10-Q 1 adv-20220331.htm 10-Q 10-Q
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r60.

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2022

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

 

Commission File Number: 001-38990

 

Advantage Solutions Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

83-4629508

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification Number)

 

15310 Barranca Parkway Suite 100

Irvine, CA 92618

(Address of principal executive offices)

 

(949) 797-2900

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A common stock, $0.0001 par value per share

 

ADV

 

Nasdaq Global Select Market

Warrants exercisable for one share of Class A common stock at an exercise price of $11.50 per share

 

ADVWW

 

Nasdaq Global Select Market

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

As of May 9, 2022, the registrant had 318,408,933 shares of Class A common stock outstanding.

 

 

 

 


 

Advantage Solutions Inc.

 

TABLE OF CONTENTS

 

 

 

Page

PART I—FINANCIAL INFORMATION

 

3

 

 

 

Item 1. Financial Statements (Unaudited)

 

3

 

 

 

 

Condensed Consolidated Balance Sheets

 

3

 

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

 

4

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

5

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows

 

6

 

 

 

 

 

Notes to the Condensed Consolidated Financial Statements

 

7

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

39

 

 

 

Item 4. Controls and Procedures

 

40

 

 

 

PART II—OTHER INFORMATION

 

41

 

 

 

Item 1. Legal Proceedings

 

41

 

 

 

Item 1A. Risk Factors

 

42

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

66

 

 

 

Item 3. Defaults Upon Senior Securities

 

66

 

 

 

Item 4. Mine Safety Disclosures

 

66

 

 

 

Item 5. Other Information

 

66

 

 

 

Item 6. Exhibits

 

67

 

 

 

Signatures

 

68

 

 

2


 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

ADVANTAGE SOLUTIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

March 31,

 

 

December 31,

 

(in thousands, except share and per share data)

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

123,560

 

 

$

164,622

 

Restricted cash

 

 

17,381

 

 

 

16,015

 

Accounts receivable, net of allowance for expected credit losses of
     $
14,730 and $15,916, respectively

 

 

776,760

 

 

 

797,677

 

Prepaid expenses and other current assets

 

 

189,702

 

 

 

126,000

 

Total current assets

 

 

1,107,403

 

 

 

1,104,314

 

Property and equipment, net

 

 

66,961

 

 

 

63,696

 

Goodwill

 

 

2,204,046

 

 

 

2,206,004

 

Other intangible assets, net

 

 

2,237,132

 

 

 

2,287,514

 

Investments in unconsolidated affiliates

 

 

126,886

 

 

 

125,158

 

Other assets

 

 

96,598

 

 

 

67,582

 

Total assets

 

$

5,839,026

 

 

$

5,854,268

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Current portion of long-term debt

 

$

14,955

 

 

$

14,397

 

Accounts payable

 

 

220,052

 

 

 

277,366

 

Accrued compensation and benefits

 

 

140,478

 

 

 

139,157

 

Other accrued expenses

 

 

176,502

 

 

 

164,133

 

Deferred revenues

 

 

52,543

 

 

 

50,467

 

Total current liabilities

 

 

604,530

 

 

 

645,520

 

Long-term debt, net of current portion

 

 

2,027,650

 

 

 

2,028,882

 

Deferred income tax liabilities

 

 

489,873

 

 

 

483,165

 

Warrant liability

 

 

6,747

 

 

 

22,189

 

Other long-term liabilities

 

 

105,607

 

 

 

92,218

 

Total liabilities

 

 

3,234,407

 

 

 

3,271,974

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

1,849

 

 

 

1,893

 

 

 

 

 

 

 

 

Equity attributable to stockholders of Advantage Solutions Inc.

 

 

 

 

 

 

Common stock, $0.0001 par value, 3,290,000,000 shares authorized;
     
318,393,829 and 316,963,552 shares issued and outstanding as of
     March 31, 2022 and December 31, 2021, respectively

 

 

32

 

 

 

32

 

Additional paid in capital

 

 

3,379,350

 

 

 

3,373,278

 

Accumulated deficit

 

 

(847,642

)

 

 

(866,607

)

Loans to Karman Topco L.P.

 

 

(6,345

)

 

 

(6,340

)

Accumulated other comprehensive loss

 

 

(3,090

)

 

 

(4,479

)

Treasury stock, at cost; 1,610,014 shares as of March 31, 2022
     and December 31, 2021

 

 

(12,567

)

 

 

(12,567

)

Total equity attributable to stockholders of Advantage Solutions Inc.

 

 

2,509,738

 

 

 

2,483,317

 

Nonredeemable noncontrolling interest

 

 

93,032

 

 

 

97,084

 

Total stockholders’ equity

 

 

2,602,770

 

 

 

2,580,401

 

Total liabilities, redeemable noncontrolling interest, and
     stockholders’ equity

 

$

5,839,026

 

 

$

5,854,268

 

 

See Notes to the Condensed Consolidated Financial Statements.

 

3


 

ADVANTAGE SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

 

 

 

Three Months Ended March 31,

 

(in thousands, except share and per share data)

 

2022

 

 

2021

 

Revenues

 

$

914,808

 

 

$

791,021

 

Cost of revenues (exclusive of depreciation and
     amortization shown separately below)

 

 

785,943

 

 

 

653,339

 

Selling, general, and administrative expenses

 

 

48,073

 

 

 

40,481

 

Depreciation and amortization

 

 

57,768

 

 

 

59,613

 

Total operating expenses

 

 

891,784

 

 

 

753,433

 

Operating income

 

 

23,024

 

 

 

37,588

 

Other (income) expenses:

 

 

 

 

 

 

Change in fair value of warrant liability

 

 

(15,442

)

 

 

5,526

 

Interest expense, net

 

 

11,883

 

 

 

30,865

 

Total other (income) expenses

 

 

(3,559

)

 

 

36,391

 

Income before income taxes

 

 

26,583

 

 

 

1,197

 

Provision for income taxes

 

 

9,049

 

 

 

1,743

 

Net income (loss)

 

 

17,534

 

 

 

(546

)

Less: net loss attributable to noncontrolling
     interest

 

 

(1,431

)

 

 

(430

)

Net income (loss) attributable to stockholders of
     Advantage Solutions Inc.

 

 

18,965

 

 

 

(116

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

1,389

 

 

 

(2,420

)

Total comprehensive income (loss) attributable to
     stockholders of Advantage Solutions Inc.

 

$

20,354

 

 

$

(2,536

)

Net income (loss) per common share:

 

 

 

 

 

 

Basic

 

$

0.06

 

 

$

(0.00

)

Diluted

 

$

0.06

 

 

$

(0.00

)

Weighted-average number of common shares:

 

 

 

 

 

 

Basic

 

 

317,784,656

 

 

 

317,601,345

 

Diluted

 

 

318,721,082

 

 

 

317,601,345

 

 

See Notes to the Condensed Consolidated Financial Statements.

 

4


 

ADVANTAGE SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

Advantage

 

 

 

 

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Additional

 

 

 

 

 

Loans

 

 

Other

 

 

Solutions Inc.

 

 

Nonredeemable

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid-in

 

 

Accumulated

 

 

to

 

 

Comprehensive

 

 

Stockholders'

 

 

Noncontrolling

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Topco

 

 

Income (Loss)

 

 

Equity

 

 

Interests

 

 

Equity

 

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2022

 

316,963,552

 

 

$

32

 

 

 

1,610,014

 

 

$

(12,567

)

 

$

3,373,278

 

 

$

(866,607

)

 

$

(6,340

)

 

$

(4,479

)

 

$

2,483,317

 

 

$

97,084

 

 

$

2,580,401

 

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,965

 

 

 

 

 

 

 

 

 

18,965

 

 

 

(1,441

)

 

 

17,524

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,389

 

 

 

1,389

 

 

 

(2,611

)

 

 

(1,222

)

Total comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,354

 

 

 

(4,052

)

 

 

16,302

 

Interest on loans to Karman Topco L.P.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

 

 

 

(5

)

 

 

 

 

 

(5

)

Equity-based compensation of Topco

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,795

)

 

 

 

 

 

 

 

 

 

 

 

(2,795

)

 

 

 

 

 

(2,795

)

Shares issued under 2020 Employee Stock
     Purchase Plan

 

242,427

 

 

 

 

 

 

 

 

 

 

 

 

1,653

 

 

 

 

 

 

 

 

 

 

 

 

1,653

 

 

 

 

 

 

1,653

 

Shares issued under 2020 Incentive
     Award Plan

 

1,187,850

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

7,214

 

 

 

 

 

 

 

 

 

 

 

 

7,214

 

 

 

 

 

 

7,214

 

Balance at March 31, 2022

 

318,393,829

 

 

$

32

 

 

 

1,610,014

 

 

$

(12,567

)

 

$

3,379,350

 

 

$

(847,642

)

 

$

(6,345

)

 

$

(3,090

)

 

$

2,509,738

 

 

$

93,032

 

 

$

2,602,770

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

Advantage

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Loans

 

 

Other

 

 

Solutions Inc.

 

 

Nonredeemable

 

 

Total

 

 

 

 

 

 

 

 

Paid-in

 

 

Accumulated

 

 

to

 

 

Comprehensive

 

 

Stockholders'

 

 

Noncontrolling

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Topco

 

 

Income (Loss)

 

 

Equity

 

 

Interests

 

 

Equity

 

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2021

 

318,425,182

 

 

$

32

 

 

$

3,348,546

 

 

$

(921,101

)

 

$

(6,316

)

 

$

674

 

 

$

2,421,835

 

 

$

96,954

 

 

$

2,518,789

 

Comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

(116

)

 

 

 

 

 

 

 

 

(116

)

 

 

(430

)

 

 

(546

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,420

)

 

 

(2,420

)

 

 

(710

)

 

 

(3,130

)

Total comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,536

)

 

 

(1,140

)

 

 

(3,676

)

Interest on loans to Karman Topco L.P.

 

 

 

 

 

 

 

 

 

 

 

 

 

(6

)

 

 

 

 

 

(6

)

 

 

 

 

 

(6

)

Equity-based compensation of Topco

 

 

 

 

 

 

 

(4,049

)

 

 

 

 

 

 

 

 

 

 

 

(4,049

)

 

 

 

 

 

(4,049

)

Shares issued under 2020 Incentive
     Award Plan

 

24,784

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

9,886

 

 

 

 

 

 

 

 

 

 

 

 

9,886

 

 

 

 

 

 

9,886

 

Balance at March 31, 2021

 

318,449,966

 

 

$

32

 

 

$

3,354,383

 

 

$

(921,217

)

 

$

(6,322

)

 

$

(1,746

)

 

$

2,425,130

 

 

$

95,814

 

 

$

2,520,944

 

 

See Notes to the Condensed Consolidated Financial Statements.

 

5


 

ADVANTAGE SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Three Months Ended
March 31,

 

 

(in thousands)

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

Net income (loss)

 

$

17,534

 

 

$

(546

)

 

Adjustments to reconcile net income (loss) to net cash (used in) provided by
   operating activities

 

 

 

 

 

 

 

Noncash interest expense, net

 

 

(18,704

)

 

 

(3,084

)

 

Depreciation and amortization

 

 

57,768

 

 

 

59,613

 

 

Change in fair value of warrant liability

 

 

(15,442

)

 

 

5,526

 

 

Fair value adjustments related to contingent consideration

 

 

2,134

 

 

 

(584

)

 

Deferred income taxes

 

 

7,235

 

 

 

1,793

 

 

Equity-based compensation of Topco