8-K
false00017766610001776661adv:WarrantsExercisableForOneShareOfClassCommonStockAtExercisePriceOf11.50PerShareMember2024-02-292024-02-290001776661adv:ClassCommonStock0.0001ParValuePerShareMember2024-02-292024-02-2900017766612024-02-292024-02-29

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 29, 2024

 

 

Advantage Solutions Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware

001-38990

83-4629508

(State or Other Jurisdiction
of Incorporation)

(Commission File Number)

(IRS Employer
Identification No.)

 

 

 

 

 

15310 Barranca Parkway, Suite 100

 

Irvine, California

 

92618

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (949) 797-2900

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

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. ☐

 


Item 2.02 – Results of Operations and Financial Condition.

On February 29, 2024, Advantage Solutions Inc. (the “Company”) issued a press release announcing its financial results for the year ended December 31, 2023. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

On February 29, 2024, at 8:30 a.m. ET, the Company will host a conference call announcing its financial results for the year ended December 31, 2023. A copy of management’s earnings presentation materials is attached as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated by reference herein. The presentation will be accessible, live via audio broadcast, through a link posted on the Investor Relations section of the Company’s website at https://ir.advantagesolutions.net. This presentation will be available for audio replay for one week following the call.

The Company makes reference to non-GAAP financial information in the press release and earnings presentation materials. The Company’s non-GAAP financial measures should be viewed in addition to and not as a substitute for or superior to the Company’s reported results prepared in accordance with GAAP. Reconciliation of these non-GAAP financial measures to the nearest comparable GAAP financial measures are contained in the data tables at the end of the press release and earnings presentation materials.

The information in this Item 2.02, including Exhibits 99.1 and 99.2 furnished under Item 9.01, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section. Furthermore, the information in this Item 2.02, including Exhibit 99.1 and 99.2 furnished under Item 9.01, shall not be deemed incorporated by reference into the filings of the Company under the Securities Act of 1933 or the Exchange Act.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit No.

 

Description

 

99.1

 

Press Release issued by Advantage Solutions Inc., dated February 29, 2024 regarding results for the year ended December 31, 2023.

 

99.2

 

Management’s Earnings Presentation for Advantage Solutions Inc., dated February 29, 2024.

 

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document).

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:

February 29, 2024

 

ADVANTAGE SOLUTIONS INC.

 

 

 

 

 

 

By:

/s/ Christopher Growe

 

 

 

Christopher Growe
Chief Financial Officer

 


EX-99.1

https://cdn.kscope.io/7908b9781270a5140f7662243ca15ec6-img111595218_0.jpg 

 

Advantage Solutions exceeded 2023 financial guidance with solid fourth-quarter performance and expects continued growth in 2024

2023 consolidated revenues were $4.2 billion, a year-over-year increase of 4.3%, and operating income was $76.2 million. Excluding foreign exchange, acquisitions and divestitures, revenues increased 6.8%, and Adjusted EBITDA declined 1.7% to $424.3 million but finished ahead of previous guidance.
Solid performance in the fourth quarter resulted in operating income of $46.2 million and a 2% year-over-year increase in Adjusted EBITDA, which increased by 4.4% excluding foreign exchange, acquisitions and divestitures. Margin increased 40 basis points to 10.6%.
Management continued to execute its transformation plan, including the deconsolidation of its European joint venture, the divestiture of its foodservice businesses, and collaborations with Genpact and TCS to outsource certain administrative functions.
Disciplined capital allocation with debt and share repurchases of $168.2 million and $6.4 million, respectively in 2023.
Management announced 2024 guidance with expectations for low single-digit growth in consolidated revenues and Adjusted EBITDA.

 

IRVINE, Calif., February 29, 2024 – Advantage Solutions Inc. (NASDAQ: ADV) (“Advantage,” “Advantage Solutions,” the “company,” “we” or “our”), a leading provider of sales and marketing services to consumer goods manufacturers and retailers, today reported financial results for its fourth quarter and fiscal full year ended December 31, 2023. The results continue to reflect a trendline of improving financial performance and progress executing its transformation strategy.

 

“Our ongoing efforts to strengthen our culture, simplify our operations, improve our financial discipline and enhance our processes as a unified company resulted in a solid fourth-quarter performance,” said Advantage Solutions CEO Dave Peacock. “I am incredibly proud of our team’s success as we delivered full-year revenue growth and Adjusted EBITDA results ahead of expectations. We are committed to continuing to evolve our position in the marketplace and deliver long-term, profitable growth by enhancing our service level with clients and customers.”

 

The company also continues to evaluate its service offerings, consistent with its stated strategy, to ensure more focus on its mission of converting shoppers into buyers for consumer goods companies and retailers. To that end, Advantage Solutions completed additional actions to advance its transformation. Those include:

 

Divesture of foodservice businesses: The company divested its foodservice businesses, most notably Waypoint, to Prospect Hill Growth Partners LP on Jan. 31, 2024. As part of the sale, the foodservice businesses were combined with KeyImpact Sales & Systems Inc. to form Acxion Foodservice. The resulting firm creates an innovative go-to-market model to offer clients next-generation services powered by analytics. Advantage received total proceeds of approximately $100 million in mostly cash and an ongoing 7.5% stake in the combined entity.

Deconsolidation of the European joint venture: Advantage Solutions reduced its stake in Advantage Smollan Limited, a joint venture with the Smollan Group in Europe, from a majority stake under 60% to a minority position of 49.6% in exchange for cash and other considerations. The transaction restructures the European operation by reducing back-office complexities and expenses and simplifies the company’s overall financial reporting.

Administrative and technology agreements: Advantage Solutions entered into an agreement with Genpact to build an innovative, proprietary digital solution designed to streamline and automate processes behind Advantage BPO and administrative services. Additionally, the company announced a collaboration with Tata Consultancy Services to provide certain IT services.

 

1


“We believe the path to unlock Advantage Solutions’ potential lies in our core capabilities,” Peacock said. “The actions we have taken to date and potential future actions under consideration are designed to make us more nimble, insights-driven, and efficient to provide unmatched service to our clients and customers.”

 

In 2023, the company reduced the face value of its debt by $168.2 million in voluntary open-market repurchases of its term loan and senior secured notes while executing $6.4 million in share repurchases. Advantage’s capital allocation philosophy focuses on maximizing returns for equity holders, including deleveraging its balance sheet and investing behind core business offerings to fuel future growth.

 

“We believe having a healthy balance sheet and a sound infrastructure are crucial to providing clients and customers with best-in-class service,” Peacock said. “Advantage is committed to quickly implementing the right plans to generate more cash to invest in the business and position the company for long-term success.”

 

Fiscal Year 2023 Highlights Compared to 2022

Revenues

 

 

Year Ended December 31,

 

 

Change

 

 

 

2023

 

 

2022

 

 

$

 

 

%

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

2,445,015

 

 

$

2,507,017

 

 

$

(62,002

)

 

 

(2.5

%)

Marketing

 

 

1,779,831

 

 

 

1,542,725

 

 

 

237,106

 

 

 

15.4

%

Total Revenues

 

$

4,224,846

 

 

$

4,049,742

 

 

$

175,104

 

 

 

4.3

%

 

Adjusted EBITDA and Adjusted EBITDA by Segment

 

 

Year Ended December 31,

 

 

Change

 

 

 

2023

 

 

2022

 

 

$

 

 

%

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

265,255

 

 

$

294,234

 

 

$

(28,979

)

 

 

(9.8

%)

Marketing

 

 

159,092

 

 

 

141,761

 

 

 

17,331

 

 

 

12.2

%

Total Adjusted EBITDA

 

$

424,347

 

 

$

435,995

 

 

$

(11,648

)

 

 

(2.7

%)

 

Consolidated revenues grew 4.3% to $4.2 billion and increased 6.8% excluding the impact of foreign exchange and divestitures (including the deconsolidation of the European joint venture). Revenue growth in the marketing segment was driven primarily by the continued recovery of in-store sampling and demonstration services and pricing realization. The decline in the sales segment was driven by completed divestitures and an intentional client exit in late 2022, partially offset by price and volume realization.

 

Operating income was $76.2 million, an increase of $1.5 billion due to a non-cash goodwill impairment and intangible asset impairment charge in the fourth quarter of 2022. Inflationary cost pressures related to wage and incentive compensation and internal reorganization activities negatively impacted operating income in 2023 but were largely in line with expectations. The Company recorded a non-cash intangible asset impairment expense and a non-cash gain on the deconsolidation of subsidiaries related to the European deconsolidation in the fourth quarter of 2023.

 

Adjusted EBITDA declined 2.7% to $424.3 million. Price increases and increased in-store sampling and demonstration activity drove improved performance in the marketing segment. This was offset by a decline in revenues in the sales segment, inflationary cost pressure, incentive compensation, and higher technology expenses.

 

Net loss was $60.3 million compared with net loss of $1.4 billion in 2022 due to the one-time impairment charges. Net loss in the current period was also impacted by an unfavorable interest expense due to higher interest rates, partially offset by lower debt balances.

 

 

 

 

2


Fourth Quarter 2023 Highlights Compared to Fourth Quarter 2022

Revenues

 

 

Three Months Ended
December 31,

 

 

Change

 

 

 

2023

 

 

2022

 

 

$

 

 

%

 

(in thousands)

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

Sales

 

$

603,297

 

 

$

664,670

 

 

$

(61,373

)

 

 

(9.2

%)

Marketing

 

 

476,452

 

 

 

438,093

 

 

 

38,359

 

 

 

8.8

%

Total Revenues

 

$

1,079,749

 

 

$

1,102,763

 

 

$

(23,014

)

 

 

(2.1

%)

 

Adjusted EBITDA and Adjusted EBITDA by Segment

 

 

Three Months Ended
December 31,

 

 

Change

 

 

 

2023

 

 

2022

 

 

$

 

 

%

 

(in thousands)

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

Sales

 

$

68,811

 

 

$

78,076

 

 

$

(9,265

)

 

 

(11.9

%)

Marketing

 

 

46,105

 

 

 

34,590

 

 

 

11,515

 

 

 

33.3

%

Total Adjusted EBITDA

 

$

114,916

 

 

$

112,666

 

 

$

2,250

 

 

 

2.0

%

 

Consolidated revenues declined 2.1% to $1.1 billion and increased 3.4%, excluding the impact of foreign exchange, acquisitions and divestitures. The drivers of top-line performance were similar to what drove the full-year results.

 

Operating income in the quarter was $46.2 million, an increase of $1.6 billion due to a non-cash goodwill impairment and intangible asset impairment charge in the prior year period. Price actions in the quarter helped to mostly offset inflationary cost pressures related to wages and benefits. Additional costs related to various internal reorganization activities were recognized in the quarter. The Company recorded a non-cash intangible asset impairment charge and a gain on deconsolidation of subsidiaries related to the European deconsolidation in the current period.

 

The continuing trend for improved performance led to an Adjusted EBITDA of $114.9 million, which resulted in modest year-over-year growth and margin expansion.

 

Net income was $17.8 million compared with a net loss of $1.4 billion in the prior year, which was impacted by the one-time impairment charges. Net income in the current period was consistent with expectations for operating performance and the net effects of the current interest rate environment and reduction in debt balances.

 

Balance Sheet Highlights

 

As of December 31, 2023, the company’s cash and cash equivalents were $126.5 million, including the reduction in cash from the deconsolidation of the European joint venture and the use of cash for debt and share repurchases in the fourth quarter. Total Debt was $1,897.5 million, and Net Debt was $1,771.0 million. The debt capitalization consists primarily of the $1,149.1 million First Lien Term Loan and $743.0 million of senior secured notes.

 

During the quarter, Advantage voluntarily repurchased approximately $25.0 million of its First Lien Term Loan and approximately $32.0 million of its senior secured notes at attractive discounts, resulting in a net leverage ratio of approximately 4.2x Adjusted EBITDA as of December 31, 2023, compared to 4.5x at the end of 2022. Approximately 89% of the company’s debt is hedged or at a fixed interest rate.

 

Fiscal Year 2024 Outlook

 

In light of growing business momentum and improving market dynamics, management expects 2024 revenue and Adjusted EBITDA growth in the range of low single digits, excluding the in-year impact of the completed divestitures on the 2023 results. The company plans to execute additional simplification objectives in 2024, including activities related to improving operating efficiencies and investments behind the business from a talent and technology perspective. As a result, capital expenditures are expected to be $90 million to $110 million with a tapering in the spending planned for 2025 and a return to historical spending levels in 2026. The company also establishes a long-term net leverage target

3


below 3.5x LTM Adjusted EBITDA. Additional guidance metrics can be found in the company’s supplemental earnings presentation.

 

Conference Call Details

 

Advantage will host a conference call at 8:30 am ET on February 29, 2024 to discuss its fourth quarter and full year 2023 financial performance and business outlook. To participate, please dial 877-407-4018 within the United States or +1-201-689-8471 outside the United States approximately 10 minutes before the scheduled start of the call. The conference ID for the call is 13742873. The conference call will also be accessible live via audio broadcast on the Investor Relations section of the Advantage website at ir.advantagesolutions.net.

 

A replay of the conference call will be available online on the investor section of the Advantage website. In addition, an audio replay of the call will be available for one week following the call and can be accessed by dialing 844-512-2921 within the United States or +1-412-317-6671 outside the United States. The replay ID is 13742873.

 

About Advantage Solutions

 

Advantage Solutions is a leading provider of outsourced sales and marketing solutions uniquely positioned at the intersection of brands and retailers. Our data- and technology-driven services — which include headquarter sales, retail merchandising, in-store and online sampling, digital commerce, omnichannel marketing, retail media and others — help brands and retailers of all sizes get products into the hands of consumers, wherever they shop. As a trusted partner and problem solver, we help our clients sell more while spending less. Advantage has offices throughout North America and strategic investments in select markets throughout Africa, Asia, Australia, Latin America and Europe through which the company serves the global needs of multinational, regional and local manufacturers. For more information, please visit advantagesolutions.net.

 

Included with this press release are the company’s consolidated and condensed financial statements as of and for the three and twelve months ended December 31, 2023. These financial statements should be read in conjunction with the information contained in the company’s Annual Report on Form 10-K, to be filed with the Securities and Exchange Commission on or about March 1, 2024.

 

Forward-Looking Statements

 

Certain statements in this press release may be considered forward-looking statements within the meaning of the federal securities laws, including statements regarding the expected future performance of Advantage's business and projected financial results. Forward-looking statements generally relate to future events or Advantage’s future financial or operating performance. These forward-looking statements generally are identified by the words “may”, “should”, “expect”, “intend”, “will”, “would”, “could”, “estimate”, “anticipate”, “believe”, “predict”, “confident”, “potential” or “continue”, or the negatives of these terms or variations of them or similar terminology. Such forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those expressed or implied by such forward looking statements.

 

These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by Advantage and its management at the time of such statements, are inherently uncertain. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, market-driven wage changes or changes to labor laws or wage or job classification regulations, including minimum wage; the COVID-19 pandemic and other future potential pandemics or health epidemics; Advantage’s ability to continue to generate significant operating cash flow; client procurement strategies and consolidation of Advantage’s clients’ industries creating pressure on the nature and pricing of its services; consumer goods manufacturers and retailers reviewing and changing their sales, retail, marketing and technology programs and relationships; Advantage’s ability to successfully develop and maintain relevant omni-channel services for our clients in an evolving industry and to otherwise adapt to significant technological change; Advantage’s ability to maintain proper and effective internal control over financial reporting in the future; potential and actual harms to Advantage’s business arising from the Take 5 Matter; Advantage’s substantial indebtedness and our ability to refinance at favorable rates; and other risks and uncertainties set forth in the section titled “Risk Factors” in the Annual Report on Form 10-K to be filed by the company with the Securities and Exchange Commission (the “SEC”) on or about March 1, 2024, and in its other filings made from time to time with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are

4


cautioned not to put undue reliance on forward-looking statements, and Advantage assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

Non-GAAP Financial Measures and Related Information

 

This press release includes certain financial measures not presented in accordance with generally accepted accounting principles (“GAAP”), including Adjusted EBITDA, Adjusted EBITDA by Segment and Net Debt. These are not measures of financial performance calculated in accordance with GAAP and may exclude items that are significant in understanding and assessing Advantage’s financial results. Therefore, the measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP, and should not be considered in isolation or as an alternative to net income, cash flows from operations or other measures of profitability, liquidity or performance under GAAP. You should be aware that Advantage’s presentation of these measures may not be comparable to similarly titled measures used by other companies. Reconciliations of historical non-GAAP measures to their most directly comparable GAAP counterparts are included below.

 

Advantage believes these non-GAAP measures provide useful information to management and investors regarding certain financial and business trends relating to Advantage’s financial condition and results of operations. Advantage believes that the use of Adjusted EBITDA, Adjusted EBITDA by Segment and Net Debt provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing Advantage’s financial measures with other similar companies, many of which present similar non-GAAP financial measures to investors. Non-GAAP financial measures are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and income are excluded or included in determining these non-GAAP financial measures. Additionally, other companies may calculate non-GAAP measures differently, or may use other measures to calculate their financial performance, and therefore Advantage’s non-GAAP measures may not be directly comparable to similarly titled measures of other companies.

 

Adjusted EBITDA and Adjusted EBITDA by Segment mean net (loss) income before (i) interest expense, net, (ii) provision for (benefit from) income taxes, (iii) depreciation, (iv) impairment of goodwill and indefinite-lived assets, (v) amortization of intangible assets, (vi) gain on deconsolidation of subsidiaries, (vii) loss on divestitures, (viii) equity-based compensation of Karman Topco L.P., (ix) changes in fair value of warrant liability, (x) stock based compensation expense, (xi) fair value adjustments of contingent consideration related to acquisitions, (xii) acquisition and divestiture related expenses, (xiii) costs associated with COVID-19, net of benefits received, (xiv) EBITDA for economic interests in investments, (xv) reorganization expenses, (xvi) litigation expenses, (xvii) recovery from and costs associated with the Take 5 Matter and (xviii) other adjustments that management believes are helpful in evaluating our operating performance.

 

Net Debt represents the sum of current portion of long-term debt and long-term debt, less cash and cash equivalents and debt issuance costs. With respect to Net Debt, cash and cash equivalents are subtracted from the GAAP measure, total debt, because they could be used to reduce the debt obligations. We present Net Debt because we believe this non-GAAP measure provides useful information to management and investors regarding certain financial and business trends relating to the company’s financial condition and to evaluate changes to the company's capital structure and credit quality assessment.

 

Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

 

This press release also includes certain estimates and projections of Adjusted EBITDA, including with respect to expected fiscal 2024 results. Due to the high variability and difficulty in making accurate estimates and projections of some of the information excluded from Adjusted EBITDA, together with some of the excluded information not being ascertainable or accessible, Advantage is unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measures without unreasonable effort. Consequently, no disclosure of estimated or projected comparable GAAP measures is included and no reconciliation of such forward-looking non-GAAP financial measures is included.

 

5


Advantage Solutions Inc.

Consolidated Balance Sheets

 

 

 

December 31,

 

(in thousands, except share data)

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

126,479

 

 

$

120,715

 

Restricted cash

 

 

16,363

 

 

 

17,817

 

Accounts receivable, net of allowance for expected credit
      losses of $34,807 and $22,752, respectively

 

 

703,252

 

 

 

869,000

 

Prepaid expenses and other current assets

 

 

165,940

 

 

 

149,476

 

Total current assets

 

 

1,012,034

 

 

 

1,157,008

 

Property and equipment, net

 

 

73,910

 

 

 

70,898

 

Goodwill

 

 

855,391

 

 

 

887,949

 

Other intangible assets, net

 

 

1,580,134

 

 

 

1,897,503

 

Investments in unconsolidated affiliates

 

 

211,393

 

 

 

129,491

 

Other assets

 

 

46,461

 

 

 

119,522

 

Total assets

 

$

3,779,323

 

 

$

4,262,371

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Current portion of long-term debt

 

$

13,580

 

 

$

13,991

 

Accounts payable

 

 

181,076

 

 

 

261,464

 

Accrued compensation and benefits

 

 

165,701

 

 

 

154,744

 

Other accrued expenses

 

 

153,015

 

 

 

133,173

 

Deferred revenues

 

 

27,925

 

 

 

37,329

 

Total current liabilities

 

 

541,297

 

 

 

600,701

 

Long-term debt, net of current portion

 

 

1,852,784

 

 

 

2,022,819

 

Deferred income tax liabilities

 

 

204,251

 

 

 

297,874

 

Warrant liability

 

 

667

 

 

 

953

 

Other long-term liabilities

 

 

76,247

 

 

 

110,554

 

Total liabilities

 

 

2,675,246

 

 

 

3,032,901

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

 

 

 

3,746

 

 

 

 

 

 

 

 

Equity attributable to stockholders of Advantage Solutions Inc.

 

Preferred stock, no par value, 10,000,000 shares
     authorized; none issued and outstanding
     as of December 31, 2023 and 2022, respectively

 

 

 

 

 

 

Common stock, $0.0001 par value, 3,290,000,000
     shares authorized; 322,235,261 and 319,690,300
     shares issued and outstanding as of December 31,
     2023 and 2022, respectively

 

 

32

 

 

 

32

 

Additional paid in capital

 

 

3,449,261

 

 

 

3,408,836

 

Accumulated deficit

 

 

(2,314,650

)

 

 

(2,247,109

)

Loans to Karman Topco L.P.

 

 

(6,387

)

 

 

(6,363

)

Accumulated other comprehensive loss

 

 

(3,945

)

 

 

(18,849

)

Treasury stock, at cost; 3,600,075 and 1,610,014 shares
     as of December 31, 2023 and 2022, respectively

 

 

(18,949

)

 

 

(12,567

)

Total equity attributable to stockholders of Advantage
     Solutions Inc.

 

 

1,105,362

 

 

 

1,123,980

 

Nonredeemable noncontrolling interest

 

 

(1,285

)

 

 

101,744

 

Total stockholders’ equity

 

 

1,104,077

 

 

 

1,225,724

 

Total liabilities, redeemable noncontrolling interest,
     and stockholders’ equity

 

$

3,779,323

 

 

$

4,262,371

 

 

6


Advantage Solutions Inc.

Consolidated Statements of Operations and Comprehensive (Loss) Income

 

 

Three Months Ended
December 31,

 

 

Year Ended
December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

(in thousands, except share and per share data)

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

 

Revenues

$

1,079,749

 

 

$

1,102,763

 

 

$

4,224,846

 

 

$

4,049,742

 

 

Cost of revenues

 

915,985

 

 

 

956,927

 

 

 

3,660,464

 

 

 

3,493,183

 

 

Selling, general, and administrative expenses

 

80,854

 

 

 

51,863

 

 

 

265,091

 

 

 

187,504

 

 

Impairment of goodwill and indefinite-lived assets

 

43,500

 

 

 

1,572,523

 

 

 

43,500

 

 

 

1,572,523

 

 

Depreciation and amortization

 

54,390

 

 

 

59,078

 

 

 

224,697

 

 

 

233,075

 

 

Gain on deconsolidation of subsidiaries

 

(58,891

)

 

 

 

 

 

(58,891

)

 

 

 

 

(Gain) loss on divestitures

 

(1,140

)

 

 

(90

)

 

 

19,068

 

 

 

2,863

 

 

Income from unconsolidated investments

 

(1,141

)

 

 

 

 

 

(5,273

)

 

 

 

 

Total expenses

 

1,033,557

 

 

 

2,640,301

 

 

 

4,148,656

 

 

 

5,489,148

 

 

Operating income (loss)

 

46,192

 

 

 

(1,537,538

)

 

 

76,190

 

 

 

(1,439,406

)

 

Other (income) expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrant liability

 

(873

)

 

 

220

 

 

 

(286

)

 

 

(21,236

)

 

Interest expense, net

 

45,850

 

 

 

40,831

 

 

 

165,802

 

 

 

104,459

 

 

Total other expenses

 

44,977

 

 

 

41,051

 

 

 

165,516

 

 

 

83,223

 

 

Income (loss) before income taxes

 

1,215

 

 

 

(1,578,589

)

 

 

(89,326

)

 

 

(1,522,629

)

 

(Benefit from) provision for income taxes

 

(16,573

)

 

 

(156,860

)

 

 

(29,008

)

 

 

(145,337

)

 

Net income (loss)

 

17,788

 

 

 

(1,421,729

)

 

 

(60,318

)

 

 

(1,377,292

)

 

Less: net income attributable to noncontrolling interest

 

359

 

 

 

2,168

 

 

 

2,940

 

 

 

3,210

 

 

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

 

17,429

 

 

 

(1,423,897

)

 

 

(63,258

)

 

 

(1,380,502

)

 

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

6,280

 

 

 

11,129

 

 

 

5,817

 

 

 

(14,370

)

 

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

$

23,709

 

 

$

(1,412,768

)

 

$

(57,441

)

 

$

(1,394,872

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic (loss) earnings per common share

$

0.05

 

 

$

(4.45

)

 

$

(0.20

)

 

$

(4.33

)

 

Diluted (loss) earnings per common share

$

0.05

 

 

$

(4.45

)

 

$

(0.20

)

 

$

(4.33

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of common shares:

 

324,639,562

 

 

 

319,682,507

 

 

 

323,677,515

 

 

 

318,682,548

 

 

Weighted-average number of common shares,
     assuming dilution

 

340,320,151

 

 

 

319,682,507

 

 

 

323,677,515

 

 

 

318,682,548

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7


Advantage Solutions Inc.

Consolidated Statement of Cash Flows

 

 

 

 

 

 

 

Year Ended December 31,

 

(in thousands)

 

2023

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(60,318

)

 

$

(1,377,292

)

 

$

57,549

 

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

 

 

 

 

 

 

 

 

 

Noncash interest income

 

 

(7,660

)

 

 

(43,785

)

 

 

(8,315

)

Amortization of deferred financing fees

 

 

8,292

 

 

 

8,860

 

 

 

9,250

 

Impairment of goodwill and indefinite-lived assets

 

 

43,500

 

 

 

1,572,523

 

 

 

 

Extinguishment costs related to repayment and repricing of long-term debt

 

 

 

 

 

 

 

 

1,569

 

Depreciation and amortization

 

 

224,697

 

 

 

233,075

 

 

 

240,041

 

Change in fair value of warrant liability

 

 

(286

)

 

 

(21,236

)

 

 

955

 

Fair value adjustments related to contingent consideration

 

 

10,362

 

 

 

4,774

 

 

 

5,763

 

Deferred income taxes

 

 

(80,416

)

 

 

(190,754

)

 

 

(10,012

)

Equity-based compensation of Karman Topco L.P.

 

 

(2,524

)

 

 

(6,934

)

 

 

(15,030

)

Stock-based compensation

 

 

42,880

 

 

 

39,825

 

 

 

39,412

 

Equity in earnings of unconsolidated affiliates

 

 

(5,511

)

 

 

(10,609

)

 

 

(10,298

)

Distribution received from unconsolidated affiliates

 

 

2,100

 

 

 

1,826

 

 

 

1,465

 

Loss on disposal of property and equipment

 

 

3,318

 

 

 

644

 

 

 

7,162

 

Loss on divestitures

 

 

19,068

 

 

 

2,863

 

 

 

 

Gain on deconsolidation of subsidiaries

 

 

(58,891

)

 

 

 

 

 

 

Gain on repurchases from the Term Loan Facility and Senior Secured Notes debt

 

 

(8,665

)

 

 

 

 

 

 

Changes in operating assets and liabilities, net of effects from
   divestitures and purchases of businesses:

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

45,601

 

 

 

(75,688

)

 

 

(215,501

)

Prepaid expenses and other assets

 

 

50,626

 

 

 

(22,738

)

 

 

(14,000

)

Accounts payable

 

 

(26,175

)

 

 

(17,635

)

 

 

46,000

 

Accrued compensation and benefits

 

 

26,941

 

 

 

16,678

 

 

 

(2,363

)

Deferred revenues

 

 

6,974

 

 

 

(11,551

)

 

 

(2,694

)

Other accrued expenses and other liabilities

 

 

5,082

 

 

 

18,412

 

 

 

(4,962

)

Net cash provided by operating activities

 

 

238,995

 

 

 

121,258

 

 

 

125,991

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

Purchase of businesses, net of cash acquired

 

 

 

 

 

(74,206

)

 

 

(42,668

)

Purchase of investment in unconsolidated affiliates

 

 

(3,023

)

 

 

(775

)

 

 

(2,000

)

Purchase of property and equipment

 

 

(46,271

)

 

 

(40,455

)

 

 

(31,175

)

Proceeds from divestitures

 

 

21,108

 

 

 

1,896

 

 

 

 

Deconsolidation of subsidiaries cash and
     cash equivalents and restricted cash, net of proceeds

 

 

(31,465

)

 

 

 

 

 

 

Proceeds from sale of investment in unconsolidated affiliates

 

 

4,428

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(55,223

)

 

 

(113,540

)

 

 

(75,843

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

Borrowings under lines of credit

 

 

99,538

 

 

 

326,090

 

 

 

61,629

 

Payments on lines of credit

 

 

(99,102

)

 

 

(326,968

)

 

 

(111,736

)

Proceeds from government loans for COVID-19 relief

 

 

1,339

 

 

 

 

 

 

2,975

 

Principal payments on long-term debt

 

 

(13,602

)

 

 

(13,394

)

 

 

(13,309

)

Repurchases of Term Loan Facility and Senior Secured Notes debt

 

 

(156,559

)

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

2,248

 

 

 

3,320

 

 

 

794

 

Payments for taxes related to net share settlement
     under 2020 Incentive Award Plan

 

 

(1,880

)

 

 

 

 

 

 

Contingent consideration payments

 

 

(4,898

)

 

 

(23,164

)

 

 

(9,814

)

Holdback payments

 

 

(1,886

)

 

 

(11,057

)

 

 

(3,989

)

Purchase of treasury stock

 

 

(6,382

)

 

 

 

 

 

(12,567

)

Financing fees paid

 

 

 

 

 

(1,464

)

 

 

(74

)

Contribution from noncontrolling interest

 

 

 

 

 

5,217

 

 

 

 

Redemption of noncontrolling interest

 

 

(154

)

 

 

(224

)

 

 

(209

)

Net cash used in financing activities

 

 

(181,338

)

 

 

(41,644

)

 

 

(86,300

)

Net effect of foreign currency changes on cash

 

 

1,876

 

 

 

(8,179

)

 

 

(3,177

)

Net change in cash, cash equivalents and restricted cash

 

 

4,310

 

 

 

(42,105

)

 

 

(39,329

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

138,532

 

 

 

180,637

 

 

 

219,966

 

Cash, cash equivalents and restricted cash, end of period

 

$

142,842

 

 

$

138,532

 

 

$

180,637

 

SUPLLEMENTARY NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

Exchange of ownership of SPV for fair value of GSH

 

$

15,854

 

 

$

 

 

$

 

Non-cash proceeds from divestitures

 

$

4,283

 

 

$

 

 

$

 

Purchase of property and equipment recorded in accounts payable
   and accrued expenses

 

$

1,201

 

 

$

842

 

 

$

759

 

SUPPLEMENTAL CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

 

Cash payments for interest

 

$

174,767

 

 

$

126,560

 

 

$

137,467

 

Cash received from interest rate derivatives

 

$

28,808

 

 

$

6,527

 

 

$

 

Cash payments for income taxes, net

 

$

39,007

 

 

$

45,729

 

 

$

40,189

 

 

8


Advantage Solutions Inc.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

(Unaudited)

 

Consolidated

Three Months Ended
December 31,

 

 

Year Ended
December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

17,788

 

 

$

(1,421,729

)

 

$

(60,318

)

 

$

(1,377,292

)

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

45,850

 

 

 

40,831

 

 

 

165,802

 

 

 

104,459

 

 

(Benefit from) provision for income taxes

 

(16,573

)

 

 

(156,860

)

 

 

(29,008

)

 

 

(145,337

)

 

Depreciation and amortization

 

54,390

 

 

 

59,078

 

 

 

224,697

 

 

 

233,075

 

 

Impairment of goodwill and indefinite-lived assets

 

43,500

 

 

 

1,572,523

 

 

 

43,500

 

 

 

1,572,523

 

 

Gain on deconsolidation of subsidiaries

 

(58,891

)

 

 

 

 

 

(58,891

)

 

 

 

 

(Gain) loss on divestitures

 

(1,140

)

 

 

(90

)

 

 

19,068

 

 

 

2,863

 

 

Equity-based compensation of Karman Topco L.P.(a)

 

754

 

 

 

208

 

 

 

(2,524

)

 

 

(6,934

)

 

Change in fair value of warrant liability

 

(873

)

 

 

220

 

 

 

(286

)

 

 

(21,236

)

 

Fair value adjustments related to contingent consideration
     related to acquisitions
(b)

 

(1,229

)

 

 

(674

)

 

 

10,362

 

 

 

4,774

 

 

Acquisition and divestiture related expenses(c)

 

2,503

 

 

 

4,149

 

 

 

7,024

 

 

 

21,039

 

 

Reorganization expenses(d)

 

17,620

 

 

 

1,636

 

 

 

57,021

 

 

 

6,094

 

 

Litigation expenses(e)

 

855

 

 

 

6,157

 

 

 

9,519

 

 

 

5,357

 

 

Costs associated with COVID-19, net of benefits received(f)

 

(2

)

 

 

2,263

 

 

 

3,283

 

 

 

7,208

 

 

Costs associated with (recovery from) the Take 5 Matter(g)

 

63

 

 

 

377

 

 

 

(1,380

)

 

 

2,465

 

 

Stock-based compensation expense(h)

 

10,370

 

 

 

9,919

 

 

 

42,880

 

 

 

39,825

 

 

EBITDA for economic interests in investments(i)

 

(69

)

 

 

(5,342

)

 

 

(6,402

)

 

 

(12,888

)

 

Adjusted EBITDA

$

114,916

 

 

$

112,666

 

 

$

424,347

 

 

$

435,995

 

 

 

Sales Segment

Three Months Ended
December 31,

 

 

Year Ended
December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss) income

$

29,471

 

 

$

(1,389,107

)

 

$

38,443

 

 

$

(1,323,192

)

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

36,791

 

 

 

40,075

 

 

 

154,891

 

 

 

161,385

 

 

Impairment of goodwill and indefinite-lived assets

 

43,500

 

 

 

1,421,719

 

 

 

43,500

 

 

 

1,421,719

 

 

Gain on deconsolidation of subsidiaries

 

(58,891

)

 

 

 

 

 

(58,891

)

 

 

 

 

(Gain) loss on divestitures

 

(1,086

)

 

 

(90

)

 

 

14,911

 

 

 

2,863

 

 

Equity-based compensation of Karman Topco L.P.(a)

 

552

 

 

 

283

 

 

 

(1,270

)

 

 

(3,721

)

 

Fair value adjustments related to contingent consideration
     related to acquisitions
(b)

 

(1,464

)

 

 

(4,442

)

 

 

6,616

 

 

 

550

 

 

Acquisition and divestiture related expenses(c)

 

1,817

 

 

 

898

 

 

 

4,887

 

 

 

11,679

 

 

Reorganization expenses(d)

 

12,166

 

 

 

1,307

 

 

 

36,853

 

 

 

4,826

 

 

Litigation expenses(e)

 

223

 

 

 

6,157

 

 

 

6,860

 

 

 

6,057

 

 

Costs associated with COVID-19, net of benefits received(f)

 

5

 

 

 

611

 

 

 

369

 

 

 

1,412

 

 

Stock-based compensation expense(h)

 

5,439

 

 

 

6,016

 

 

 

23,850

 

 

 

24,025

 

 

EBITDA for economic interests in investments(i)

 

288

 

 

 

(5,351

)

 

 

(5,764

)

 

 

(13,369

)

 

Sales Segment Adjusted EBITDA

$

68,811

 

 

$

78,076

 

 

$

265,255

 

 

$

294,234

 

 

 

9


Marketing Segment

Three Months Ended
December 31,

 

 

Year Ended
December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

$

16,721

 

 

$

(148,431

)

 

$

37,747

 

 

$

(116,214

)

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

17,599

 

 

 

19,003

 

 

 

69,806

 

 

 

71,690

 

 

Impairment of goodwill and indefinite-lived assets

 

 

 

 

150,804

 

 

 

 

 

 

150,804

 

 

(Gain) loss on divestitures

 

(54

)

 

 

 

 

 

4,157

 

 

 

 

 

Equity-based compensation of Karman Topco L.P.(a)

 

202

 

 

 

(75

)

 

 

(1,254

)

 

 

(3,213

)

 

Fair value adjustments related to contingent consideration
     related to acquisitions
(b)

 

235

 

 

 

3,768

 

 

 

3,746

 

 

 

4,224

 

 

Acquisition and divestiture related expenses(c)

 

686

 

 

 

3,251

 

 

 

2,137

 

 

 

9,360

 

 

Reorganization expenses(d)

 

5,454

 

 

 

329

 

 

 

20,168

 

 

 

1,268

 

 

Litigation expenses (recovery)(e)

 

632

 

 

 

 

 

 

2,659

 

 

 

(700

)

 

Costs associated with COVID-19, net of benefits received(f)

 

(7

)

 

 

1,652

 

 

 

2,914

 

 

 

5,796

 

 

Costs associated with (recovery from) the Take 5 Matter(g)

 

63

 

 

 

377

 

 

 

(1,380

)

 

 

2,465

 

 

Stock-based compensation expense(h)

 

4,931

 

 

 

3,903

 

 

 

19,030

 

 

 

15,800

 

 

EBITDA for economic interests in investments(i)

 

(357

)

 

 

9

 

 

 

(638

)

 

 

481

 

 

Marketing Segment Adjusted EBITDA

$

46,105

 

 

$

34,590

 

 

$

159,092

 

 

$

141,761

 

 

 

 

 

 

(a)

Represents expenses related to (i) equity-based compensation expense associated with grants of Common Series D Units of Karman Topco L.P. ("Topco") made to one of the equity holders of Topco and (ii) equity-based compensation expense associated with the Common Series C Units of Topco.

(b)

Represents adjustments to the estimated fair value of our contingent consideration liabilities related to our acquisitions. See Note 9—Fair Value of Financial Instruments to our consolidated financial statements for the years ended December 31, 2023 and 2022.

(c)

Represents fees and costs associated with activities related to our acquisitions, divestitures, and related reorganization activities, including professional fees, due diligence, and integration activities.

(d)

Represents fees and costs associated with various internal reorganization activities, including professional fees, lease exit costs, severance, and nonrecurring compensation costs.

(e)

Represents legal settlements, reserves, and expenses that are unusual or infrequent costs associated with our operating activities.

(f)

Represents (i) costs related to implementation of strategies for workplace safety in response to COVID-19, including additional sick pay for front-line associates and personal protective equipment; and (ii) benefits received from government grants for COVID-19 relief.

(g)

Represents (i) cash receipts from an insurance policy for claims related to the Take 5 Matter; and (ii) costs associated with the Take 5 Matter, primarily, professional fees and other related costs.

(h)

Represents non-cash compensation expense related to the 2020 Incentive Award Plan and the 2020 Employee Stock Purchase Plan.

(i)

Represents additions to reflect our proportional share of Adjusted EBITDA related to our equity method investments and reductions to remove the Adjusted EBITDA related to the minority ownership percentage of the entities that we fully consolidate in our financial statements.

 

 

 

 

 

 

 

 

 

 

 

10


Advantage Solutions Inc.

Disaggregated revenues

 

 

Three Months Ended
December 31,

 

 

Year Ended
December 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(in thousands)

(unaudited)

 

 

(unaudited)

 

 

 

 

 

 

 

Sales brand-centric services

$

328,983

 

 

$

358,966

 

 

$

1,362,612

 

 

$

1,364,673

 

Sales retail-centric services

 

274,314

 

 

 

305,704

 

 

 

1,082,403

 

 

 

1,142,344

 

Total sales revenues

 

603,297

 

 

 

664,670

 

 

 

2,445,015

 

 

 

2,507,017

 

Marketing brand-centric services

 

149,473

 

 

 

166,063

 

 

 

545,243

 

 

 

559,218

 

Marketing retail-centric services

 

326,979

 

 

 

272,030

 

 

 

1,234,588

 

 

 

983,507

 

Total marketing revenues

 

476,452

 

 

 

438,093

 

 

 

1,779,831

 

 

 

1,542,725

 

Total Revenues

$

1,079,749

 

 

$

1,102,763

 

 

$

4,224,846

 

 

$

4,049,742

 

 

 

11


Advantage Solutions Inc.

Reconciliation of Total Debt to Net Debt

(Unaudited)

 

 

December 31, 2023

 

(in millions)

 

 

Current portion of long-term debt

$

13.6

 

Long-term debt, net of current portion

 

1,852.8

 

Less: Debt issuance costs

 

(31.1

)

Total Debt

 

1,897.5

 

Less: Cash and cash equivalents

 

126.5

 

Total Net Debt

$

1,771.0

 

 

 

 

Adjusted EBITDA

$

424.3

 

Net Debt / Adjusted EBITDA (Net Leverage) Ratio

4.2x

 

 

 

 

Investor Contacts:

Sean Choksi

sean.choksi@advantagesolutions.net

 

Ruben Mella

ruben.mella@advantagesolutions.net

 

Media Contacts:

Peter Frost

peter.frost@advantagesolutions.net

 

12


Slide 1

2023 Earnings Presentation February 29, 2024


Slide 2

Disclaimer Forward-Looking Statements Certain statements in this presentation may be considered forward-looking statements within the meaning of the federal securities laws, including statements regarding the expected future performance of Advantage's business and projected financial results. Forward-looking statements generally relate to future events or Advantage’s future financial or operating performance. These forward-looking statements generally are identified by the words “may”, “should”, “expect”, “intend”, “will”, “would”, “could”, “estimate”, “anticipate”, “believe”, “predict”, “confident”, “potential”, “guidance”, or “continue”, or the negatives of these terms or variations of them or similar terminology. Such forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those expressed or implied by such forward looking statements. These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by Advantage and its management at the time of such statements, are inherently uncertain. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, market-driven wage changes or changes to labor laws or wage or job classification regulations, including minimum wage; the COVID-19 pandemic, or any future similar pandemic or health epidemic; Advantage’s ability to continue to generate significant operating cash flow; client procurement strategies and consolidation of Advantage’s clients’ industries creating pressure on the nature and pricing of its services; consumer goods manufacturers and retailers reviewing and changing their sales, retail, marketing and technology programs and relationships; Advantage’s ability to successfully develop and maintain relevant omni-channel services for our clients in an evolving industry and to otherwise adapt to significant technological change; Advantage’s ability to maintain proper and effective internal control over financial reporting in the future; potential and actual harms to Advantage’s business arising from the Take 5 Matter; Advantage’s substantial indebtedness and our ability to refinance at favorable rates; and other risks and uncertainties set forth in the section titled “Risk Factors” in the Annual Report on Form 10-K expected to be filed by the company with the Securities and Exchange Commission (the “SEC”) on or about March 1, 2024, and in its other filings made from time to time with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and Advantage assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Non-GAAP Financial Measures and Related Information This presentation includes certain financial measures not presented in accordance with generally accepted accounting principles (“GAAP”), Adjusted EBITDA, Adjusted EBITDA by Segment, Adjusted EBITDA margin, Net Debt, Adjusted Unlevered Free Cash Flow and Adjusted Unlevered Free Cash Flow as a percentage of Adjusted EBITDA. These are not measures of financial performance calculated in accordance with GAAP and may exclude items that are significant in understanding and assessing Advantage’s financial results. Therefore, the measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP, and should not be considered in isolation or as an alternative to net income, cash flows from operations or other measures of profitability, liquidity or performance under GAAP. You should be aware that Advantage’s presentation of these measures may not be comparable to similarly-titled measures used by other companies. Reconciliations of historical non-GAAP measures to their most directly comparable GAAP counterparts are included below. Advantage believes these non-GAAP measures provide useful information to management and investors regarding certain financial and business trends relating to Advantage’s financial condition and results of operations. Advantage believes that the use of Adjusted EBITDA, Adjusted EBITDA by Segment, Adjusted EBITDA margin, Net Debt, Adjusted Unlevered Free Cash Flow and Adjusted Unlevered Free Cash Flow as a percentage of Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing Advantage’s financial measures with other similar companies, many of which present similar non-GAAP financial measures to investors. Non-GAAP financial measures are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and income are excluded or included in determining these non-GAAP financial measures. Additionally, other companies may calculate non-GAAP measures differently, or may use other measures to calculate their financial performance, and therefore Advantage’s non-GAAP measures may not be directly comparable to similarly titled measures of other companies. Adjusted EBITDA and Adjusted EBITDA by Segment means net (loss) income before (i) interest expense, net, (ii) provision for (benefit from) income taxes, (iii) depreciation, (iv) impairment of goodwill and indefinite-lived assets, (v) amortization of intangible assets, (vi) gain on deconsolidation of subsidiaries, (vii) loss on divestitures, (viii) equity-based compensation of Karman Topco L.P., (ix) changes in fair value of warrant liability, (x) stock based compensation expense, (xi) fair value adjustments of contingent consideration related to acquisitions, (xii) acquisition and divestiture related expenses,  (xiii) costs associated with COVID-19, net of benefits received, (xiv) EBITDA for economic interests in investments, (xv) reorganization expenses, (xvi) litigation expenses, (xvii) recovery from and costs associated with the Take 5 Matter and (xviii) other adjustments that management believes are helpful in evaluating our operating performance. Adjusted EBITDA Margin means adjusting net (loss) income to exclude (i) interest expense, net, (ii) provision for (benefit from) income taxes, (iii) depreciation, (iv) impairment of goodwill and indefinite-lived assets, (v) amortization of intangible assets, (vi) gain on deconsolidation of subsidiaries, (vii) loss on divestitures, (viii) equity-based compensation of Karman Topco L.P., (ix) changes in fair value of warrant liability, (x) stock based compensation expense, (xi) fair value adjustments of contingent consideration related to acquisitions, (xii) acquisition and divestiture related expenses,  (xiii) costs associated with COVID-19, net of benefits received, (xiv) EBITDA for economic interests in investments, (xv) reorganization and restructuring expenses, (xvi) litigation expenses (recovery), (xvii) recovery from Take 5 and costs associated with the Take 5 Matter and (xviii) other adjustments that management believes are helpful in evaluating our operating performance, and then dividing this figure by total revenues.  Net Debt represents the sum of current portion of long-term debt and long-term debt, less cash and cash equivalents and debt issuance costs. With respect to Net Debt, cash and cash equivalents are subtracted from the GAAP me