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dr60.

 

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 September 30, 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 November 8, 2022, the registrant had 319,684,462 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

 

4

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

5

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows

 

7

 

 

 

 

 

Notes to the Condensed Consolidated Financial Statements

 

8

 

 

 

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

 

26

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

46

 

 

 

Item 4. Controls and Procedures

 

47

 

 

 

PART II—OTHER INFORMATION

 

48

 

 

 

Item 1. Legal Proceedings

 

48

 

 

 

Item 1A. Risk Factors

 

49

 

 

 

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

 

73

 

 

 

Item 3. Defaults Upon Senior Securities

 

73

 

 

 

Item 4. Mine Safety Disclosures

 

73

 

 

 

Item 5. Other Information

 

74

 

 

 

Item 6. Exhibits

 

74

 

 

 

Signatures

 

75

 

 

2


 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

ADVANTAGE SOLUTIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

September 30,

 

 

December 31,

 

(in thousands, except share data)

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

96,215

 

 

$

164,622

 

Restricted cash

 

 

18,079

 

 

 

16,015

 

Accounts receivable, net of allowance for expected credit losses of
     $
13,648 and $15,916, respectively

 

 

833,432

 

 

 

797,677

 

Prepaid expenses and other current assets

 

 

155,429

 

 

 

126,000

 

Total current assets

 

 

1,103,155

 

 

 

1,104,314

 

Property and equipment, net

 

 

69,084

 

 

 

63,696

 

Goodwill

 

 

2,246,053

 

 

 

2,206,004

 

Other intangible assets, net

 

 

2,150,075

 

 

 

2,287,514

 

Investments in unconsolidated affiliates

 

 

124,815

 

 

 

125,158

 

Other assets

 

 

120,644

 

 

 

67,582

 

Total assets

 

$

5,813,826

 

 

$

5,854,268

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Current portion of long-term debt

 

$

14,704

 

 

$

14,397

 

Accounts payable

 

 

267,684

 

 

 

277,366

 

Accrued compensation and benefits

 

 

109,935

 

 

 

139,157

 

Other accrued expenses

 

 

161,246

 

 

 

164,133

 

Deferred revenues

 

 

47,441

 

 

 

50,467

 

Total current liabilities

 

 

601,010

 

 

 

645,520

 

Long-term debt, net of current portion

 

 

2,024,591

 

 

 

2,028,882

 

Deferred income tax liabilities

 

 

456,755

 

 

 

483,165

 

Warrant liability

 

 

733

 

 

 

22,189

 

Other long-term liabilities

 

 

109,421

 

 

 

92,218

 

Total liabilities

 

 

3,192,510

 

 

 

3,271,974

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

3,353

 

 

 

1,893

 

 

 

 

 

 

 

 

Equity attributable to stockholders of Advantage Solutions Inc.

 

 

 

 

 

 

Common stock, $0.0001 par value, 3,290,000,000 shares authorized;
     
319,675,888 and 316,963,552 shares issued and outstanding as of
     September 30, 2022 and December 31, 2021, respectively

 

 

32

 

 

 

32

 

Additional paid in capital

 

 

3,398,477

 

 

 

3,373,278

 

Accumulated deficit

 

 

(823,212

)

 

 

(866,607

)

Loans to Karman Topco L.P.

 

 

(6,357

)

 

 

(6,340

)

Accumulated other comprehensive loss

 

 

(29,978

)

 

 

(4,479

)

Treasury stock, at cost; 1,610,014 shares as of September 30, 2022
     and December 31, 2021

 

 

(12,567

)

 

 

(12,567

)

Total equity attributable to stockholders of Advantage Solutions Inc.

 

 

2,526,395

 

 

 

2,483,317

 

Nonredeemable noncontrolling interest

 

 

91,568

 

 

 

97,084

 

Total stockholders’ equity

 

 

2,617,963

 

 

 

2,580,401

 

Total liabilities, redeemable noncontrolling interest, and
     stockholders’ equity

 

$

5,813,826

 

 

$

5,854,268

 

 

See Notes to the Condensed Consolidated Financial Statements.

 

3


 

ADVANTAGE SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

(in thousands, except share and per share data)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

Revenues

 

$

1,051,095

 

 

$

928,760

 

 

$

2,946,979

 

 

$

2,569,735

 

 

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

 

 

908,523

 

 

 

766,253

 

 

 

2,536,256

 

 

 

2,117,818

 

 

Selling, general, and administrative expenses

 

 

37,945

 

 

 

37,742

 

 

 

138,594

 

 

 

124,830

 

 

Depreciation and amortization

 

 

57,785

 

 

 

59,163

 

 

 

173,997

 

 

 

181,450

 

 

Total operating expenses

 

 

1,004,253

 

 

 

863,158

 

 

 

2,848,847

 

 

 

2,424,098

 

 

Operating income

 

 

46,842

 

 

 

65,602

 

 

 

98,132

 

 

 

145,637

 

 

Other (income) expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrant liability

 

 

(1,100

)

 

 

(3,491

)

 

 

(21,456

)

 

 

(5,024

)

 

Interest expense, net

 

 

23,557

 

 

 

36,490

 

 

 

63,628

 

 

 

104,544

 

 

Total other expenses

 

 

22,457

 

 

 

32,999

 

 

 

42,172

 

 

 

99,520

 

 

Income before income taxes

 

 

24,385

 

 

 

32,603

 

 

 

55,960

 

 

 

46,117

 

 

Provision for income taxes

 

 

1,158

 

 

 

8,276

 

 

 

11,523

 

 

 

16,582

 

 

Net income

 

 

23,227

 

 

 

24,327

 

 

 

44,437

 

 

 

29,535

 

 

Less: net income attributable to
     noncontrolling interest

 

 

2,168

 

 

 

1,016

 

 

 

1,042

 

 

 

219

 

 

Net income attributable to stockholders of
     Advantage Solutions Inc.

 

 

21,059

 

 

 

23,311

 

 

 

43,395

 

 

 

29,316

 

 

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(13,616

)

 

 

(2,443

)

 

 

(25,499

)

 

 

(4,239

)

 

Total comprehensive income attributable to
     stockholders of Advantage Solutions Inc.

 

$

7,443

 

 

$

20,868

 

 

$

17,896

 

 

$

25,077

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.07

 

 

$

0.07

 

 

$

0.14

 

 

$

0.09

 

 

Diluted

 

$

0.07

 

 

$

0.07

 

 

$

0.14

 

 

$

0.09

 

 

Weighted-average number of common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

318,821,895

 

 

 

318,563,497

 

 

 

318,345,565

 

 

 

318,213,337

 

 

Diluted

 

 

319,725,065

 

 

 

320,120,634

 

 

 

319,190,804

 

 

 

319,654,817

 

 

 

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 July 1, 2022

 

318,465,449

 

 

$

32

 

 

 

1,610,014

 

 

$

(12,567

)

 

$

3,390,899

 

 

$

(844,271

)

 

$

(6,351

)

 

$

(16,362

)

 

$

2,511,380

 

 

$

90,109

 

 

$

2,601,489

 

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,059

 

 

 

 

 

 

 

 

 

21,059

 

 

 

2,092

 

 

 

23,151

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,616

)

 

 

(13,616

)

 

 

(6,824

)

 

 

(20,440

)

Total comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,443

 

 

 

(4,732

)

 

 

2,711

 

Interest on loans to Karman Topco L.P.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6

)

 

 

 

 

 

(6

)

 

 

 

 

 

(6

)

Increase in noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,191

 

 

 

6,191

 

Equity-based compensation of Karman
     Topco L.P.

 

 

 

 

 

 

 

 

 

 

 

 

 

(828

)

 

 

 

 

 

 

 

 

 

 

 

(828

)

 

 

 

 

 

(828

)

Shares issued under 2020 Employee
     Stock Purchase Plan

 

470,786

 

 

 

 

 

 

 

 

 

 

 

 

1,667

 

 

 

 

 

 

 

 

 

 

 

 

1,667

 

 

 

 

 

 

1,667

 

Shares issued under 2020 Incentive
     Award Plan

 

739,653

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

6,739

 

 

 

 

 

 

 

 

 

 

 

 

6,739

 

 

 

 

 

 

6,739

 

Balance at September 30, 2022

 

319,675,888

 

 

$

32

 

 

$

1,610,014

 

 

$

(12,567

)

 

$

3,398,477

 

 

$

(823,212

)

 

$

(6,357

)

 

$

(29,978

)

 

$

2,526,395

 

 

$

91,568

 

 

$

2,617,963

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

Advantage

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Loans

 

 

Other

 

 

Solutions Inc.

 

 

Nonredeemable

 

 

Total

 

 

 

 

 

 

 

 

Paid-in

 

 

Accumulated