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 September 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 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

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.

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.

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