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60.

 

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, 2021

 

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, 2021, the registrant had 318,573,566 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

 

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

 

50

 

 

 

Item 4. Controls and Procedures

 

51

 

 

 

PART II—OTHER INFORMATION

 

54

 

 

 

Item 1. Legal Proceedings

 

54

 

 

 

Item 1A. Risk Factors

 

55

 

 

 

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

 

55

 

 

 

Item 3. Defaults Upon Senior Securities

 

55

 

 

 

Item 4. Mine Safety Disclosures

 

55

 

 

 

Item 5. Other Information

 

56

 

 

 

Item 6. Exhibits

 

56

 

 

 

Signatures

 

57

 

 

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 and per share data)

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

168,028

 

 

$

204,301

 

Restricted cash

 

 

16,379

 

 

 

15,665

 

Accounts receivable, net of allowance for expected credit losses of
     $
15,773 and $16,377, respectively

 

 

704,119

 

 

 

574,142

 

Prepaid expenses and other current assets

 

 

167,581

 

 

 

105,643

 

Total current assets

 

 

1,056,107

 

 

 

899,751

 

Property and equipment, net

 

 

65,083

 

 

 

80,016

 

Goodwill

 

 

2,203,121

 

 

 

2,163,339

 

Other intangible assets, net

 

 

2,338,520

 

 

 

2,452,796

 

Investments in unconsolidated affiliates

 

 

121,844

 

 

 

115,624

 

Other assets

 

 

68,226

 

 

 

65,966

 

Total assets

 

$

5,852,901

 

 

$

5,777,492

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Current portion of long-term debt

 

$

13,369

 

 

$

63,745

 

Accounts payable

 

 

244,586

 

 

 

195,452

 

Accrued compensation and benefits

 

 

158,522

 

 

 

142,136

 

Other accrued expenses

 

 

155,371

 

 

 

121,758

 

Deferred revenue

 

 

56,250

 

 

 

51,898

 

Total current liabilities

 

 

628,098

 

 

 

574,989

 

Long-term debt, net of current portion

 

 

2,026,027

 

 

 

2,029,328

 

Deferred income tax liabilities

 

 

475,483

 

 

 

491,242

 

Warrant liability

 

 

16,210

 

 

 

21,234

 

Other long-term liabilities

 

 

147,967

 

 

 

141,910

 

Total liabilities

 

 

3,293,785

 

 

 

3,258,703

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

1,819

 

 

 

 

Equity attributable to stockholders of Advantage Solutions Inc.

 

 

 

 

 

 

Preferred stock, no par value, 10,000,000 shares authorized; none issued
     and outstanding as of September 30, 2021 and December 31, 2020,
     respectively

 

 

 

 

 

 

Common stock, $0.0001 par value, 3,290,000,000 shares authorized;
     
318,573,563 and 318,425,182 shares issued and outstanding as of
     September 30, 2021 and December 31, 2020, respectively

 

 

32

 

 

 

32

 

Additional paid in capital

 

 

3,364,365

 

 

 

3,348,546

 

Accumulated deficit

 

 

(891,785

)

 

 

(921,101

)

Loans to Karman Topco L.P.

 

 

(6,334

)

 

 

(6,316

)

Accumulated other comprehensive (loss) income

 

 

(3,565

)

 

 

674

 

Total equity attributable to stockholders of Advantage Solutions Inc.

 

 

2,462,713

 

 

 

2,421,835

 

Nonredeemable noncontrolling interest

 

 

94,584

 

 

 

96,954

 

Total stockholders’ equity

 

 

2,557,297

 

 

 

2,518,789

 

Total liabilities, redeemable noncontrolling interest, and
     stockholders’ equity

 

$

5,852,901

 

 

$

5,777,492

 

 

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 September 30,

 

 

Nine Months Ended September 30,

 

(in thousands, except share and per share data)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues

 

$

928,760

 

 

$

784,345

 

 

$

2,569,735

 

 

$

2,305,284

 

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

 

 

766,253

 

 

 

625,363

 

 

 

2,117,818

 

 

 

1,881,979

 

Selling, general, and administrative expenses

 

 

37,742

 

 

 

11,855

 

 

 

124,830

 

 

 

133,480

 

Recovery from Take 5

 

 

 

 

 

 

 

 

 

 

 

(7,700

)

Depreciation and amortization

 

 

59,163

 

 

 

58,556

 

 

 

181,450

 

 

 

177,513

 

Total operating expenses

 

 

863,158

 

 

 

695,774

 

 

 

2,424,098

 

 

 

2,185,272

 

Operating income

 

 

65,602

 

 

 

88,571

 

 

 

145,637

 

 

 

120,012

 

Other (income) expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrant liability

 

 

(3,491

)

 

 

 

 

 

(5,024

)

 

 

 

Interest expense, net

 

 

36,490

 

 

 

48,243

 

 

 

104,544

 

 

 

151,558

 

Total other expenses

 

 

32,999

 

 

 

48,243

 

 

 

99,520

 

 

 

151,558

 

Income (loss) before income taxes

 

 

32,603

 

 

 

40,328

 

 

 

46,117

 

 

 

(31,546

)

Provision for (benefit from) income taxes

 

 

8,276

 

 

 

3,623

 

 

 

16,582

 

 

 

(8,714

)

Net income (loss)

 

 

24,327

 

 

 

36,705

 

 

 

29,535

 

 

 

(22,832

)

Less: net income attributable to noncontrolling
     interest

 

 

1,016

 

 

 

756

 

 

 

219

 

 

 

331

 

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

 

 

23,311

 

 

 

35,949

 

 

 

29,316

 

 

 

(23,163

)

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(2,443

)

 

 

5,970

 

 

 

(4,239

)

 

 

(347

)

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

 

$

20,868

 

 

$

41,919

 

 

$

25,077

 

 

$

(23,510

)

Net income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.07

 

 

$

0.18

 

 

$

0.09

 

 

$

(0.11

)

Diluted

 

$

0.07

 

 

$

0.18

 

 

$

0.09

 

 

$

(0.11

)

Weighted-average number of common shares:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

318,563,497

 

 

 

203,750,000

 

 

 

318,213,337

 

 

 

203,750,000

 

Diluted

 

 

320,120,634

 

 

 

203,750,000

 

 

 

319,654,817

 

 

 

203,750,000

 

 

See Notes to the Condensed Consolidated Financial Statements.

 

4


 

ADVANTAGE SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 July 1, 2021

 

318,496,390

 

 

$

32

 

 

$

3,361,262

 

 

$

(915,096

)

 

$

(6,328

)

 

$

(1,122

)

 

$

2,438,748

 

 

$

95,916

 

 

$

2,534,664

 

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

23,311

 

 

 

 

 

 

 

 

 

23,311

 

 

 

973

 

 

 

24,284

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,443

)

 

 

(2,443

)

 

 

(2,305

)

 

 

(4,748

)

Total comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,868

 

 

 

(1,332

)

 

 

19,536

 

Loans to Karman Topco L.P.

 

 

 

 

 

 

 

 

 

 

 

 

 

(6

)

 

 

 

 

 

(6

)

 

 

 

 

 

(6

)

Redemption of noncontrolling interest

 

 

 

 

 

 

 

(16

)

 

 

 

 

 

 

 

 

 

 

 

(16

)

 

 

 

 

 

(16

)

Equity-based compensation

 

 

 

 

 

 

 

(6,030

)

 

 

 

 

 

 

 

 

 

 

 

(6,030

)

 

 

 

 

 

(6,030

)

Shares issued upon exercise of
     warrants

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued under Employee Stock Purchase
     Plan

 

77,172

 

 

 

 

 

 

736

 

 

 

 

 

 

 

 

 

 

 

 

736

 

 

 

 

 

 

736

 

Stock-based compensation expense

 

 

 

 

 

 

 

8,413

 

 

 

 

 

 

 

 

 

 

 

 

8,413

 

 

 

 

 

 

8,413

 

Balance at September 30, 2021

 

318,573,563

 

 

$

32

 

 

$

3,364,365

 

 

$

(891,785

)

 

$

(6,334

)

 

$

(3,565

)

 

$

2,462,713

 

 

$

94,584

 

 

$

2,557,297

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 July 1, 2020

 

203,750,000

 

 

$

20

 

 

$

2,339,121

 

 

$

(804,407

)

 

$

(6,282

)

 

$

(14,470

)

 

$

1,513,982

 

 

$

87,483

 

 

$

1,601,465

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

35,949

 

 

 

 

 

 

 

 

 

35,949

 

 

 

756

 

 

 

36,705

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,970

 

 

 

5,970

 

 

 

3,618

 

 

 

9,588

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

41,919

 

 

 

4,374

 

 

 

46,293

 

Loans to Karman Topco L.P.

 

 

 

 

 

 

 

 

 

 

 

 

 

(38

)

 

 

 

 

 

(38

)

 

 

 

 

 

(38

)

Balance at September 30, 2020

 

203,750,000

 

 

$

20

 

 

$

2,339,121

 

 

$

(768,458

)

 

$

(6,320

)

 

$

(8,500

)

 

$

1,555,863

 

 

$

91,857

 

 

$

1,647,720

 

 

 

 

5


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated