Advantage Solutions Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS ADVANTAGE SOLUTIONS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) September 30, December 31, (in thousands, except share data) 2024 2023 ASSETS Current assets Cash and cash equivalents $ 196,098 $ 120,839 Restricted cash 16,372 16,363 Accounts receivable, net of allowance for expected credit losses of $ 16,532 and $ 29,294 , respectively 667,441 659,499 Prepaid expenses and other current assets 95,286 115,921 Current assets of discontinued operations — 99,412 Total current assets 975,197 1,012,034 Property and equipment, net 90,080 64,708 Goodwill 610,532 710,191 Other intangible assets, net 1,419,000 1,551,828 Investments in unconsolidated affiliates 234,008 210,829 Other assets 62,541 43,543 Other assets of discontinued operations — 186,190 Total assets 3,391,358 3,779,323 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current portion of long-term debt $ 13,250 $ 13,274 Accounts payable 197,898 172,894 Accrued compensation and benefits 117,103 161,447 Other accrued expenses 155,182 144,415 Deferred revenues 29,500 26,598 Current liabilities of discontinued operations — 22,669 Total current liabilities 512,933 541,297 Long-term debt, net of current portion 1,688,213 1,848,118 Deferred income tax liabilities 187,742 204,136 Other long-term liabilities 69,939 74,555 Other liabilities of discontinued operations — 7,140 Total liabilities 2,458,827 2,675,246 Commitments and contingencies (Note 10) Equity attributable to stockholders of Advantage Solutions Inc. Common stock, $ 0.0001 par value, 3,290,000,000 shares authorized; 320,418,083 and 322,235,261 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively 32 32 Additional paid in capital 3,459,252 3,449,261 Accumulated deficit ( 2,463,568 ) ( 2,314,650 ) Loans to Karman Topco L.P. ( 6,868 ) ( 6,387 ) Accumulated other comprehensive loss ( 3,301 ) ( 3,945 ) Treasury stock, at cost; 12,400,075 and 3,600,075 shares as of September 30, 2024 and December 31, 2023, respectively ( 53,016 ) ( 18,949 ) Total equity attributable to stockholders of Advantage Solutions Inc. 932,531 1,105,362 Nonredeemable noncontrolling interest — ( 1,285 ) Total stockholders' equity 932,531 1,104,077 Total liabilities and stockholders' equity $ 3,391,358 $ 3,779,323 See Notes to the Condensed Consolidated Financial Statements. 3 ADVANTAGE SOLUTIONS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except share and per share data) 2024 2023 2024 2023 Revenues $ 939,270 $ 1,019,706 $ 2,674,039 $ 2,908,177 Cost of revenues (exclusive of depreciation and amortization shown separately below) 794,958 892,347 2,298,139 2,552,642 Selling, general, and administrative expenses 98,438 68,291 250,377 172,172 Impairment of goodwill and indefinite-lived assets — — 99,670 — Depreciation and amortization 51,866 52,415 152,931 157,436 Loss from equity method investments ( 2,815 ) — ( 2,692 ) — Total operating expenses 942,447 1,013,053 2,798,425 2,882,250 Operating (loss) income from continuing operations ( 3,177 ) 6,653 ( 124,386 ) 25,927 Other expenses (income): Change in fair value of warrant liabilities 40 587 ( 359 ) 587 Interest expense, net 38,969 42,275 114,484 119,883 Total other expenses, net 39,009 42,862 114,125 120,470 Loss from continuing operations before income taxes ( 42,186 ) ( 36,209 ) ( 238,511 ) ( 94,543 ) Benefit from income taxes from continuing operations ( 4,866 ) ( 6,577 ) ( 38,042 ) ( 15,994 ) Net loss from continuing operations ( 37,320 ) ( 29,632 ) ( 200,469 ) ( 78,549 ) Net (loss) income from discontinued operations, net of tax ( 5,456 ) 7,050 53,743 443 Net loss ( 42,776 ) ( 22,582 ) ( 146,726 ) ( 78,106 ) Less: net (loss) from continuing operations attributable to noncontrolling interest, net of tax — 1,437 — 2,346 Less: net (loss) from discontinued operations attributable to noncontrolling interest, net of tax — 319 2,192 235 Net loss attributable to stockholders of Advantage Solutions Inc. $ ( 42,776 ) $ ( 24,338 ) $ ( 148,918 ) $ ( 80,687 ) Net loss per common share: Basic loss per common share from continuing operations $ ( 0.12 ) $ ( 0.09 ) $ ( 0.62 ) $ ( 0.24 ) Basic (loss) earnings per common share from discontinued operations $ ( 0.02 ) $ 0.02 $ 0.17 $ 0.00 Basic loss per common share attributable to stockholders of Advantage Solutions Inc. $ ( 0.13 ) $ ( 0.07 ) $ ( 0.46 ) $ ( 0.25 ) Diluted net loss per share: Diluted loss per common share from continuing operations $ ( 0.12 ) $ ( 0.09 ) $ ( 0.62 ) $ ( 0.24 ) Diluted (loss) earnings per common share from discontinued operations $ ( 0.02 ) $ 0.02 $ 0.17 $ 0.00 Diluted loss per common share attributable to stockholders of Advantage Solutions Inc. $ ( 0.13 ) $ ( 0.07 ) $ ( 0.46 ) $ ( 0.25 ) Weighted-average number of common shares: Basic 321,080,571 324,706,866 321,774,115 323,353,308 Diluted 321,080,571 324,706,866 321,774,115 323,353,308 Comprehensive Loss: Net loss attributable to stockholders of Advantage Solutions Inc. $ ( 42,776 ) $ ( 24,338 ) $ ( 148,918 ) $ ( 80,687 ) Other comprehensive income (loss), net of tax: Foreign currency translation adjustments 8,132 ( 5,709 ) 3,075 ( 463 ) Total comprehensive loss attributable to stockholders of Advantage Solutions Inc. $ ( 34,644 ) $ ( 30,047 ) $ ( 145,843 ) $ ( 81,150 ) See Notes to the Condensed Consolidated Financial Statements. 4 ADVANTAGE SOLUTIONS INC. CONDENSED CONSOL IDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) Accumulated Additional Other Total Common Stock Treasury Stock Paid-in Accumulated Loans to Comprehensive Stockholders' (in thousands, except share data) Shares Amount Shares Amount Capital Deficit Topco Income (Loss) Equity Balance at July 1, 2024 323,020,596 $ 32 8,875,170 $ ( 39,724 ) $ 3,452,358 $ ( 2,420,792 ) $ ( 6,707 ) $ ( 11,433 ) $ 973,734 Comprehensive loss Net loss — — — — — ( 42,776 ) — — ( 42,776 ) Foreign currency translation adjustments — — — — — — — 8,132 8,132 Total comprehensive loss — — — — — — — — ( 34,644 ) Interest on loans to Karman Topco L.P. — — — — — — ( 161 ) — ( 161 ) Purchase of treasury stock ( 3,524,905 ) — 3,524,905 ( 13,292 ) — — — — ( 13,292 ) Equity-based compensation of Karman Topco L.P. — — — — ( 178 ) — — — ( 178 ) Shares issued under 2020 Employee Stock Purchase Plan 401,854 — — — 1,123 — — — 1,123 Payments for taxes related to net share settlement under 2020 Incentive Award Plan — — — — ( 550 ) — — — ( 550 ) Shares issued under 2020 Incentive Award Plan 520,538 — — — — — — — — Stock-based compensation expense — — — — 6,499 — — — 6,499 Balance at September 30, 2024 320,418,083 $ 32 12,400,075 $ ( 53,016 ) $ 3,459,252 $ ( 2,463,568 ) $ ( 6,868 ) $ ( 3,301 ) $ 932,531 Accumulated Advantage Additional Other Solutions Inc. Total Common Stock Treasury Stock Paid-in Accumulated Loans to Comprehensive Stockholders' Noncontrolling Stockholders' (in thousands, except share data) Shares Amount Shares Amount Capital Deficit Topco Income (Loss) Equity Interest Equity Balance at July 1, 2023 324,481,143 $ 32 1,610,014 $ ( 12,567 ) $ 3,427,490 $ ( 2,303,458 ) $ ( 6,375 ) $ ( 13,603 ) $ 1,091,519 $ 106,087 $ 1,197,606 Comprehensive loss Net (loss) income — — — — — ( 24,338 ) — — ( 24,338 ) 1,622 ( 22,716 ) Foreign currency translation adjustments — — — — — — — ( 5,709 ) ( 5,709 ) ( 3,727 ) ( 9,436 ) Total comprehensive loss — — — — — — — — ( 30,047 ) ( 2,105 ) ( 32,152 ) Interest on loans to Karman Topco L.P. — — — — — — ( 6 ) — ( 6 ) — ( 6 ) Equity-based compensation of Karman Topco L.P. — — — — 209 — — — 209 — 209 Shares issued under 2020 Employee Stock Purchase Plan 566,464 — — — 1,055 — — — 1,055 — 1,055 Shares issued under 2020 Incentive Award Plan 727,030 — — — — — — — — — — Stock-based compensation expense — — — — 9,588 — — — 9,588 — 9,588 Balance at September 30, 2023 325,774,637 $ 32 1,610,014 $ ( 12,567 ) $ 3,438,342 $ ( 2,327,796 ) $ ( 6,381 ) $ ( 19,312 ) $ 1,072,318 $ 103,982 $ 1,176,300 See Notes to the Condensed Consolidated Financial Statements. 5 Accumulated Advantage Additional Other Solutions Inc. Total Common Stock Treasury Stock Paid-in Accumulated Loans to Comprehensive Stockholders' Noncontrolling Stockholders' (in thousands, except share data) Shares Amount Shares Amount Capital Deficit Topco Income (Loss) Equity Interest Equity Balance at January 1, 2024 322,235,261 $ 32 3,600,075 $ ( 18,949 ) $ 3,449,261 $ ( 2,314,650 ) $ ( 6,387 ) $ ( 3,945 ) $ 1,105,362 $ ( 1,285 ) $ 1,104,077 Comprehensive (loss) income Net (loss) income — — — — — ( 148,918 ) — — ( 148,918 ) 2,192 ( 146,726 ) Foreign currency translation adjustments — — — — — — — 3,075 3,075 73 3,148 Total comprehensive (loss) income — — — — — — — — ( 145,843 ) 2,265 ( 143,578 ) Interest on loans to Karman Topco L.P. — — — — — — ( 481 ) — ( 481 ) — ( 481 ) Purchase of treasury stock ( 8,800,000 ) — 8,800,000 ( 34,067 ) — — — — ( 34,067 ) — ( 34,067 ) Equity-based compensation of Karman Topco L.P. — — — — ( 658 ) — — — ( 658 ) — ( 658 ) Shares issued under 2020 Employee Stock Purchase Plan 983,808 — — — 2,294 — — — 2,294 — 2,294 Payments for taxes related to net share settlement under 2020 Incentive Award Plan — — — — ( 11,663 ) — — — ( 11,663 ) — ( 11,663 ) Shares issued under 2020 Incentive Award Plan 5,999,014 — — — — — — — — — — Sale of a business — — — — — — — ( 2,431 ) ( 2,431 ) ( 980 ) ( 3,411 ) Stock-based compensation expense — — — — 20,018 — — — 20,018 — 20,018 Balance at September 30, 2024 320,418,083 $ 32 12,400,075 $ ( 53,016 ) $ 3,459,252 $ ( 2,463,568 ) $ ( 6,868 ) $ ( 3,301 ) $ 932,531 $ — $ 932,531 Accumulated Advantage Additional Other Solutions Inc. Total Common Stock Treasury Stock Paid-in Accumulated Loans to Comprehensive Stockholders' Noncontrolling Stockholders' (in thousands, except share data) Shares Amount Shares Amount Capital Deficit Topco Income (Loss) Equity Interest Equity Balance at January 1, 2023 319,690,300 $ 32 1,610,014 $ ( 12,567 ) $ 3,408,836 $ ( 2,247,109 ) $ ( 6,363 ) $ ( 18,849 ) $ 1,123,980 $ 101,744 $ 1,225,724 Comprehensive (loss) income Net (loss) income — — — — — ( 80,687 ) — — ( 80,687 ) 2,280 ( 78,407 ) Foreign currency translation adjustments — — — — — — — ( 463 ) ( 463 ) ( 42 ) ( 505 ) Total comprehensive (loss) income — — — — — — — — ( 81,150 ) 2,238 ( 78,912 ) Interest on loans to Karman Topco L.P. — — — — — — ( 18 ) — ( 18 ) — ( 18 ) Equity-based compensation of Karman Topco L.P. — — — — ( 3,278 ) — — — ( 3,278 ) — ( 3,278 ) Shares issued under 2020 Employee Stock Purchase Plan 1,241,440 — — — 2,248 — — — 2,248 — 2,248 Payments for taxes related to net share settlement under 2020 Incentive Award Plan — — — — ( 1,277 ) — — — ( 1,277 ) — ( 1,277 ) Shares issued under 2020 Incentive Award Plan 4,842,897 — — — — — — — — — — Stock-based compensation expense — — — — 31,813 — — — 31,813 — 31,813 Balance at September 30, 2023 325,774,637 $ 32 1,610,014 $ ( 12,567 ) $ 3,438,342 $ ( 2,327,796 ) $ ( 6,381 ) $ ( 19,312 ) $ 1,072,318 $ 103,982 $ 1,176,300 See Notes to the Condensed Consolidated Financial Statements. 6 ADVANTAGE SOLUTIONS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, (in thousands) 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 146,726 ) $ ( 78,106 ) Net (loss) income from discontinued operations, net of tax 53,743 443 Net loss from continuing operations ( 200,469 ) ( 78,549 ) Adjustments to reconcile net loss to net cash provided by operating activities Noncash interest income (expense) 1,664 ( 12,699 ) Deferred financing fees related to repricing of long-term debt 1,079 — Amortization of deferred financing fees 5,137 6,387 Impairment of goodwill and indefinite-lived assets 99,670 — Depreciation and amortization 152,931 157,436 Change in fair value of warrant liability ( 359 ) 587 Fair value adjustments related to contingent consideration 1,678 10,487 Deferred income taxes ( 16,241 ) ( 56,986 ) Equity-based compensation of Karman Topco L.P. ( 658 ) ( 3,278 ) Stock-based compensation 24,224 29,401 Loss from equity method investments ( 2,692 ) (4,132 ) Distribution received from equity method investments 3,289 1,611 Gain on repurchases of Senior Secured Notes and Term Loan Facility debt ( 9,141 ) ( 5,241 ) Loss on disposal of property and equipment 775 782 Changes in operating assets and liabilities, net of effects from divestitures: Accounts receivable, net ( 9,550 ) 19,816 Prepaid expenses and other assets 30,567 87,368 Accounts payable 25,435 ( 1,883 ) Accrued compensation and benefits ( 43,849 ) ( 13,511 ) Deferred revenues 2,992 14,686 Other accrued expenses and other liabilities 11,527 20,294 Net cash provided by operating activities from continuing operations 78,009 172,576 Net cash provided by operating activities from discontinued operations 6,437 8,227 Net cash provided by operating activities 84,446 180,803 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments in unconsolidated affiliates ( 13,932 ) ( 3,023 ) Purchase of property and equipment ( 50,358 ) ( 24,424 ) Proceeds from divestitures, net of cash 275,717 12,763 Proceeds from sale of investments in unconsolidated affiliates — 4,428 Net cash provided by (used in) investing activities from continuing operations 211,427 ( 10,256 ) Net cash used in investing activities from discontinued operations ( 7,304 ) ( 5,234 ) Net cash provided by (used in) investing activities 204,123 ( 15,490 ) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings under lines of credit — 77,884 Payments on lines of credit — ( 77,222 ) Principal payments on long-term debt ( 9,938 ) ( 10,172 ) Repurchases of Senior Secured Notes and Term Loan Facility debt ( 147,122 ) ( 103,954 ) Debt issuance costs ( 971 ) — Proceeds from issuance of common stock 2,294 2,248 Payments for taxes related to net share settlement under 2020 Incentive Award Plan ( 11,663 ) ( 1,277 ) Contingent consideration payments ( 5,655 ) ( 1,867 ) Holdback payments — ( 656 ) Redemption of noncontrolling interest — ( 154 ) Purchase of treasury stock ( 34,067 ) — Net cash used in financing activities from continuing operations ( 207,122 ) ( 115,170 ) Net cash (used in) provided by financing activities from discontinued operations ( 4,362 ) 397 Net cash used in financing activities ( 211,484 ) ( 114,773 ) Net effect of foreign currency changes on cash from continuing operations ( 1,405 ) 655 Net effect of foreign currency changes on cash from discontinued operations ( 412 ) ( 2,017 ) Net effect of foreign currency changes on cash ( 1,817 ) ( 1,362 ) Net change in cash, cash equivalents and restricted cash 75,268 49,178 Cash, cash equivalents and restricted cash, beginning of period 137,202 138,532 Cash, cash equivalents and restricted cash, end of period 212,470 187,710 Less: Cash, cash equivalents and restricted cash of discontinued operations — 4,024 Cash, cash equivalents and restricted cash, end of period $ 212,470 $ 183,686 SUPPLEMENTAL CASH FLOW INFORMATION Gain on divestitures from discontinued operations $ 95,260 $ — Noncash consideration for purchases of investments in unconsolidated affiliates $ 2,000 $ — Noncash proceeds from divestitures $ 45,056 $ — Purchase of property and equipment recorded in accounts payable and accrued expenses $ 4,650 $ 437 See Notes to the Condensed Consolidated Financial Statements. 7 ADVANTAGE SOLUTIONS INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Organization and Significant Accounting Policies Advantage Solutions Inc. (the “Company”) is a provider of outsourced solutions to consumer goods companies and retailers. The Company’s Class A common stock is listed on the Nasdaq Global Select Market under the symbol “ADV” and warrants to purchase the Class A common stock at an exercise price of $ 11.50 per share are listed on the Nasdaq Global Select Market under the symbol “ADVWW”. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. The unaudited condensed consolidated financial statements do not include all of the information required by accounting principles generally accepted in the United States (“GAAP”). The Condensed Consolidated Balance Sheet at December 31, 2023 was derived from the audited Consolidated Balance Sheet at that date and does not include all the disclosures required by GAAP. In the opinion of management, all adjustments which are of a normal recurring nature and necessary for a fair statement of the results as of September 30, 2024 and for the three and nine months ended September 30, 2024 and 2023 have been reflected in the condensed consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2023 and the related footnotes thereto. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period. The Company has reorganized its portfolio of businesses into a new, simplified structure that more closely aligns its business capabilities with economic buyers. As a result of this reorganization, the Company revised its reportable segments and identified non-core businesses for disposition (“Divestiture plan”). In the first quarter of 2024, the Company determined its Divestiture plan met the criteria for discontinued operations as it represented a strategic shift that had a major effect on the Company’s operations and financial results. As such, the results of businesses meeting the criteria to be classified as held for sale or disposed of in the current or prior periods in accordance with the Company’s Divestiture plan have been reclassified to discontinued operations. Refer to Note 2— Held for Sale, Divestitures and Discontinued Operations for additional information on the Company’s assets and liabilities classified as held for sale and the Company's discontinued operations. Certain prior period balances related to the Company's reportable segments and discontinued operations have been reclassified to conform to the current presentation in the condensed consolidated financial statements and accompanying notes. The notes to the condensed consolidated financial statements are presented on a continuing operations basis unless otherwise noted. Refer to Note 8— Segments for additional information on the Company’s reportable segments. Refer to Note 2— Held for Sale, Divestitures and Discontinued Operations for additional information on the Company’s discontinued operations. Reportable Segments Effective January 1, 2024, Advantage Solutions Inc. revised its reportable segments to align with the Company's business strategy, and the manner in which the Chief Executive Officer, the Company's chief operating decision maker (“CODM”), assesses performance and makes decisions regarding the allocation of resources for the Company. The Company’s revised operating and reportable segments consist of Branded Services, Experiential Services, and Retailer Services. This change had no impact on the Company’s Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations and Comprehensive Loss, Condensed Consolidated Statements of Stockholders' Equity and Condensed Consolidated Statements of Cash Flows. Prior period segment results have been reclassified to reflect the Company’s new reportable segments on a continuing operations basis. Refer to Note 8— Segments for additional information on the Company’s reportable segments. 8 Discontinued Operations The Company presents discontinued operations when there is a disposal of a component or a group of components that represents a strategic shift that will have a major effect on operations and financial results. The results of discontinued operations are reported in net income (loss) from discontinued operations in the condensed consolidated statements of operations for all periods presented, commencing in the period in which the business is either disposed of or is classified as held for sale, including any gain or loss recognized on closing or adjustment of the carrying amount to fair value less costs to sell. Assets and liabilities related to a business classified as held for sale which also meets the criteria for discontinued operations are segregated in the condensed consolidated balance sheets for the current and prior periods presented. Cash flows for continuing and discontinued operations are segregated in the condensed consolidated cash flows for the current and prior periods. When proceeds are not utilized to paydown long-term debt, the assets and liabilities associated with discontinued operations in the current period balance sheet are classified as current. Goodwill Goodwill represents the excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired in an acquisition. The Company tests for impairment of goodwill at the reporting unit level. The Company generally combines components that have similar economic characteristics, nature of services, types of clients, distribution methods and regulatory environment. In connection with the Company’s reorganization and the associated change in operating segments, the Company reassessed its reporting units and concluded that it has five reporting units (Branded Services, Branded Agencies, Experiential Services, Merchandising and Retailer Agencies). As a result, the Company performed the required impairment assessments directly before and immediately after the change in reporting units as of January 1, 2024. The assets and liabilities were reassigned to the applicable reporting units and allocated goodwill using the relative fair value approach. The estimated fair value of the underlying reporting units was determined based on a combination of the income and market approaches. The income approach utilizes estimates of discounted cash flows for the underlying business, which requires assumptions for growth rates, EBITDA margins, terminal growth rate, discount rate, and incremental net working capital, all of which require significant management judgment. The market approach applies market multiples derived from historical earnings data of selected guideline publicly traded companies that are first screened by industry group and then further narrowed on the reporting units' business descriptions, markets served, competitors, EBITDA margins and revenue size. The Company compared a weighted average of the output from the income and market approaches to compute the fair value of the reporting units. The assumptions in the income and market approach are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. The uncertainty and volatility in the economic environment in which the Company operates could have an impact on the Company's future growth and could result in future impairment charges. There is no assurance that actual future earnings, cash flows or other assumptions for the reporting units will not significantly decline from these projections. In conjunction with the tests performed as of January 1, 2024, each of the fair values for the reporting units tested was in excess of its carrying amount. The fair values of the Branded Agencies and Experiential Services reporting units exceeded their respective carrying values by less than 20 %. 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 assets, liabilities and prospective cash flows of the Branded Agencies reporting unit. As a result of the impairment test performed, 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 and indefinite-lived assets” 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. Indefinite Lived Intangible Assets Intangible assets with indefinite useful lives are not amortized but tested annually for impairment, at the beginning of the fourth quarter, or more often if events occur or circumstances change that would create a triggering event. Prior to the segment change, the Company went to market with the Advantage Trade Name being specifically used and assessed for impairment in the Sales and Marketing businesses. As a result of the change in the Company's reportable segments effective as of January 1, 2024, the Company determined, based on the change in the planned use of the 9 Advantage Trade Name intangible asset, that the Advantage Trade Name should be considered an entity-wide asset for reporting and impairment testing purposes. As of January 1, 2024, the Company concluded there was a triggering event for an interim impairment assessment due to the change in unit of account of the indefinite-lived intangible assets. Based on the interim impairment assessment, the estimated fair value exceeded the carrying value by approximately 6 %, thus no impairment was recorded. For the three and nine months ended September 30, 2024 , no events or circumstances were noted that would indicate a triggering event for the Company’s intangible assets with indefinite useful lives. The uncertainty and volatility in the economic environment in which the Company operates could have an impact on the Company’s future growth and could result in future impairment charges. There is no assurance that actual cash flows or other assumptions will not significantly decline from these projections. Revenue Recognition The Company recognizes revenue when control of promised goods or services is transferred to the client in an amount that reflects the consideration that the Company expects to be entitled to in exchange for such goods or services. Substantially all of the Company’s contracts with clients involve the transfer of a service to the client, which represents a performance obligation that is satisfied over time because the client simultaneously receives and consumes the benefits of the services provided. In most cases, the contracts provide for a performance obligation that is comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). For these contracts, the Company allocates the ratable portion of the consideration based on the services provided in each period of service to such period. Revenues related to the Branded Services segment are primarily recognized in the form of commissions, fee-for-service and cost-plus fees for providing headquarter relationship management, execution of merchandising strategies and omni-commerce marketing services. Revenues within the Branded Services segment are further disaggregated between brokerage services, branded merchandising services, omni-commerce marketing services, and revenues related to the Company's international joint venture (prior to the deconsolidation during fiscal year 2023). Brokerage services revenues are primarily outsourced sales and services for branded consumer goods manufacturers at retailer headquarters, in-store and online. Branded merchandising services relate to merchandising in-store and online for branded consumer goods manufacturers. Omni-commerce marketing services primarily relate to digital and field marketing services. Experiential Services segment revenues are primarily recognized in the form of fee-for-service and cost-plus fees for providing in-store, digital sampling and demonstrations, where the Company manages highly customized, large-scale sampling programs for leading brands and retailers. Retailer Services segment revenues are primarily recognized in the form of commissions, fee-for-service and cost-plus fees for providing consulting services related to private brand development, the execution of merchandising strategies and marketing strategies within retailer locations, including retail media networks and analyzing shopper behavior. Revenues within the Retailer Services segment are further disaggregated between advisory services, retailer merchandising services and agency services to retailers. Advisory services primarily consist of consulting services related to private brand development. Retailer merchandising services primarily relate to the execution of merchandising strategies. Agency services primarily consist of providing marketing strategies within retail locations. 10 Disaggregated revenues were as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Branded Services Brokerage services $ 123,965 $ 133,766 $ 373,961 $ 396,829 Branded merchandising services 106,018 110,284 319,791 328,716 Omni-commerce marketing services 101,374 102,334 289,000 302,773 International joint venture — 104,789 — 298,817 Total Branded Services revenue $ 331,357 $ 451,173 $ 982,752 $ 1,327,135 Experiential Services Experiential services $ 342,731 $ 308,381 $ 969,590 $ 850,722 Total Experiential Services revenue $ 342,731 $ 308,381 $ 969,590 $ 850,722 Retailer Services Retail merchandising services $ 189,002 $ 181,445 $ 543,700 $ 555,080 Advisory services 59,039 60,612 129,831 131,872 Agency services 17,141 18,095 48,166 43,368 Total Retailer Services revenue $ 265,182 $ 260,152 $ 721,697 $ 730,320 Total revenues $ 939,270 $ 1,019,706 $ 2,674,039 $ 2,908,177 Contract liabilities represent deferred revenues, which are cash payments that are received in advance of the Company’s satisfaction of the applicable obligation and are included in Deferred revenues in the Condensed Consolidated Balance Sheets. Deferred revenues are recognized as revenues when the related services are performed for the client. Revenues recognized during the three and nine months ended September 30, 2024 that were included in Deferred revenues as of December 31, 2023 were $ 1.3 million and $ 18.1 million, respectively . Revenues recognized during the three and nine months ended September 30, 2023 included in Deferred revenues as of December 31, 2022 were $ 3.4 million and $ 18.0 million, respectively. Accounting Standards Recently Issued but Not Yet Adopted by the Company In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires entities to expand their existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for the Company beginning in fiscal year 2025, with early adoption permitted. The new standard is expected to be applied prospectively, but retrospective application is permitted. The Company is currently evaluating the impact of ASU 2023-09 on the consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires entities to disclose incremental segment information on an annual and interim basis, including significant segment expenses and measures of profit or loss that are regularly provided to the CODM. The standard is effective for the Company beginning in fiscal year 2024 and interim periods within fiscal year 2025 and it will be applied retrospectively to all periods presented. The Company is currently evaluating the impact of ASU 2023-07 on the consolidated financial statements and related disclosures. In March 2024, the Securities and Exchange Commission (“SEC”) adopted final climate-related disclosure rules under SEC Release Nos. 33-11275 and 34-99678, The Enhancement and Standardization of Climate-Related Disclosures for Investors . The rules require disclosure of governance, risk management and strategy related to material climate-related risks as well as disclosure of material greenhouse gas emissions in registration statements and annual reports. In addition, the rules require presentation of certain material climate-related disclosures in the annual consolidated financial statements. On April 4, 2024, the SEC voluntarily stayed the effective date of the final rules pending completion of judicial review following legal challenges. The disclosure requirements will apply to the Company's fiscal year reporting beginning October 4, 2025, pending resolution of the stay. The Company is currently evaluating the impact of the rules on the consolidated financial statements and related disclosures. 11 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. Other new accounting pronouncements recently issued or newly effective were not applicable to the Company, did not have a material impact on the condensed consolidated financial statements or are not expected to have a material impact on the condensed consolidated financial statements. 2. Held for Sale, Divestitures and Discontinued Operations Held for Sale As of December 31, 2023, the Company classified certain assets and liabilities as held for sale in the Condensed Consolidated Balance Sheets, primarily related to assets and liabilities to be disposed of by sale (“disposal groups”). The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value of the disposal group. The assets and liabilities related to these businesses are included in the discontinued operations captions in the Condensed Consolidated Balance Sheets for all periods presented. 2023 Divestitures In 2023, the Company entered into an agreement to sell certain assets and liabilities (collectively, the “2023 Divestitures”). The Company determined that the disposal groups did not meet the criteria for classification as discontinued operations as of September 30, 2023. During the three and nine months ended September 30, 2023 , the Company recorded a loss of $ 2.6 million and $ 20.2 million, respectively, on divestitures as a component of “Net income (loss) from discontinued operations, net of tax” in the Condensed Consolid ated Statements of Operations and Comprehensive Loss. 2024 Divestitures On January 31, 2024, the Company sold a collection of foodservice businesses, previously classified as held for sale (as current assets) as of December 31, 2023 (collectively with the other businesses disposed during the nine months ended September 30, 2024, the “2024 Divestitures” ). As part of the sale, the foodservice businesses were combined with an entity owned by the buyer, with the Company receiving approximately $ 91.0 million, subject to working capital adjustments and an ongoing 7.5 % interest in the combined business. The ongoing ownership interest represents a continuing involvement which the Company has determined represents an equity method investment. Upon the close of the transaction, the retained 7.5 % interest was recognized at fair value of $ 8.4 million, valued using unobservable inputs (i.e., Level 3 inputs), primarily discounted cash flow. The investment is reported in “Investments in unconsolidated affiliates” on the Condensed Consolidated Balance Sheets and an immaterial amount of equity income (loss) reported in “Income from equity method investments” on the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2024. Transactions between the Company and the combined foodservice entity are considered to be related-party transactions subsequent to the divesture. During the second quarter of 2024, the Company sold two agencies in the Branded Services segment, one agency in the Experiential Services segment and one agency in the Retailer Services segment (collectively with the other businesses disposed during the nine months ended September 30, 2024, the “2024 Divestitures”) . The Company received $ 65.2 million including estimated working capital adjustments. On July 31, 2024, the Company completed the sale of the Jun Group business in exchange for proceeds of approximately $ 185.0 million less any adjustments. The Company received approximately $ 130.0 million in cash upon completion of the sale. As part of the purchase agreement, the buyer has agreed to remit the remaining consideration to 12 the Company in two additional installments of $ 22.5 million ($ 27.5 million less $ 5 million estimated adjustments) and $ 27.5 million, 12 and 18 months , respectively, after the completion of the sale. During the three and nine months ended September 30, 2024 , the Company recorded a gain from the 2024 Divestitures of $ 25.1 million and $ 95.3 million, respectively, as a component of “Net income (loss) from discontinued operations, net of tax” in the Condensed Consolid ated Statements of Operations and Comprehensive Loss. Proceeds from the sales were classified as cash provided by investing activities from continuing operations in the Condensed Consolidated Statements of Cash Flows. Discontinued Operations The Company classifies a business that has been disposed of or is classified as held for sale as a discontinued operation when the criteria prescribed by the FASB Accounting Standards Codification (“ASC”) 205, Presentation of Financial Statements are met. While the 2023 Divestitures did not previously qualify for presentation as discontinued operations, the Company concluded that, in the aggregate, the sales of these businesses along with the 2024 Divestitures (collectively, the “discontinued operations” that are all part of the divestiture plan) met the criteria for discontinued operations presentation as their dispositions represent a strategic shift that has had a major effect on the Company's operations and financial results. As a result, each of these businesses has been reclassified to discontinued operations in the Condensed Consolidated Statements of Operations and Comprehensive Loss, Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows for all periods presented. As part of the agreements for certain of the divestitures the Company has agreed to provide certain transitional services as detailed within respective transition services agreements for a period of time after sale. Income and expenses related to these transitional services are immaterial and are reported in “Net loss from continuing operations” on the Condensed Consolidated Statements of Operations and Comprehensive Loss. The following table presents the summarized balance sheet of discontinued operations. As of September 30, 2024, all businesses that were previously classified as discontinued operations had been fully divested. (in thousands) December 31, 2023 Carrying amounts of major classes of assets Cash and cash equivalents $ 5,641 Accounts receivable, net of allowance for expected credit losses of $ 2,834 56,848 Prepaid and other current assets 6,839 Property and equipment, net 10,245 Goodwill 160,400 Other intangible assets, net 41,025 Investments in unconsolidated affiliates 564 Other assets 4,040 Total assets of discontinued operations (1) $ 285,602 Carrying amounts of major classes of liabilities Current portion of long-term debt $ 306 Accounts payable 9,737 Accrued compensation and benefits 5,729 Other accrued expenses 3,210 Deferred revenues 3,137 Long-term debt, net of current portion 4,666 Other liabilities 3,024 Total liabilities of discontinued operations (1) $ 29,809 Total net assets of the disposal group classified as discontinued operations $ 255,793 (1) Certain assets and liabilities from discontinued operations are classified as noncurrent at December 31, 2023 as they did not previously meet the held-for-sale criteria at that date. 13 The following table presents the summarized statements of operations of discontinued operations. Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Revenues $ 6,509 $ 76,353 $ 80,017 $ 236,920 Cost of revenues (exclusive of depreciation and amortization shown separately below) 4,077 55,199 59,605 187,705 Selling, general, and administrative expenses 3,238 5,221 15,816 12,065 (Gain) loss on divestiture ( 25,065 ) 2,553 ( 95,261 ) 20,208 Depreciation and amortization 204 4,050 4,695 12,871 Total operating expenses ( 17,546 ) 67,023 ( 15,145 ) 232,849 Operating income from discontinued operations 24,055 9,330 95,162 4,071 Other expenses: Interest expense — 26 48 69 Total other expenses — 26 48 69 Income before income taxes from discontinued operations 24,055 9,304 95,114 4,002 Provision for income taxes from discontinued operations 29,511 2,254 41,371 3,559 Net (loss) income from discontinued operations, net of tax ( 5,456 ) 7,050 53,743 443 Less: net income from discontinued operations attributable to noncontrolling interest, net of tax — 319 2,192 235 Net (loss) income from discontinued operations attributable to stockholders of Advantage Solutions Inc. $ ( 5,456 ) $ 6,731 $ 51,551 $ 208 3. Goodwill and Intangible Assets The following tables set forth information for goodwill by reportable segment: (in thousands) Branded Services Retailer Services Experiential Services Total Balance at December 31, 2023 $ 252,809 $ 217,955 $ 239,427 $ 710,191 Impairment charge ( 99,670 ) — — ( 99,670 ) Foreign exchange translation effects 11 — — 11 Balance at September 30, 2024 $ 153,150 $ 217,955 $ 239,427 $ 610,532 Accumulated impairment losses related to goodwill were $ 2.1 billion and $ 2.0 billion as of September 30, 2024 and December 31, 2023, respectively. The following tables set forth information for intangible assets: September 30, 2024 (amounts in thousands) Weighted Average Useful Life Gross Carrying Value Accumulated Amortization Accumulated Impairment Charges Net Carrying Value Finite-lived intangible assets: Client relationships 14 years $ 2,282,703 $ 1,543,665 $ — $ 739,038 Trade names 10 years 88,600 60,138 — 28,462 Total finite-lived intangible assets 2,371,303 1,603,803 — 767,500 Indefinite-lived intangible assets: Trade name 1,480,000 — 828,500 651,500 Total other intangible assets $ 3,851,303 $ 1,603,803 $ 828,500 $ 1,419,000 14 December 31, 2023 (amounts in thousands) Weighted Average Useful Life Gross Carrying Value Accumulated Amortization Accumulated Impairment Charges Net Carrying Value Finite-lived intangible assets: Client relationships 14 years $ 2,282,792 $ 1,417,570 $ — $ 865,222 Trade names 10 years 88,600 53,493 — 35,107 Total finite-lived intangible assets 2,371,392 1,471,063 — 900,329 Indefinite-lived intangible assets: Trade name 1,480,000 — 828,500 651,500 Total other intangible assets $ 3,851,392 $ 1,471,063 $ 828,500 $ 1,551,829 Amortization of intangible assets was $ 44.5 million an d $ 46.9 million for the three months ended September 30, 2024 and 2023 , respectively, and $ 133.0 million and $ 140.9 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, estimated future amortization expense of the Company’s finite-lived intangible assets are as follows: (in thousands) Remainder of 2024 $ 44,130 2025 171,719 2026 169,231 2027 167,540 2028 133,089 Thereafter 81,791 Total amortization expense $ 767,500 4. Debt September 30, December 31, (in thousands) 2024 2023 Term Loan Facility $ 1,109,308 $ 1,149,057 Senior Secured Notes 615,087 743,000 Other notes — 426 Total long-term debt 1,724,395 1,892,483 Less: current portion 13,250 13,274 Less: debt issuance costs 22,932 31,091 Long-term debt, net of current portion $ 1,688,213 $ 1,848,118 As of September 30, 2024, the Company had $ 1.1 billion of debt outstanding under the Term Loan Facility (as defined below) and $ 615.1 million of debt outstanding under the Notes (both as defined in the Annual Report on Form 10-K filed March 1, 2024 for the year ended December 31, 2023 (the “2023 Annual Report”)) with maturity dates of October 28, 2027 and November 15, 2028 , respectively. In April 2024 (the “Third Lien Amendment Effective Date” ), the Company amended the Term Loan Facility to (i) reduce the applicable interest rate margin (a) from 4.50 % to 4.25 % for SOFR loans or (b) from 3.50 % to 3.25 % for base rate loans; and (ii) reset the period for six months following the Third Lien Amendment Effective Date in which a 1.00 % prepayment premium shall apply to any prepayment of the term loans in connection with a Repricing Event (as defined in the amended First Lien Credit Agreement). The Term Loan Facility bears interest at a floating rate of Term SOFR plus an applicable margin of 4.25 % per annum, subject to an additional spread adjustment on SOFR ranging from 0.11 % to 0.26 %. Interest on the Notes is payable semi-annually in arrears at a rate of 6.50 % per annum. The Company was in compliance with all of its affirmative and negative covenants under the Term Loan Facility and Notes as of September 30, 2024 . In addition, the Company is required to repay the principal under the Term Loan 15 Facility in the greater amount of its excess cash flow, as such term is defined in the agreement governing the Term Loan Facility, or $ 13.3 million, per annum, in quarterly payments. The Company made the minimum quarterly principal payments of $ 3.3 million and $ 9.9 million during the three and nine months ended September 30, 2024 and 2023, respectively. No payments under the excess cash flow calculation were required in such periods. In May 2023 (the “Second Lien Amendment Effective Date”), the Company amended the Term Loan Facility to replace the U.S. Dollar LIBOR provisions with SOFR, effective June 30, 2023. The Company voluntarily repurchased an aggregate of $ 50.4 million and $ 127.9 million principal amount of its Senior Secured Notes during the three and nine months ended September 30, 2024, respectively. The Company recognized a gain on the repurchase of the Senior Secured Notes of $ 3.5 million and $ 8.6 million for the three and nine months ended September 30, 2024, respectively, as a component of “Interest expense, net” in the Condensed Consolidated Statements of Operations and Comprehensive Loss. The Company voluntarily repurchased an aggregate of $ 29.8 million principal amount of its Term Loan Facility during the three and nine months ended September 30, 2024 . The Company recognized a gain on the repurchases of $ 0.5 million for the three and nine months ended September 30, 2024 as a component of “Interest expense, net” in the Condensed Consolidated Statements of Operations and Comprehensive Loss. The Company voluntarily repurchased an aggregate of $ 56.8 million and $ 111.2 million principal amount of its Term Loan Facility during the three and nine months ended September 30, 2023 , respectively. The Company recognized a gain on the repurchases of an immaterial amount and $ 5.2 million for the three and nine months ended September 30, 2023, respectively, as a component of “Interest expense, net” in the Condensed Consolidated Statements of Operations and Comprehensive Loss. As of September 30, 2024, the Company had no borrowings under its 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”). All borrowings under the Revolving Credit Facility are subject to the satisfaction of certain customary conditions. Borrowings under the credit agreement bear interest at a floating rate, which at the option of the Company may be either (i) a base rate or Canadian Prime Rate plus an applicable margin of 0.75 %, 1.00 %, or 1.25 % per annum or (ii) Term SOFR or Alternative Currency Spread plus an applicable margin of 1.75 %, 2.00 % or 2.25 % per annum. The Company is required to pay a commitment fee ranging from 0.250 % to 0.375 % per annum in respect of the average daily unused commitments under the Revolving Credit Facility. 5. Fair Value of Financial Instruments The Company measures fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. The following table sets forth the Company’s financial assets and liabilities measured on a recurring basis at fair value, categorized by input level within the fair value hierarchy. September 30, 2024 (in thousands) Fair Value Level 1 Level 2 Level 3 Assets measured at fair value Derivative financial instruments $ 6,751 $ — $ 6,751 $ — Total assets measured at fair value $ 6,751 $ — $ 6,751 $ — Liabilities measured at fair value Derivative financial instruments $ 2,620 $ — $ 2,620 $ — Warrant liability 308 — 308 — Total liabilities measured at fair value $ 2,928 $ — $ 2,928 $ — 16 December 31, 2023 (in thousands) Fair Value Level 1 Level 2 Level 3 Assets measured at fair value Derivative financial instruments $ 26,344 $ — $ 26,344 $ — Total assets measured at fair value $ 26,344 $ — $ 26,344 $ — Liabilities measured at fair value Warrant liability $ 667 $ — $ 667 $ — Contingent consideration liabilities 18,355 — — 18,355 Total liabilities measured at fair value $ 19,022 $ — $ 667 $ 18,355 Interest Rate Cap Agreements The Company had interest rate cap and collar contracts with an aggregate notional value of principal of $ 1,350.0 million and $ 950.0 million as of September 30, 2024 and December 31, 2023, respectively, from various financial institutions to manage the Company’s exposure to interest rate movements on variable rate credit facilities. The interest rate cap and collar contracts will mature on December 16, 2024 and April 5, 2026, respectively. In July 2024, the Company entered into two interest rate collar contracts with a notional value of principal of $ 200.0 million each. The interest rate collar contracts are effective December 16, 2024 and will mature on April 5, 2027 and 2028. As of September 30, 2024, the fair value of the Company’s outstanding interest rate caps and collars of $4.1 million was included in “Prepaid expenses and other current assets” and “Other long-term liabilities” in the Condensed Consolidated Balance Sheet. As of December 31, 2023 the fair value of the Company’s outstanding interest rate caps and collars of $ 26.3 million was included in “Prepaid expenses and other current assets” and “Other assets” in the Condensed Consolidated Balance Sheet. Changes in fair value of the Company's outstanding interest rate caps and collars are recognized as a component of “Interest expense, net” in the Condensed Consolidated Statements of Operations and Comprehensive Loss. During the three months ended September 30, 2024 and 2023, the Company recorded a loss o f $ 3.7 million and a gain of $ 3.2 million, respectively, within “ Interest expense , net, ” related to changes in the fair value of its derivative instruments. During the nine months ended September 30, 2024 and 2023 , the Company recorded a gain of $ 1.7 million and $ 12.6 million, respectively, within “ Interest expense , ” net, related to changes in the fair value of its derivative instruments. Contingent Consideration Liabilities During each reporting period, the Company measures the fair value of its contingent consideration liabilities by evaluating the significant unobservable inputs and probability weightings using Monte Carlo simulations. Any resulting decreases or increases in the fair value result in a corresponding gain or loss reported in “Selling, general, and administrative expenses” in the Condensed Consolidated Statements of Operations and Comprehensive Loss. The following table summarizes the changes in the carrying value of estimated contingent consideration liabilities: September 30, (in thousands) 2024 2023 Beginning of the period $ 18,355 $ 14,629 Changes in fair value 1,678 10,487 Payments ( 20,033 ) ( 7,133 ) End of the period $ — $ 17,983 17 Long-term Debt The following tables set forth the carrying values and fair values of the Company’s financial liabilities measured on a recurring basis, categorized by input level within the fair value hierarchy: (in thousands) Carrying Value Fair Value (Level 2) Balance at September 30, 2024 Term Loan Facility $ 1,109,308 $ 1,148,499 Senior Secured Notes 615,087 633,691 Total long-term debt $ 1,724,395 $ 1,782,190 (in thousands) Carrying Value Fair Value (Level 2) Balance at December 31, 2023 Term Loan Facility $ 1,149,057 $ 1,221,012 Senior Secured Notes 743,000 745,223 Other notes 426 100 Total long-term debt $ 1,892,483 $ 1,966,335 6. Related Party Transactions Beginning February 2023, an officer of the Company has served as a member of the board of directors of a client of the Company. The Company recognized $ 1.3 million and $ 1.2 million of revenues from such client during the three months ended September 30, 2024 and 2023, respectively. The Company recognized $ 3.9 million and $ 3.2 million of revenues from such client during the nine months ended September 30, 2024 and 2023, respectively. Accounts receivable from this client were $ 0.8 million and $ 0.6 million as of September 30, 2024 and December 31, 2023 , respectively. Beginning February 2023, an officer of the Company has served as a member of the board of directors of a consultant of the Company. The Company recognized $ 0.2 million of expense from such consultant during the three and nine months ended September 30, 2024. The Company did no t owe any amounts to this consultant as of September 30, 2024 and December 31, 2023. Beginning July 2023, a member of the board of directors of the Company has served as an officer of a client of the Company. The Company recognized $ 2.0 million and $ 5.9 million of revenues from such client during the three and nine months ended September 30, 2024 , respectively. The Company recognized $ 4.0 million of revenues from such client during the three and nine months ended September 30, 2023. Accounts receivable from this client were $ 0.1 million and $ 0.5 million as of September 30, 2024 and December 31, 2023, respectively. Unconsolidated Affiliates During the three months ended September 30, 2024 and 2023 , the Company recognized revenues of $ 2.7 million and $ 6.9 million, respectively, from unconsolidated affiliates. During the nine months ended September 30, 2024 and 2023 , the Company recognized revenues of $ 14.0 million and $ 15.2 million, respectively, from transactions with unconsolidated affiliates. Accounts receivable from transactions with unconsolidated affiliates were $ 1.3 million and $ 3.7 million as of September 30, 2024 and December 31, 2023 , respectively. 7. Income Taxes The Company’s effective tax rates were 11.5 % and 18.2 % for the three months ended September 30, 2024 and 2023 , respectively. The effective tax rate is based upon the estimated income or loss before taxes for the year, by jurisdiction, and adjusted for estimated permanent tax adjustments. The fluctuation in the Company’s effective tax rate was primarily due to $ 2.6 million of tax expense resulting from return to provision adjustments during the three months ended September 30, 2024 and a difference in the stock-based compensation shortfall of $ 0.3 million for the three months ended September 30, 2024, as compared to a $ 1.0 million shortfall for the three months ended September 30, 2023. 18 The Company’s effective tax rates were 15.9 % and 16.9 % for the nine months ended September 30, 2024 and 2023 , respectively. The effective tax rate is based upon the estimated income or loss before taxes for the year, by jurisdiction, and adjusted for estimated permanent tax adjustments. The fluctuation in the Company’s effective tax rate was primarily due to additional tax expense during the nine months ended September 30, 2024 due to a goodwill impairment which the Company treated as nondeductible, $ 2.6 million of tax expense resulting from return to provision adjustments during the nine months ended September 30, 2024, a difference in 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 the nine months ended September 30, 2023, and the release of the valuation allowance of $ 1.1 million on deferred tax assets that were determined to be realizable for the nine months ended September 30, 2024. Income tax expense from discontinued operations was $ 29.5 million and $ 2.3 million for the three months ended September 30, 2024 and 2023, respectively. Income tax expense for the three months ended September 30, 2024 and 2023 was impacted primarily by the sale of the divested entities and changes in the income (loss) before income taxes from discontinued operations. Income tax expense from discontinued operations was $ 41.4 million and $ 3.6 million for the nine months ended September 30, 2024 and 2023, respectively. Income tax expense for the nine months ended September 30, 2024 and 2023 was impacted primarily by the sale of the divested entities and changes in the income (loss) before income taxes from discontinued operations. 8. Segments Effective January 1, 2024, the Company revised its reportable segments to align with the Company’s business strategy, and the manner in which the Chief Executive Officer, the Company's CODM, assesses the performance and makes decisions regarding the allocation of resources for the Company. The Company’s revised reportable segments consist of Branded Services, Experiential Services, and Retailer Services. The reportable segments reported below are the segments of the Company for which separate financial information is available and for which segment results are evaluated regularly by the CODM in deciding how to allocate resources and in assessing performance. Through the Company's Branded Services segment, the Company offers capabilities in brokerage, branded merchandising and omni-commerce marketing services to consumer goods manufacturers. Through the Company's Experiential Services segment, the Company expands the reach of consumer brands and retailer products to convert shoppers into buyers through sampling and product demonstration programs executed in-store and online. Through the Company's Retailer Services segment, the Company provides retailers with end-to-end advisory, retailer merchandising, and agency expertise to drive sales. The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; therefore, no additional information is produced or included herein. The Company and its CODM evaluate performance based on revenues and operating (loss) income. Discontinued operations are not included in the applicable reportable segments. Refer to Note 2— Held for Sale, Divestitures and Discontinued Operations. (in thousands) Branded Services Experiential Services Retailer Services Total Three Months Ended September 30, 2024 Revenues $ 331,357 $ 342,731 $ 265,182 $ 939,270 Depreciation and amortization $ 33,087 $ 10,289 $ 8,490 $ 51,866 Loss from equity method investments $ ( 2,815 ) $ — $ — $ ( 2,815 ) Operating (loss) income from continuing operations $ ( 12,210 ) $ 587 $ 8,446 $ ( 3,177 ) Three Months Ended September 30, 2023 Revenues $ 451,173 $ 308,381 $ 260,152 $ 1,019,706 Depreciation and amortization $ 35,369 $ 9,221 $ 7,825 $ 52,415 Operating (loss) income from continuing operations $ ( 599 ) $ 1,971 $ 5,281 $ 6,653 19 (in thousands) Branded Services Experiential Services Retailer Services Total Nine Months Ended September 30, 2024 Revenues $ 982,752 $ 969,590 $ 721,697 $ 2,674,039 Impairment of goodwill and indefinite-lived assets $ 99,670 $ — $ — $ 99,670 Depreciation and amortization $ 97,401 $ 31,224 $ 24,306 $ 152,931 Loss from equity method investments $ ( 2,692 ) $ — $ — $ ( 2,692 ) Operating (loss) income from continuing operations $ ( 141,608 ) $ 3,398 $ 13,824 $ ( 124,386 ) Nine Months Ended September 30, 2023 Revenues $ 1,327,135 $ 850,722 $ 730,320 $ 2,908,177 Depreciation and amortization $ 106,550 $ 27,286 $ 23,600 $ 157,436 Operating income from continuing operations $ 11,607 $ 2,450 $ 11,870 $ 25,927 9. Restructuring In the third quarter of 2024, the Company implemented restructuring plans as a result of the overall reorganization. Voluntary Early Retirement Program 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 $ 20.5 million of settlement charges and special termination benefits in “Selling, general, and administrative expenses” in the Condensed Consolidated Statements of Operations and Comprehensive Loss. 2024 Restructuring Program (“2024 RIF”) 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 expected to be completed in fiscal year 2024. During the three and nine months ended September 30, 2024, the Company recorded $ 3.6 million of settlement charges and special termination benefits in “Selling, general, and administrative expenses” in the Condensed Consolidated Statements of Operations and Comprehensive Loss. As of September 30, 2024 , $ 21.1 million of the Company’s restructuring charges were included in “Other accrued expenses” in the Condensed Consolidated Balance Sheets. (in thousands) Three and Nine Months Ended September 30, 2024 Restructuring expenses: 2024 RIF $ 3,607 2024 VERP 20,511 Total restructuring expenses $ 24,118 The following table summarizes the Company’s restructuring activity: (in thousands) 2024 RIF 2024 VERP Total Balance at January 1, 2024 $ — $ — $ — Charges 3,607 20,511 24,118 Cash payments — ( 3,061 ) ( 3,061 ) Balance at September 30, 2024 $ 3,607 $ 17,450 $ 21,057 20 The following table summarizes the Company’s restructuring expense by segment: (in thousands) Three and Nine Months Ended September 30, 2024 Branded Services $ 15,392 Experiential Services 3,430 Retailer Services 5,296 Total restructuring expenses $ 24,118 10. Commitments and Contingencies Litigation The Company is involved in various legal matters that arise in the ordinary course of its business. Some of these legal matters purport or may be determined to be class and/or representative actions, or seek substantial damages, or penalties. The Company has accrued amounts in connection with certain legal matters, including with respect to certain of the matters described below. There can be no assurance, however, that these accruals will be sufficient to cover such matters or other legal matters or that such matters or other legal matters will not materially or adversely affect the Company’s financial position, liquidity, or results of operations. The Company is involved in various litigation and arbitration matters, including purported class or representative actions with respect to matters arising under the California Labor Code and Private Attorneys General Act, and commercial disputes with clients, vendors and third-party sellers of businesses. In April 2018, the Company acquired the business of Take 5 Media Group (“Take 5”). As a result of an investigation into that business in 2019 that identified certain misconduct, the Company terminated all operations of Take 5 in July 2019 and offered refunds to clients of collected revenues attributable to the period after the Company’s acquisition. The Company refers to the foregoing as the “Take 5 Matter.” The Company voluntarily disclosed to the United States Attorney’s Office and the Federal Bureau of Investigation certain misconduct occurring at Take 5. The Company intends to cooperate in this and any other governmental investigations that may arise in connection with the Take 5 Matter. In October 2022, an arbitrator made a final award in favor of the Company. The Company is actively pursuing the collection of this award in state court in Florida. The Company is currently unable to estimate if or when it will be able to collect any amounts associated with this arbitration. The Take 5 Matter may result in additional litigation against the Company, including lawsuits from clients, or governmental investigations, which may expose the Company to potential liability in excess of the amounts being offered by the Company as refunds to Take 5 clients. The Company is currently unable to determine the amount of any potential liability, costs or expenses (above the amounts already being offered as refunds) that may result from any lawsuits or investigations associated with the Take 5 Matter or determine whether any such issues will have any future material adverse effect on the Company’s financial position, liquidity, or results of operations. Although the Company has insurance covering certain liabilities, the Company cannot be certain that the insurance will be sufficient to cover any potential liability or expenses associated with the Take 5 Matter. 11. Stock-Based Compensation The Company has issued nonqualified stock options, restricted stock units (“RSUs”), and performance restricted stock units (“PSUs”) under the Advantage Solutions Inc. 2020 Incentive Award Plan (the “Plan”). The Company’s restricted stock units and performance restricted stock units, as described below, are expensed based on the fair value at the grant date. The Company recognized stock-based compensation expense and equity-based compensation expense associated with the Common Series C Units of Karman Topco L.P. as follows: 21 Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2024 2023 2024 2023 Restricted stock-based unit awards $ 5,121 $ 5,900 $ 14,265 $ 16,982 Other share-based awards 3,022 3,083 9,959 8,751 Total stock-based compensation before tax 8,143 8,983 24,224 25,733 Tax benefit ( 1,429 ) ( 2,102 ) ( 4,038 ) ( 6,660 ) Total stock-based compensation expense included in net income $ 6,714 $ 6,881 $ 20,186 $ 19,073 Performance Restricted Stock Units PSUs granted in 2024 are subject to achievement of certain performance conditions based on measurements of the Company’s Adjusted EBITDA margin and cash earnings. The Company’s Adjusted EBITDA margin and cash earnings relative to specified targets will be measured each year over the three-year period of 2024, 2025 and 2026, and an annual achievement percentage will be determined. The annual achievement percentages for each of 2024, 2025 and 2026 will be averaged following the completion of the three-year performance period to determine the final achievement percentage. In addition, the earned PSUs are subject to further adjustment depending on the Company’s performance against a specified peer group for total stockholder return during the three-year performance period. This adjustment can either put a floor or a cap on the calculation of the final PSUs value. Subject to certain termination events, these PSUs are scheduled to cliff-vest on the third-year anniversary of the date of grant and may vest from 0 % to 200 % of the “target” number of PSUs specified in the table below. PSUs are subject to the recipient's continued service to the Company. PSUs granted in 2023, 2022 and 2021 are subject to achievement of certain performance conditions based on the Company’s revenues (“PSU Revenues”) and Adjusted EBITDA (“PSU EBITDA”) targets in the respective measurement period and the recipient’s continued service to the Company. The measurement period is based on the twelve months of the respective fiscal year. The PSUs are scheduled to vest over a three-year period from the date of grant and may vest from 0 % to 150 % of the number of shares set forth in the table below. The number of PSUs earned shall be adjusted to be proportional to the partial performance between the Threshold Goals, Target Goals and Maximum Goals. During the first quarter of fiscal year 2024 , the Human Capital Committee determined that the achievement of the performance objectives applicable to the 2023 PSU EBITDA and 2023 PSU Revenues objectives were 150 % of Target Goals. The value of these PSU awards above the Target Goals remain subject to additional performance requirements (i.e., the above target performance must be maintained in 2024 and 2025, respectively) and service-based vesting conditions. The performance period for those PSU awards up to the Target Goals ended on December 31, 2023, but remain subject to service-based vesting conditions. The fair value of PSU grants was equal to the closing price of the Company's stock on the date of the applicable grant. The maximum potential expense if the Maximum Goals were met for these awards has been provided in the table below. Recognition of expense associated with performance-based stock is not permitted until achievement of the performance targets are probable of occurring. Measurement Period Number of Shares Threshold Number of Shares Target Number of Shares Maximum Weighted Average Fair Value per Share Maximum Remaining Unrecognized Compensation Expense Weighted-average remaining requisite service periods (in thousands, except share and per share data) 2024 133,111 1,064,885 2,129,770 $ 4.33 $ 4,196,829 2.6 years 2023 1,733,416 3,466,832 5,200,248 $ 2.10 $ 5,633,029 1.7 years 2022 75,118 150,236 150,236 $ 5.51 $ 140,490 0.7 years 22 The following table summarizes the PSU activity for the nine months ended September 30, 2024: Performance Share Units Weighted Average Grant Date Fair Value Outstanding at January 1, 2024 7,339,129 $ 2.60 Granted 1,064,885 $ 4.33 Distributed ( 2,405,453 ) $ 3.34 Forfeited ( 1,903,495 ) $ 2.12 PSU performance adjustment 2,326,312 $ 2.08 Outstanding at September 30, 2024 6,421,378 $ 2.55 Restricted Stock Units RSUs are subject to the recipient’s continued service to the Company. RSUs are generally scheduled to vest over three years and are subject to the provisions of the agreement under the Plan. During the nine months ended September 30, 2024, the following activities involving RSUs occurred under the Plan: Number of RSUs Weighted Average Grant Date Fair Value Outstanding at January 1, 2024 18,238,623 $ 2.92 Granted 5,872,921 $ 4.27 Distributed ( 6,586,358 ) $ 3.54 Forfeited ( 3,727,959 ) $ 2.84 Outstanding at September 30, 2024 13,797,227 $ 3.22 As of September 30, 2024 , the total remaining unrecognized compensation cost related to RSUs amounted to $ 23.1 million, which is expected to be amortized over the weighted-average remaining requisite service periods of 2.2 years. Stock Options During the nine months ended September 30, 2024, the following activities involving stock options occurred under the Plan: Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value Outstanding at January 1, 2024 17,375,000 $ 6.00 Granted 3,058,018 $ 4.33 Forfeited — $ — Cancelled/Expired — $ — Outstanding at September 30, 2024 20,433,018 $ 5.75 7.8 years $ 5,886,000 Exercisable at September 30, 2024 3,280,000 $ 2.33 8.6 years $ 5,514,000 As of September 30, 2024 , the Company had approximately $ 8.0 million of total unrecognized compensation expense related to stock options, net of forfeitures, which the Company expects to recognize over a weighted-average period of approximately 2.5 years. There were no options exercised during the nine months ended September 30, 2024 and 2023. 23 12. Earnings Per Share The Company calculates earnings per share using a dual presentation of basic and diluted earnings per share. Basic earnings per share is calculated by dividing net income attributable to stockholders of the Company by the weighted-average shares of common stock outstanding without the consideration for potential dilutive shares of common stock. Diluted earnings per share represents basic earnings per share adjusted to include the potentially dilutive effect of performance stock units, restricted stock units, public and private placement warrants, the employee stock purchase plan and stock options. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding and the potential dilutive shares of common stock for the period determined using the treasury stock method. During periods of net loss, diluted loss per share is equal to basic loss per share because the antidilutive effect of potential common shares is disregarded. The following is a reconciliation of basic and diluted net earnings per common share: Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except share and earnings per share data) 2024 2023 2024 2023 Basic earnings per share computation: Numerator: Net loss from continuing operations $ ( 37,320 ) $ ( 29,632 ) $ ( 200,469 ) $ ( 78,549 ) Less: net income from continuing operations attributable to noncontrolling interest — 1,437 — 2,346 Net loss from continuing operations attributable to stockholders of Advantage Solutions Inc. $ ( 37,320 ) $ ( 31,069 ) $ ( 200,469 ) $ ( 80,895 ) Net income from discontinued operations, net of tax $ ( 5,456 ) $ 7,050 $ 53,743 $ 443 Less: net income from discontinued operations attributable to noncontrolling interest — 319 2,192 235 Net income (loss) from discontinued operations attributable to stockholders of Advantage Solutions Inc. $ ( 5,456 ) $ 6,731 $ 51,551 $ 208 Denominator: Weighted average common shares - basic 321,080,571 324,706,866 321,774,115 323,353,308 Basic loss per common share from continuing operations $ ( 0.12 ) $ ( 0.09 ) $ ( 0.62 ) $ ( 0.24 ) Basic earnings (loss) per common share from discontinued operations $ ( 0.02 ) $ 0.02 $ 0.17 $ 0.00 Basic earnings (loss) per common share from continuing operations attributable to stockholders of Advantage Solutions Inc. $ ( 0.12 ) $ ( 0.10 ) $ ( 0.62 ) $ ( 0.25 ) Basic earnings (loss) per common share from discontinued operations attributable to stockholders of Advantage Solutions Inc. $ ( 0.02 ) $ 0.02 $ 0.16 $ 0.00 Diluted earnings per share computation: Numerator: Net loss from continuing operations $ ( 37,320 ) $ ( 29,632 ) $ ( 200,469 ) $ ( 78,549 ) Less: net income from continuing operations attributable to noncontrolling interest — 1,437 — 2,346 Net loss from continuing operations attributable to stockholders of Advantage Solutions Inc. $ ( 37,320 ) $ ( 31,069 ) $ ( 200,469 ) $ ( 80,895 ) Net income from discontinued operations, net of tax $ ( 5,456 ) $ 7,050 $ 53,743 $ 443 Less: net income from discontinued operations attributable to noncontrolling interest — 319 2,192 235 Net income (loss) from discontinued operations attributable to stockholders of Advantage Solutions Inc. $ ( 5,456 ) $ 6,731 $ 51,551 $ 208 Denominator: Weighted average common shares - diluted 321,080,571 324,706,866 321,774,115 323,353,308 Diluted loss per common share from continuing operations $ ( 0.12 ) $ ( 0.09 ) $ ( 0.62 ) $ ( 0.24 ) Diluted earnings (loss) per common share from discontinued operations $ ( 0.02 ) $ 0.02 $ 0.17 $ 0.00 Diluted loss per common share from continuing operations attributable to stockholders of Advantage Solutions Inc. $ ( 0.12 ) $ ( 0.10 ) $ ( 0.62 ) $ ( 0.25 ) Diluted earnings (loss) per common share from discontinued operations attributable to stockholders of Advantage Solutions Inc. $ ( 0.02 ) $ 0.02 $ 0.16 $ 0.00 The Company had 18,578,321 warrants to purchase Class A common stock at $ 11.50 per share outstanding at September 30, 2024 and 2023, which have been excluded from the calculation of diluted earnings per common share, as 24 the weighted average market price of the common stock during the three and nine months ended September 30, 2024 and 2023 did not exceed the exercise price of the warrants. In accordance with the treasury stock method the weighted average shares outstanding assuming dilution include the incremental effect of stock-based awards, except when such effect would be antidilutive. Stock-based awards of 13.9 million and 16.6 million weighted-average shares were outstanding for the three and nine months ended September 30, 2024, respectively, but were not included in the computation of diluted (loss) earnings per common share because the net loss position of the Company made them antidilutive. Stock-based awards of 8.7 million and 4.0 million weighted-average shares were outstanding for the three and nine months ended September 30, 2023, respectively, but were not included in the computation of diluted loss per common share because the net loss position of the Company made them antidilutive. In addition, PSUs related to 6.0 million shares assuming achievement of the target level performance were outstanding for the nine months ended September 30, 2024, but were not included in the computation of diluted loss per common share, as the performance targets were not yet met during the nine months ended September 30, 2024. In addition, PSUs related to 7.3 million shares assuming achievement of the Target Goals were outstanding for the nine months ended September 30, 2023 , but were not included in the computation of diluted (loss) earnings per common share, as the performance targets were not yet met during the nine months ended September 30, 2023 . 25