SEC Filing - Advantage Solutions

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10-Q

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 June 30, 2022


	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 August 8, 2022, the registrant had 318,503,330 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		25

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		73

Item 6. Exhibits		74

Signatures		75

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ADVANTAGE SOLUTIONS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	June 30,			December 31,
(in thousands, except share and per share data)	2022			2021
ASSETS
Current assets
Cash and cash equivalents	$	115,780		$	164,622
Restricted cash		17,883			16,015
Accounts receivable, net of allowance for expected credit losses of $16,579 and $15,916, respectively		804,906			797,677
Prepaid expenses and other current assets		156,184			126,000
Total current assets		1,094,753			1,104,314
Property and equipment, net		68,416			63,696
Goodwill		2,247,466			2,206,004
Other intangible assets, net		2,200,957			2,287,514
Investments in unconsolidated affiliates		125,207			125,158
Other assets		108,186			67,582
Total assets	$	5,844,985		$	5,854,268
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	59,775		$	14,397
Accounts payable		250,593			277,366
Accrued compensation and benefits		128,003			139,157
Other accrued expenses		141,120			164,133
Deferred revenues		48,501			50,467
Total current liabilities		627,992			645,520
Long-term debt, net of current portion		2,025,978			2,028,882
Deferred income tax liabilities		474,250			483,165
Warrant liability		1,833			22,189
Other long-term liabilities		111,695			92,218
Total liabilities		3,241,748			3,271,974
Commitments and contingencies (Note 10)

Redeemable noncontrolling interest		1,748			1,893

Equity attributable to stockholders of Advantage Solutions Inc.
Common stock, $0.0001 par value, 3,290,000,000 shares authorized; 318,465,449 and 316,963,552 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		32			32
Additional paid in capital		3,390,899			3,373,278
Accumulated deficit		(844,271	)		(866,607	)
Loans to Karman Topco L.P.		(6,351	)		(6,340	)
Accumulated other comprehensive loss		(16,362	)		(4,479	)
Treasury stock, at cost; 1,610,014 shares as of June 30, 2022 and December 31, 2021		(12,567	)		(12,567	)
Total equity attributable to stockholders of Advantage Solutions Inc.		2,511,380			2,483,317
Nonredeemable noncontrolling interest		90,109			97,084
Total stockholders’ equity		2,601,489			2,580,401
Total liabilities, redeemable noncontrolling interest, and stockholders’ equity	$	5,844,985		$	5,854,268

See Notes to the Condensed Consolidated Financial Statements.

ADVANTAGE SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)


	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except share and per share data)	2022			2021			2022			2021
Revenues	$	981,076		$	849,954		$	1,895,884		$	1,640,975
Cost of revenues (exclusive of depreciation and amortization shown separately below)		841,790			698,226			1,627,733			1,351,565
Selling, general, and administrative expenses		52,576			46,607			100,649			87,088
Depreciation and amortization		58,444			62,674			116,212			122,287
Total operating expenses		952,810			807,507			1,844,594			1,560,940
Operating income		28,266			42,447			51,290			80,035
Other (income) expenses:
Change in fair value of warrant liability		(4,914	)		(7,059	)		(20,356	)		(1,533	)
Interest expense, net		28,188			37,189			40,071			68,054
Total other expenses (income)		23,274			30,130			19,715			66,521
Income before income taxes		4,992			12,317			31,575			13,514
Provision for income taxes		1,316			6,563			10,365			8,306
Net income		3,676			5,754			21,210			5,208
Less: net income (loss) attributable to noncontrolling interest		305			(367	)		(1,126	)		(797	)
Net income attributable to stockholders of Advantage Solutions Inc.		3,371			6,121			22,336			6,005
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments		(13,272	)		624			(11,883	)		(1,796	)
Total comprehensive (loss) income attributable to stockholders of Advantage Solutions Inc.	$	(9,901	)	$	6,745		$	10,453		$	4,209
Net income per common share:
Basic	$	0.01		$	0.02		$	0.07		$	0.02
Diluted	$	0.01		$	0.00		$	0.07		$	0.01
Weighted-average number of common shares:
Basic		318,418,746			318,464,596			318,103,452			318,035,355
Diluted		319,114,865			323,294,273			318,919,725			321,958,953

See Notes to the Condensed Consolidated Financial Statements.

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 April 1, 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
Comprehensive income (loss)
Net income (loss)		—		—		—		—			—			3,371			—			—			3,371			267			3,638
Foreign currency translation adjustments		—		—		—		—			—			—			—			(13,272	)		(13,272	)		(3,190	)		(16,462	)
Total comprehensive income (loss)																							(9,901	)		(2,923	)		(12,824	)
Interest on loans to Karman Topco L.P.		—		—		—		—			—			—			(6	)		—			(6	)		—			(6	)
Equity-based compensation of Karman Topco L.P.		—		—		—		—			(3,519	)		—			—			—			(3,519	)		—			(3,519	)
Shares issued under 2020 Incentive Award Plan		71,620		—		—		—			—			—			—			—			—			—			—
Stock-based compensation expense		—		—		—		—			15,068			—			—			—			15,068			—			15,068
Balance at June 30, 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


													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 April 1, 2021		318,449,966	$	32	$	3,354,383	$	(921,217	)	$	(6,322	)	$	(1,746	)	$	2,425,130	$	95,814	$	2,520,944
Comprehensive income (loss)
Net income (loss)		—		—		—