisition and divestiture related expenses (c)

Reorganization expenses (d)

Litigation (recovery) expenses (e)

Amortization of intangible assets (j)

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

Gain on repurchases of Term Loan Facility and Senior Secured Notes (k)

Costs associated with the Take 5 Matter, net of (recoveries) (g)

Tax adjustments related to non-GAAP adjustments (l)

Restructuring expenses (d)

Reorganization expenses (e)

Litigation expenses (recovery) (f)

Amortization of intangible assets (g)

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

Gain on repurchases of Term Loan Facility and Senior Secured Notes debt (i)

Costs associated with the Take 5 Matter, net of (recoveries) (j)

Tax adjustments related to non-GAAP adjustments (k)

Adjusted Net Income

__________________

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

Represents adjustments to the estimated fair value of our contingent consideration liabilities related to our acquisitions, for the applicable periods.

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

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

Restructuring expenses include costs associated with the Voluntary Early Retirement Program (“VERP”) and employee termination benefits associated with a reduction-in-force ("2024 RIF") and other optimization initiatives.

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

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

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

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

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

Represents a gain associated with the repurchases of Term Loan Facility and Senior Secured Notes, net of deferred financing fees related to repricing of Term Loan Facility.

For additional information, refer to Note 4—Debt to our unaudited condensed financial statements for the three and nine months ended September 30, 2024 and 2023.

Represents cash receipts from an insurance policy for claims related to the Take 5 Matter and costs associated with investigation and remediation activities related to the Take 5 Matter, primarily professional fees and other related costs.

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

Adjusted EBITDA

Adjusted EBITDA from Continuing Operations, Adjusted EBITDA from Discontinued Operations and Adjusted EBITDA by Segment are supplemental non-GAAP financial measures of our operating performance.

that management believes are helpful in evaluating our operating performance, in each case, attributable to such segment.

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

Adjusted EBITDA by Segment means, with respect to each segment, operating income (loss) from continuing operations before (i) depreciation, (ii) amortization of intangible assets, (iii) impairment of goodwill, (iv) stock-based compensation expense, (v) equity-based compensation of Karman Topco L.P., (vi) fair value adjustments of contingent consideration related to acquisitions, (vii) acquisition and divestiture related expenses, (viii) restructuring expenses, (ix) reorganization expenses, (x) litigation expenses (recovery), (xi) costs associated with COVID-19, net of benefits received, (xii) costs associated with (recovery from) the Take 5 Matter, (xiii) EBITDA for economic interests in investments and (xiv) other adjustments that management believes are helpful in evaluating our operating performance, in each case, attributable to such segment.

Unallocated shared costs associated with discontinued operations from certain shared administrative functions, through the close of the discontinued operations;

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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.

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.

5 unchanged sentences

Continuing Operations

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

1 unchanged sentence

Interest expense, net

Benefit from income taxes

Benefit from income taxes from continuing operations

Depreciation and amortization

Impairment of goodwill

Change in fair value of warrant liability

Stock-based compensation expense (h)

Impairment of goodwill and indefinite-lived assets

Changes in fair value of warrant liability

Stock-based compensation expense (a)

Equity-based compensation of Karman Topco L.P.

Fair value adjustments related to contingent consideration related to acquisitions (b)

Acquisition and divestiture related expenses (c)

Reorganization expenses (d)

Litigation (recovery) expenses (e)

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

Costs associated with the Take 5 Matter, net of (recoveries) (g)

EBITDA for economic interests in investments (i)

Fair value adjustments related to contingent consideration related to acquisitions (c)

Acquisition and divestiture related expenses (d)

Restructuring expenses (e)

Reorganization expenses (f)

Litigation (recovery) expenses (g)

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

Costs associated with the Take 5 Matter, net of (recoveries) (i)

EBITDA for economic interests in investments (j)

Adjusted EBITDA from Continuing Operations

1 unchanged sentence

Discontinued Operations

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Net income (loss) from discontinued operations

Net (loss) income from discontinued operations, net of tax

Interest expense, net

Benefit from income taxes

Provision for income taxes from discontinued operations

Depreciation and amortization

Fair value adjustments related to contingent consideration related to acquisitions (b)

Acquisition and divestiture related expenses (c)

(Gain) loss on divestitures

Reorganization expenses (d)

Stock-based compensation expense (h)

EBITDA for economic interests in investments (i)

(Gain) loss on divestitures (k)

Stock-based compensation expense (a)

Fair value adjustments related to contingent consideration related to acquisitions (c)

Acquisition and divestiture related expenses (d)

Reorganization expenses (f)

EBITDA for economic interests in investments (j)

Adjusted EBITDA from Discontinued Operations

1 unchanged sentence

Branded Services segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Operating (loss) income from continuing operations

Operating (loss) income

Depreciation and amortization

Impairment of goodwill

Stock-based compensation expense (h)

Equity-based compensation of Karman Topco L.P (a)

Fair value adjustments related to contingent consideration related to acquisitions (b)

Acquisition and divestiture related expenses (c)

Reorganization expenses (d)

Litigation (recovery) expenses (e)

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

Costs associated with the Take 5 Matter, net of (recoveries) (g)

EBITDA for economic interests in investments (i)

Stock-based compensation expense (a)

Equity-based compensation of Karman Topco L.P.

Fair value adjustments related to contingent consideration related to acquisitions (c)

Acquisition and divestiture related expenses (d)

Restructuring expenses (e)

Reorganization expenses (f)

Litigation expenses (g)

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

Costs associated with the Take 5 Matter, net of (recoveries) (i)

EBITDA for economic interests in investments (j)

Branded Services segment Adjusted EBITDA

Experiential Services segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Operating income from continuing operations

Operating income

Depreciation and amortization

Stock-based compensation expense (h)

Equity-based compensation of Karman Topco L.P (a)

Fair value adjustments related to contingent consideration related to acquisitions (b)

Acquisition and divestiture related expenses (c)

Reorganization expenses (d)

Litigation (recovery) expenses (e)

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

Stock-based compensation expense (a)

Equity-based compensation of Karman Topco L.P.

Fair value adjustments related to contingent consideration related to acquisitions (c)

Acquisition and divestiture related expenses (d)

Restructuring expenses (e)

Reorganization expenses (f)

Litigation expenses (g)

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

Experiential Services segment Adjusted EBITDA

Retailer Services segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Operating income from continuing operations

Operating income

Depreciation and amortization

Stock-based compensation expense (h)

Equity-based compensation of Karman Topco L.P (a)

Fair value adjustments related to contingent consideration related to acquisitions (b)

Acquisition and divestiture related expenses (c)

Reorganization expenses (d)

Litigation (recovery) expenses (e)

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

EBITDA for economic interests in investments (i)

Stock-based compensation expense (a)

Equity-based compensation of Karman Topco L.P.

Fair value adjustments related to contingent consideration related to acquisitions (c)

Acquisition and divestiture related expenses (d)

Restructuring expenses (e)

Reorganization expenses (f)

Litigation (recovery) expenses (g)

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

EBITDA for economic interests in investments (j)

Retailer Services segment Adjusted EBITDA

Represents non-cash compensation expense related to performance stock units, restricted stock units, and stock options under the 2020 Advantage Solutions Incentive Award Plan and the Advantage Solutions 2020 Employee Stock Purchase Plan.

1 unchanged sentence

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

3 unchanged sentences

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

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

Represents a gain associated with the repurchases of Term Loan Facility and Senior Secured Notes, net of deferred financing fees related to repricing of Term Loan Facility.

For additional information, refer to Note 4— Debt to our unaudited condensed financial statements for the six months ended June 30, 2024 and 2023.

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

Liquidity and Capital Resources

1 unchanged sentence

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

Principal uses of cash used in investing activities includes our enterprise resource planning initiative, which includes upgrading our information system platform.

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

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

5 unchanged sentences

Net Cash Provided by Operating Activities

Net cash provided by operating activities from continuing operations during the six months ended June 30, 2024 consisted of net loss of $212.0 million adjusted for certain non-cash items, including impairment of goodwill of $99.7 million, gain on repurchases of Senior Secured Notes, net of cost of extinguishments, of $4.0 million, depreciation and amortization of $101.1 million, stock-based compensation of $16.1 million and effects of changes in working capital.

Net cash provided by operating activities from continuing operations during the six months ended June 30, 2023 consisted of net loss of $48.9 million adjusted for certain non-cash items, including depreciation and amortization of $105.0 million, stock-based compensation of $20.4 million and effects of changes in working capital.

The decrease in cash provided by operating activities from continuing operations during the six months ended June 30, 2024 relative to the same period in 2023 was primarily due to a larger decrease in accounts receivable during the six months ended June 30, 2023 as compared to the six months ended June 30, 2024.

Net cash provided by operating activities from continuing operations during the nine months ended September 30, 2024 consisted of net loss of $200.5 million adjusted for certain non-cash items, including impairment of goodwill of $99.7 million, gain on repurchases of Senior Secured Notes and Term Loan Facility, net of cost of extinguishments, of $9.1 million, depreciation and amortization of $152.9 million, stock-based compensation of $24.2 million and effects of changes in working capital.

Net cash provided by operating activities from continuing operations during the nine months ended September 30, 2023 consisted of net loss of $78.5 million adjusted for certain non-cash items, including depreciation and amortization of $157.4 million, stock-based compensation of $29.4 million and effects of changes in working capital.

The decrease in cash provided by operating activities from continuing operations during the nine months ended September 30, 2024 relative to the same period in 2023 was primarily due to an increase in one-time transformation costs during the nine months ended September 30, 2024.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities from continuing operations during the six months ended June 30, 2024 primarily consisted of the proceeds from divestitures of $146.8 million, partially offset by the purchase of property and equipment of $25.1 million and the purchase of investments in unconsolidated affiliates of $10.9 million.

Net cash used in investing activities during the six months ended June 30, 2023 primarily consisted of the purchase of property and equipment of $14.0 million and proceeds from the divestitures of $12.8 million.

Net cash provided by investing activities from continuing operations during the nine months ended September 30, 2024 primarily consisted of the proceeds from divestitures of $275.7 million, partially offset by the purchase of property and equipment of $50.4 million, primarily related to our ERP initiative, which includes upgrading our information system platform, and the purchase of investments in unconsolidated affiliates of $13.9 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 $24.4 million and proceeds from divestitures of $12.8 million.

Net Cash Used in Financing Activities

Cash flows used in financing activities from continuing operations during the six months ended June 30, 2024 were primarily related to repurchases of Senior Secured Notes of $71.7 million, repayment of principal on our Term Loan Facility of $6.6 million, payments of contingent consideration of $7.6 million, payments for taxes related to net share settlement of $11.1 million and payments related to the share repurchase program of $20.8 million.

Cash flows used in financing activities during the six months ended June 30, 2023 were primarily related to payments of contingent consideration and holdback payments of $3.5 million, repayment of principal on our Term Loan Facility of $6.7 million, repurchases of the Term Loan Facility of $49.4 million, payments for taxes related to net share settlement of $1.3 million, partially offset by $1.2 million related to proceeds from the issuance of Class A common stock.

Cash flows used in financing activities from continuing operations during the nine months ended September 30, 2024 were primarily related to repurchases of Senior Secured Notes and Term Loan Facility of $147.1 million, repayment of principal on our Term Loan Facility of $9.9 million\, payments for taxes related to net share settlement of $11.7 million, payments of contingent consideration of $5.7 million and payments related to the share repurchase program of $34.1 million.

Cash flows used in financing activities during the nine months ended September 30, 2023 were primarily related to repurchases of the Term Loan Facility of $104.0 million, repayment of principal on our Term Loan Facility of $10.2 million, payments of contingent consideration and holdback payments of $1.9 million, payments for taxes related to net share settlement of $1.3 million, partially offset by $2.2 million related to proceeds from the issuance of Class A common stock.

Description of Credit Facilities

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Advantage Sales & Marketing Inc.

to borrowing base capacity (as may be amended from time to time, the “Revolving Credit Facility”) and (ii) a secured first lien term loan credit facility in an aggregate principal amount of $1.1 billion (as may be amended from time to time, the “Term Loan Facility” and together with the Revolving Credit Facility, the “Senior Secured Credit Facilities”).

(the “Borrower”), our indirect wholly-owned subsidiary of the Company, has (i) a senior secured asset-based revolving credit facility in an aggregate principal amount of up to $500.0 million, subject to borrowing base capacity (as may be amended from time to time, the “Revolving Credit Facility”) and (ii) a secured first lien term loan credit facility in an aggregate principal amount of $1.1 billion (as may be amended from time to time, the “Term Loan Facility” and together with the Revolving Credit Facility, the “Senior Secured Credit Facilities”).

Revolving Credit Facility

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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, 2024, 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, 2024, 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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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.

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 $25.0 million and 10% of the lesser of the borrowing base and

maximum borrowing capacity.

Such fixed charge coverage ratio will be tested at the end of each quarter until such time as excess availability exceeds the level set forth above.

The Revolving Credit Facility provides that, upon the occurrence of certain events of default, the Borrower’s obligations thereunder may be accelerated and the lending commitments terminated.

Such events of default include

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

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

Term Loan Facility

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

dollars in an aggregate principal amount of $1.1 billion as of June 30, 2024.

dollars in an aggregate principal amount of $1.1 billion as of September 30, 2024.

Borrowings under the Term Loan Facility amortize in equal quarterly installments in an amount equal to 1.00% per annum of the original issued amount of $1.3 billion principal amount.

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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.

The Company voluntarily repurchased an aggregate of $29.8 million principal amount of its Term Loan Facility during the nine months ended September 30, 2024.

The Company recognized a gain on the repurchases of $0.5 million for the nine months ended September 30, 2024 as a component of “Interest expense, net” in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

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

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The Notes were resold to certain non-U.S.

persons pursuant to Regulation S under the Securities Act of 1933, as amended (the “Securities Act”), and to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act at a purchase price equal to 100% of their principal amount.

persons pursuant to Regulation S under the Securities Act of 1933, as amended (the “Securities

Act”), and to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act at a purchase price equal to 100% of their principal amount.

The terms of the Notes are governed by an Indenture, dated as of October 28, 2020 (the “Indenture”), among Finco, the Issuer, the guarantors named therein (the “Notes Guarantors”) and Wilmington Trust, National Association, as trustee and collateral agent.

The Borrower may voluntarily prepay loans or reduce commitments under the Senior Secured Notes, in whole or in part, subject to minimum amounts, with prior notice but without premium or penalty.

The Company voluntarily repurchased an aggregate of $77.5 million principal amount of its Senior Secured Notes during the six months ended June 30, 2024.

The Company recognized a gain on the repurchase of $5.1 million for the six months ended June 30,

2024, as a component of “Interest expense, net” in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

There were no repurchases of Senior Secured Notes during the six months ended June 30, 2023.

The Company voluntarily repurchased an aggregate of $127.9 million principal amount of its Senior Secured Notes during the nine months ended September 30, 2024.

The Company recognized a gain on the repurchase of $8.6 million for the nine months ended September 30, 2024, as a component of “Interest expense, net” in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

There were no repurchases of Senior Secured Notes during the nine months ended September 30, 2023.

Interest and maturity

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incur additional indebtedness or guarantee indebtedness;

pay dividends or make other distributions in respect of, or repurchase or redeem, the Issuer’s or a parent entity’s capital stock;

pay dividends or make other distributions in respect

of, or repurchase or redeem, the Issuer’s or a parent entity’s capital stock;

prepay, redeem or repurchase certain indebtedness;

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Cash and Cash Equivalents Held Outside the United States

As of June 30, 2024, and December 31, 2023, $56.9 million and $43.8 million, respectively, of our cash and cash equivalents were held by foreign subsidiaries.

As of June 30, 2024, and December 31, 2023, $23.5 million and $30.4 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 $0.5 million of withholding tax as of June 30, 2024 for unremitted earnings in Canada with respect to which we do not have an indefinite reinvestment assertion.

As of September 30, 2024, and December 31, 2023, $64.7 million and $43.8 million, respectively, of our cash and cash equivalents were held by foreign subsidiaries.

As of September 30, 2024, and December 31, 2023, $23.7 million and $30.4 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 $0.5 million of withholding tax as of September 30, 2024 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, 2024, to be indefinitely reinvested and, accordingly, no provision has been made for taxes in excess of the $0.5 million noted above.

We consider the majority of the undistributed earnings of our foreign subsidiaries, as of September 30, 2024, to be indefinitely reinvested and, accordingly, no provision has been made for taxes in excess of the $0.5 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 2023 Annual Report and did not materially change during the six months ended June 30, 2024 except as included below.

Our critical accounting policies and estimates are included in our 2023 Annual Report and did not materially change during the nine months ended September 30, 2024 except as included below.

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

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The fair values of the Branded Agencies and Experiential Services reporting units exceeded their respective carrying values by less than 20%.

Notwithstanding the foregoing, during the three months ended June 30, 2024, we determined a triggering event occurred and an impairment assessment was warranted for the Branded Agencies reporting unit goodwill due to the pending sale of one of the businesses that comprised a substantial portion of the assets, liabilities, and prospective cash flows of the Branded Agencies reporting unit.

Notwithstanding the foregoing, during the second quarter of fiscal year 2024, we determined a triggering event occurred and an impairment assessment was warranted for the Branded Agencies reporting unit goodwill due to the pending sale of one of the businesses that comprised a substantial portion of the assets, liabilities, and prospective cash flows of the Branded Agencies reporting unit.

We utilize a combination of income and market approaches to estimate the fair value of our reporting units.

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

As a result of the impairment test performed, we recognized a goodwill impairment charge of $99.7 million related to the Company's Branded Agencies reporting unit goodwill during the three months ended June 30, 2024, which has been reflected in “Impairment of goodwill” in the Condensed Consolidated Statements of Comprehensive (Loss) Income.

As a result of the impairment test performed, we recognized a goodwill impairment charge of $99.7 million related to the Company's Branded Agencies reporting unit goodwill during the second quarter of fiscal year 2024, which has been reflected in “Impairment of goodwill” in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

As a result of this charge, an immaterial amount of goodwill remains in this reporting unit.

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The standard is effective for us beginning in fiscal year 2025, with early adoption permitted.

The new standard is expected to be applied prospectively, but retrospective application is permitted.

The new standard is expected to

be applied prospectively, but retrospective application is permitted.

We are currently evaluating the impact of ASU 2023-09 on the consolidated financial statements and related disclosures.

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Improvements to Reportable Segment Disclosures, which requires entities to disclose incremental segment information on an annual and interim basis, including significant segment expenses and measures of profit or loss that are regularly provided to the CODM.

The standard is effective for us beginning in fiscal year 2024 and interim periods within fiscal year 2025, with early adoption permitted.

We are currently evaluating the impact of ASU 2023-07 on the consolidated financial statements and related disclosures and we expect to adopt the new standard using a retrospective approach.

In March 2024, the 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 our fiscal year reporting beginning October 4, 2025, pending resolution of the stay.

We are currently evaluating the impact of the rules on the consolidated financial statements and related disclosures.

The standard is effective for us beginning in fiscal year 2024 and interim periods within fiscal year 2025.

We are currently evaluating the impact of ASU 2023-07 on the consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis.

The standard is effective for the Company beginning in fiscal year 2026 and interim periods within fiscal year 2027, 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 2024-03 on the consolidated financial statements and related disclosures.

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 2. Management’s Discussion and Analysis