10-K
false0001776661FYhttp://www.advantagesolutions.net/20231231#ImpairmentOfIntangibleAssetsIndefinitelivedIncludingGoodwillhttp://fasb.org/us-gaap/2023#GainLossOnDispositionOfAssets1http://fasb.org/us-gaap/2023#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2023#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2023#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2023#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2023#OtherAccruedLiabilitiesCurrenthttp://fasb.org/us-gaap/2023#OtherAccruedLiabilitiesCurrenthttp://fasb.org/us-gaap/2023#OtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2023#OtherLiabilitiesNoncurrentP4Y0001776661srt:MinimumMember2023-01-012023-12-310001776661adv:CommonSeriesC2UnitsMember2023-01-012023-12-310001776661adv:PublicWarrantsMemberus-gaap:CommonClassAMember2023-12-310001776661us-gaap:OtherAssetsMemberus-gaap:InterestRateCapMember2023-12-3100017766612020-12-310001776661us-gaap:FurnitureAndFixturesMember2023-12-310001776661us-gaap:TradeNamesMember2022-12-310001776661us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001776661adv:WarrantLiabilityMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001776661us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-12-310001776661us-gaap:FairValueInputsLevel1Memberadv:ContingentConsiderationLiabilitiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001776661us-gaap:SalesMember2021-12-310001776661us-gaap:InterestRateFloorMemberus-gaap:ContractualInterestRateReductionMember2021-10-280001776661adv:UnconsolidatedSubsidiariesInvestmentsMember2023-01-012023-12-310001776661us-gaap:PrivatePlacementMember2023-12-310001776661adv:GovernmentLoansMember2022-12-310001776661adv:SalesTradeNameMember2021-10-012021-10-010001776661us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001776661adv:ContingentConsiderationLiabilitiesMember2023-01-012023-12-310001776661adv:AdvantageSmollanLtdMember2023-11-300001776661us-gaap:CommonStockMember2020-12-310001776661adv:OtherAccruedExpensesMember2023-12-310001776661adv:MarketingRevenuesMemberadv:MarketingBrandCentricServicesMember2023-01-012023-12-310001776661us-gaap:SellingAndMarketingExpenseMember2023-01-012023-12-310001776661us-gaap:NotesPayableOtherPayablesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001776661adv:CommonSeriesDUnitsMember2022-12-310001776661adv:PerformanceStockUnitsMember2023-03-310001776661adv:MarketingRetailCentricServicesMemberadv:MarketingRevenuesMember2021-01-012021-12-310001776661us-gaap:CommonClassAMemberadv:TopcoMember2022-12-310001776661us-gaap:SoftwareAndSoftwareDevelopmentCostsMembersrt:MaximumMember2023-12-3100017766612022-12-310001776661us-gaap:TreasuryStockCommonMember2023-12-310001776661us-gaap:ParentMember2021-01-012021-12-3100017766612023-06-300001776661srt:MaximumMember2023-01-012023-12-310001776661us-gaap:OtherNoncurrentAssetsMember2022-12-310001776661adv:ContingentConsiderationLiabilitiesMember2023-12-310001776661adv:AdvantageSmollanLimitedMember2023-11-302023-11-300001776661adv:CommonSeriesDUnitsMember2022-01-012022-12-310001776661adv:TwoThousandAndTwentyOneBusinessAcquisitionsMember2021-12-310001776661adv:TwoThousandFourteenTopcoAcquisitionMemberadv:CommonSeriesC2UnitsMember2014-12-310001776661adv:SalesBrandRetailServicesMemberadv:SalesRevenuesMember2021-01-012021-12-310001776661us-gaap:FairValueInputsLevel2Memberadv:NewTermLoanCreditFacilityMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001776661us-gaap:RetainedEarningsMember2023-01-012023-12-310001776661us-gaap:NoncontrollingInterestMember2022-12-310001776661us-gaap:InterestRateCapMemberus-gaap:OtherAssetsMember2022-12-310001776661srt:ParentCompanyMember2023-12-310001776661us-gaap:MajorityOwnedSubsidiaryUnconsolidatedMember2022-01-012022-12-310001776661adv:SalesReportingUnitMember2021-10-010001776661adv:TwoThousandAndTwentyOneBusinessAcquisitionsMember2021-01-012021-12-310001776661country:US2023-12-310001776661adv:MarketingReportingUnitMember2023-10-010001776661us-gaap:PerformanceSharesMember2023-12-310001776661us-gaap:RetainedEarningsMember2022-12-310001776661adv:PerformanceStockUnitsMemberMemberadv:RevenueMember2023-01-012023-12-310001776661us-gaap:DomesticCountryMember2023-12-310001776661us-gaap:DomesticCountryMember2023-01-012023-12-310001776661adv:PrivatePlacementWarrantsMember2021-01-012021-12-310001776661srt:ParentCompanyMembersrt:MinimumMember2023-12-310001776661us-gaap:OtherNoncurrentAssetsMember2023-12-310001776661adv:GovernmentLoansForCovid19ReliefAndOtherMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001776661adv:SalesBrandRetailServicesMemberadv:SalesRevenuesMember2022-01-012022-12-310001776661adv:CpSponsorMember2023-12-310001776661us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-12-310001776661adv:TwoThousandAndTwentyOneAcquisitionsMember2023-01-012023-12-310001776661us-gaap:RevolvingCreditFacilityMemberadv:VariableInterestRateSpreadTwoMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMemberadv:AdvantageSalesAndMarketingIncMember2023-01-012023-12-310001776661us-gaap:ParentMember2022-12-310001776661us-gaap:NoncontrollingInterestMember2023-12-310001776661adv:AdvantageSmollanLimitedMember2023-11-300001776661adv:CpSponsorMemberus-gaap:CommonClassAMemberadv:PrivatePlacementWarrantsMember2023-12-310001776661adv:SalesReportingUnitMember2023-10-010001776661us-gaap:LetterOfCreditMember2022-12-310001776661us-gaap:DomesticCountryMember2021-01-012021-12-310001776661adv:CommonSeriesCUnitsMember2023-01-012023-12-310001776661us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-01-012023-12-310001776661us-gaap:AdditionalPaidInCapitalMember2023-01-012023-12-310001776661us-gaap:DevelopedTechnologyRightsMember2023-12-310001776661us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2022-12-310001776661adv:AdvantageSolutionsFincoLlcMemberadv:SeniorSecuredNotesMemberadv:AdvantageSalesAndMarketingIncMember2023-01-012023-12-310001776661us-gaap:RevolvingCreditFacilityMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMemberadv:AdvantageSalesAndMarketingIncMemberadv:VariableInterestRateSpreadThreeMember2023-01-012023-12-310001776661adv:LoansToParentMemberMember2022-12-310001776661us-gaap:FurnitureAndFixturesMember2022-12-310001776661adv:TwoThousandTwentyTwoAcquisitionsMember2023-01-012023-12-310001776661adv:PerformanceStockUnitsMemberMemberadv:RevenueMember2022-12-310001776661adv:CommonSeriesCUnitsMemberus-gaap:ShareBasedCompensationAwardTrancheThreeMemberadv:DaymonAcquisitionMember2023-01-012023-12-310001776661us-gaap:LeaseholdImprovementsMembersrt:MaximumMember2023-12-310001776661us-gaap:MajorityOwnedSubsidiaryUnconsolidatedMember2021-01-012021-12-310001776661us-gaap:StateAndLocalJurisdictionMember2023-12-310001776661adv:LoansToParentMemberMember2023-01-012023-12-310001776661adv:MarketingReportingUnitMember2021-10-010001776661adv:CommonSeriesC2UnitsMember2022-12-310001776661adv:ForeignSubsidiariesMember2022-12-310001776661country:US2022-12-310001776661adv:GovernmentLoansForCovid19ReliefAndOtherMember2023-12-310001776661us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-12-310001776661adv:PerformanceStockUnitsMember2022-12-310001776661adv:ClientCompanyOneMember2023-01-012023-12-310001776661srt:ParentCompanyMember2021-01-012021-12-310001776661adv:NewTermLoanFacilityMemberadv:FloatingRateOfTermSofrMember2023-01-012023-12-310001776661us-gaap:OtherNoncurrentLiabilitiesMember2023-12-310001776661adv:SalesReportingUnitDisposalGroupMember2023-12-310001776661adv:RedemptionPricePercentageThreeMemberadv:AdvantageSolutionsFincoLlcMemberadv:SeniorSecuredNotesMemberadv:AdvantageSalesAndMarketingIncMember2023-01-012023-12-310001776661us-gaap:SubsequentEventMember2024-01-310001776661adv:PerformanceStockUnitsMembersrt:MinimumMember2023-01-012023-12-310001776661us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberadv:DerivativeFinancialInstrumentsMember2023-12-310001776661adv:SalesBrandCentricServicesMemberadv:SalesRevenuesMember2021-01-012021-12-310001776661adv:TwoThousandAndTwentyOneBusinessAcquisitionsMemberus-gaap:CustomerRelationshipsMember2021-12-310001776661adv:TwoThousandAndTwentyThreeDeconsolidationOfAdvantageSmollanLimitedMember2023-01-012023-12-310001776661adv:PublicWarrantsMember2022-12-310001776661us-gaap:PrivatePlacementMember2022-12-310001776661srt:MaximumMemberadv:EmployeeStockPurchasePlanMember2023-01-012023-12-310001776661adv:CeutaHoldingsLimitedMember2023-11-300001776661us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberadv:DerivativeFinancialInstrumentsMember2022-12-310001776661us-gaap:ComputerEquipmentMember2022-12-310001776661adv:AdvantageSolutionsFincoLlcMemberadv:SeniorSecuredNotesMemberadv:AdvantageSalesAndMarketingIncMemberadv:RedemptionPricePercentageTwoMember2023-01-012023-12-3100017766612021-01-012021-12-310001776661us-gaap:RetainedEarningsMember2020-12-310001776661srt:MaximumMemberus-gaap:FurnitureAndFixturesMember2023-12-310001776661us-gaap:InterestRateCapMember2022-12-310001776661us-gaap:ContractualInterestRateReductionMember2021-10-282021-10-280001776661adv:PartnershipSpv1LimitedMember2023-11-300001776661us-gaap:LetterOfCreditMemberadv:AdvantageSalesAndMarketingIncMemberadv:BankOfAmericaMember2020-10-280001776661us-gaap:SubsequentEventMember2024-01-012024-01-310001776661adv:MarketingMember2023-12-310001776661us-gaap:SuretyBondMember2023-12-310001776661adv:DebtInstrumentDueApril182026Member2023-04-180001776661us-gaap:RevolvingCreditFacilityMemberadv:AdvantageSalesAndMarketingIncMemberadv:BankOfAmericaMember2023-12-310001776661us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember2022-01-012022-12-310001776661us-gaap:CommonClassAMemberadv:PublicWarrantsMember2022-12-310001776661adv:SalesTradeNameMember2023-10-012023-10-010001776661adv:CommonSeriesDUnitsMember2021-01-012021-12-310001776661adv:DebtInstrumentDueApril302043Member2023-04-180001776661adv:MarketingRevenuesMember2023-01-012023-12-310001776661us-gaap:RevolvingCreditFacilityMemberus-gaap:BaseRateMemberadv:AdvantageSalesAndMarketingIncMemberadv:VariableInterestRateSpreadOneMember2023-01-012023-12-310001776661adv:TwoThousandFourteenTopcoAcquisitionMemberadv:TopcoMemberadv:NewIntercompanyLoanAgreementMember2023-01-012023-12-310001776661us-gaap:FairValueInputsLevel3Memberadv:ContingentConsiderationLiabilitiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001776661us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-12-310001776661us-gaap:FairValueMeasurementsRecurringMember2022-12-310001776661us-gaap:FairValueMeasurementsRecurringMember2023-01-012023-12-310001776661us-gaap:ParentMember2022-01-012022-12-310001776661us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberadv:DerivativeFinancialInstrumentsMember2022-12-310001776661adv:JapaneseSupermarketChainsMember2022-12-310001776661us-gaap:NoncontrollingInterestMember2020-12-310001776661adv:PerformanceStockUnitsMemberus-gaap:SubsequentEventMember2024-03-310001776661adv:GovernmentLoansForCovid19ReliefAndOtherMember2022-12-310001776661adv:AdvwwMemberexch:XNGSus-gaap:WarrantMember2022-12-3100017766612021-12-310001776661us-gaap:RetainedEarningsMember2021-12-310001776661adv:MarketingRevenuesMemberadv:MarketingBrandCentricServicesMember2021-01-012021-12-310001776661country:JP2022-12-310001776661adv:BorrowerHoldingsMemberus-gaap:RevolvingCreditFacilityMembersrt:MaximumMemberadv:BankOfAmericaMember2022-12-020001776661us-gaap:RevolvingCreditFacilityMemberus-gaap:BaseRateMemberadv:AdvantageSalesAndMarketingIncMemberadv:VariableInterestRateSpreadThreeMember2023-01-012023-12-310001776661adv:CommonSeriesCUnitsMember2018-01-012018-12-310001776661us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001776661us-gaap:TreasuryStockCommonMember2022-12-310001776661us-gaap:PerformanceSharesMember2023-01-012023-12-310001776661adv:TwoThousandAndTwentyTwoBusinessAcquisitionsMember2022-12-310001776661adv:GovernmentLoansForCovid19ReliefAndOtherMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001776661adv:MarketingTradeNameMember2023-01-012023-12-310001776661adv:UncertainTaxPositionsMember2023-01-012023-12-310001776661adv:TwoThousandFourteenTopcoAcquisitionMemberadv:TopcoMemberadv:NewIntercompanyLoanAgreementMember2023-12-310001776661adv:LoansToParentMemberMember2021-01-012021-12-310001776661adv:SalesRevenuesMember2022-01-012022-12-310001776661us-gaap:CommonStockMember2021-01-012021-12-310001776661adv:GlobalSmollanHoldingsMember2023-05-310001776661us-gaap:TreasuryStockCommonMember2021-12-310001776661adv:NewTermLoanCreditFacilityMember2022-12-310001776661adv:CommonSeriesC2UnitsMember2023-12-310001776661us-gaap:RestrictedStockUnitsRSUMember2023-12-310001776661adv:OtherLongTermLiabilitiesMember2021-12-310001776661us-gaap:ParentMember2021-12-310001776661us-gaap:ForeignCountryMember2023-12-310001776661us-gaap:OtherAssetsMember2022-12-310001776661us-gaap:RevolvingCreditFacilityMemberadv:FeePercentageOneMemberadv:AdvantageSalesAndMarketingIncMember2023-01-012023-12-310001776661adv:MarketingMember2022-01-012022-12-310001776661adv:SignificantEquityInvestmentsMember2023-12-310001776661us-gaap:ComputerEquipmentMembersrt:MaximumMember2023-12-310001776661adv:MarketingRevenuesMemberadv:MarketingBrandCentricServicesMember2022-01-012022-12-310001776661us-gaap:MajorityOwnedSubsidiaryUnconsolidatedMember2022-12-310001776661adv:CommonSeriesDUnitsMember2023-01-012023-12-310001776661adv:SignificantEquityInvestmentsMember2022-12-310001776661country:JPadv:TrancheOneMember2020-05-250001776661us-gaap:AdditionalPaidInCapitalMember2021-12-310001776661us-gaap:InvestorMemberus-gaap:CommonClassAMemberus-gaap:PrivatePlacementMember2020-01-012020-12-310001776661adv:TwoThousandAndTwentyOneBusinessAcquisitionsMemberus-gaap:DevelopedTechnologyRightsMember2021-12-310001776661us-gaap:LetterOfCreditMember2023-12-310001776661us-gaap:CommonClassAMember2021-01-012021-12-310001776661adv:CoronavirusAidReliefAndEconomicSecurityActMember2022-12-310001776661adv:ContingentConsiderationLiabilitiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001776661adv:MarketingRetailCentricServicesMemberadv:MarketingRevenuesMember2022-01-012022-12-310001776661us-gaap:RevolvingCreditFacilityMember2023-12-310001776661adv:CommonSeriesDUnitsMember2023-12-310001776661adv:MarketingTradeNameMember2021-10-012021-10-010001776661us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberadv:DerivativeFinancialInstrumentsMember2023-12-310001776661us-gaap:FairValueMeasurementsRecurringMemberadv:DerivativeFinancialInstrumentsMember2022-12-310001776661country:JPadv:DebtInstrumentDueDecember242024Membersrt:SubsidiariesMember2021-12-280001776661adv:PerformanceStockUnitsMember2023-01-012023-12-310001776661adv:LoansToParentMemberMember2023-12-310001776661us-gaap:AdditionalPaidInCapitalMember2021-01-012021-12-310001776661adv:TermLoanFacilityMember2023-12-310001776661adv:CpSponsorMember2022-12-310001776661us-gaap:CommonStockMember2021-12-310001776661adv:PublicWarrantsMember2023-12-310001776661country:JP2023-12-310001776661us-gaap:ForeignCountryMember2022-01-012022-12-310001776661adv:PerformanceStockUnitsMember2022-01-012022-12-3100017766612023-12-310001776661us-gaap:ComputerEquipmentMember2023-12-310001776661us-gaap:RevolvingCreditFacilityMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMemberadv:AdvantageSalesAndMarketingIncMemberadv:VariableInterestRateSpreadOneMember2023-01-012023-12-310001776661us-gaap:PhantomShareUnitsPSUsMember2023-01-012023-12-310001776661adv:TwoThousandFourteenTopcoAcquisitionMemberadv:TopcoMemberadv:IntercompanyLoanAgreementsMember2023-12-310001776661us-gaap:CustomerRelationshipsMember2023-12-310001776661us-gaap:ShareBasedCompensationAwardTrancheOneMemberadv:CommonSeriesCUnitsMember2023-01-012023-12-310001776661adv:NewSecuredFirstLienTermLoanFacilityMemberadv:AdvantageSalesAndMarketingIncMember2023-12-310001776661us-gaap:FairValueInputsLevel1Memberadv:WarrantLiabilityMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001776661adv:WarrantLiabilityMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001776661adv:SeniorSecuredNotesMember2022-12-310001776661adv:TwoThousandTwentyIncentiveAwardPlanMember2021-01-012021-12-310001776661adv:AdvantageSponsorsOrAffiliatesMemberus-gaap:CommonClassAMember2020-12-310001776661adv:InternationalMember2022-01-012022-12-310001776661us-gaap:AdditionalPaidInCapitalMember2022-01-012022-12-310001776661adv:GovernmentLoansMember2023-12-310001776661us-gaap:SuretyBondMember2023-12-310001776661srt:ParentCompanyMember2023-01-012023-12-310001776661us-gaap:EmployeeStockOptionMember2023-01-012023-12-310001776661adv:MarketingMember2023-01-012023-12-310001776661srt:ParentCompanyMember2022-12-310001776661adv:NewTermLoanCreditFacilityMember2023-12-310001776661us-gaap:NoncontrollingInterestMember2022-01-012022-12-310001776661us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2023-01-012023-12-310001776661adv:SubsidiaryMember2023-12-310001776661adv:WarrantLiabilityMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001776661us-gaap:SuretyBondMember2022-12-310001776661adv:PrivatePlacementWarrantsMember2020-10-282020-10-280001776661adv:PerformanceStockUnitsMembersrt:MaximumMember2023-01-012023-12-310001776661us-gaap:SoftwareDevelopmentMember2022-12-310001776661us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001776661us-gaap:PerformanceSharesMember2022-12-310001776661us-gaap:TreasuryStockCommonMember2021-01-012021-12-310001776661us-gaap:CommonStockMember2022-12-310001776661us-gaap:RevolvingCreditFacilityMemberadv:FeePercentageTwoMemberadv:AdvantageSalesAndMarketingIncMember2023-01-012023-12-310001776661us-gaap:SoftwareAndSoftwareDevelopmentCostsMembersrt:MinimumMember2023-12-3100017766612023-10-012023-12-310001776661adv:TermLoanFacilityMember2022-12-310001776661adv:NewTermLoanFacilityMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMembersrt:MinimumMember2023-01-012023-12-310001776661us-gaap:CommonClassAMember2023-12-310001776661adv:PerformanceStockUnitsMemberMemberadv:RevenueMember2022-01-012022-12-310001776661us-gaap:ShareBasedCompensationAwardTrancheTwoMemberadv:CommonSeriesCUnitsMember2023-01-012023-12-310001776661us-gaap:NoncontrollingInterestMember2021-01-012021-12-310001776661adv:WarrantLiabilityMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001776661srt:MinimumMemberus-gaap:FurnitureAndFixturesMember2023-12-310001776661us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2023-12-310001776661us-gaap:TreasuryStockCommonMember2023-01-012023-12-310001776661srt:NorthAmericaMember2022-12-310001776661adv:SalesBrandCentricServicesMemberadv:SalesRevenuesMember2023-01-012023-12-310001776661us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001776661us-gaap:RevolvingCreditFacilityMemberus-gaap:BaseRateMemberadv:VariableInterestRateSpreadTwoMemberadv:AdvantageSalesAndMarketingIncMember2023-01-012023-12-310001776661adv:AdvantageSponsorsOrAffiliatesMemberus-gaap:CommonClassAMember2020-01-012020-12-310001776661us-gaap:CustomerRelationshipsMember2022-12-310001776661us-gaap:RetainedEarningsMember2023-12-310001776661adv:PerformanceStockUnitsMemberMemberadv:RevenueMember2023-12-310001776661srt:NorthAmericaMember2021-01-012021-12-310001776661us-gaap:SalesMember2021-01-012021-12-310001776661country:JPadv:TrancheTwoMember2020-05-250001776661adv:NewTermLoanFacilityMember2023-01-012023-12-310001776661us-gaap:WarrantMember2023-01-012023-12-310001776661adv:BorrowerHoldingsMemberus-gaap:RevolvingCreditFacilityMembersrt:MinimumMemberadv:BankOfAmericaMember2022-12-020001776661adv:CeutaHoldingsLimitedMember2023-11-012023-11-300001776661us-gaap:SalesMember2022-01-012022-12-310001776661us-gaap:ParentMember2020-12-310001776661adv:MarketingTradeNameMember2023-10-012023-10-010001776661us-gaap:InterestRateCapMember2023-12-3100017766612021-10-280001776661adv:AdvantageSolutionsFincoLlcMemberadv:SeniorSecuredNotesMemberadv:AdvantageSalesAndMarketingIncMember2020-10-282020-10-280001776661adv:MarketingMember2021-12-310001776661us-gaap:FairValueInputsLevel3Memberadv:WarrantLiabilityMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001776661us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001776661adv:WorkerCompensationProgramsMember2023-12-310001776661us-gaap:ParentMember2023-12-310001776661adv:SeniorSecuredNotesMember2023-12-310001776661us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-12-310001776661us-gaap:FairValueMeasurementsRecurringMemberadv:DerivativeFinancialInstrumentsMember2023-12-310001776661us-gaap:FairValueInputsLevel1Memberadv:ContingentConsiderationLiabilitiesMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001776661us-gaap:SellingAndMarketingExpenseMember2021-01-012021-12-310001776661us-gaap:SoftwareDevelopmentMember2023-12-310001776661adv:SalesRevenuesMember2023-01-012023-12-310001776661adv:EmployeeStockPurchasePlanMember2023-01-012023-12-310001776661adv:NewSecuredFirstLienTermLoanFacilityMemberadv:AdvantageSalesAndMarketingIncMember2023-01-012023-12-310001776661us-gaap:ParentMember2023-01-012023-12-310001776661adv:CommonSeriesDUnitsMember2021-12-310001776661us-gaap:NotesPayableOtherPayablesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001776661us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001776661adv:SmollanHoldingsProprietaryLimitedMember2023-05-310001776661us-gaap:RetainedEarningsMember2022-01-012022-12-310001776661adv:TwoThousandAndTwentyTwoBusinessAcquisitionsMember2022-01-012022-12-310001776661us-gaap:FairValueInputsLevel2Memberadv:ContingentConsiderationLiabilitiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001776661us-gaap:AdditionalPaidInCapitalMember2022-12-310001776661adv:PrivatePlacementWarrantsMember2023-01-012023-12-310001776661adv:InternationalMember2021-01-012021-12-310001776661adv:PerformanceStockUnitsMemberMemberadv:RevenueMember2021-01-012021-12-310001776661us-gaap:MajorityOwnedSubsidiaryUnconsolidatedMember2023-01-012023-12-310001776661us-gaap:ForeignCountryMember2023-01-012023-12-310001776661us-gaap:NoncontrollingInterestMember2021-12-310001776661us-gaap:OtherAssetsMember2023-12-310001776661adv:LoansToParentMemberMember2022-01-012022-12-310001776661us-gaap:FairValueInputsLevel2Memberadv:ContingentConsiderationLiabilitiesMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001776661us-gaap:NotesPayableOtherPayablesMember2023-12-310001776661us-gaap:CommonStockMember2023-01-012023-12-310001776661adv:SalesTradeNameMember2023-01-012023-12-310001776661adv:TwoThousandTwentyIncentiveAwardPlanMember2023-12-310001776661adv:ClientCompanyTwoMember2023-12-310001776661adv:EmployeeStockPurchasePlanMembersrt:MinimumMember2023-12-310001776661us-gaap:LeaseholdImprovementsMember2023-12-310001776661adv:TwoThousandTwentyIncentiveAwardPlanMember2023-01-012023-12-3100017766612020-10-280001776661us-gaap:SalesMember2022-12-3100017766612024-02-290001776661adv:TwoThousandAndTwentyThreeDeconsolidationOfAdvantageSmollanLimitedMember2023-11-302023-11-300001776661us-gaap:OtherNoncurrentLiabilitiesMember2022-12-310001776661us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001776661us-gaap:SalesMember2023-01-012023-12-310001776661adv:WarrantLiabilityMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001776661us-gaap:SalesMember2023-01-012023-12-310001776661us-gaap:InterestRateCapMember2021-01-012021-12-310001776661adv:MarketingReportingUnitMember2022-01-012022-12-310001776661adv:SalesBrandRetailServicesMemberadv:SalesRevenuesMember2023-01-012023-12-310001776661adv:TwoThousandAndTwentyThreeFoodserviceBusinessesHeldForSaleMembersrt:ScenarioForecastMember2024-01-012024-03-310001776661srt:NorthAmericaMember2023-12-310001776661adv:ForeignSubsidiariesMember2023-12-310001776661country:JPsrt:SubsidiariesMember2021-12-280001776661adv:AdvantageSolutionsFincoLlcMemberadv:SeniorSecuredNotesMemberadv:AdvantageSalesAndMarketingIncMemberadv:RedemptionPricePercentageOneMember2023-01-012023-12-310001776661adv:SecuredFirstLienTermLoanFacilityMemberadv:AdvantageSalesAndMarketingIncMember2023-01-012023-12-310001776661adv:AdvwwMemberexch:XNGSus-gaap:WarrantMember2023-12-310001776661us-gaap:FairValueMeasurementsRecurringMember2023-12-310001776661adv:MarketingRetailCentricServicesMemberadv:MarketingRevenuesMember2023-01-012023-12-310001776661us-gaap:InterestRateCapMember2022-01-012022-12-310001776661adv:PerformanceStockUnitsMemberMemberadv:RevenueMember2021-12-310001776661country:US2023-01-012023-12-310001776661us-gaap:InvestorMemberus-gaap:CommonClassAMemberadv:InvestorSubscriptionAgreementsMember2020-10-282020-10-280001776661adv:CpSponsorMemberus-gaap:CommonClassAMemberadv:PrivatePlacementWarrantsMember2022-12-310001776661adv:MarketingRevenuesMember2022-01-012022-12-310001776661us-gaap:CommonStockMember2022-01-012022-12-310001776661us-gaap:InvestorMemberus-gaap:CommonClassAMemberadv:InvestorSubscriptionAgreementsMember2020-10-280001776661us-gaap:FairValueInputsLevel3Memberadv:ContingentConsiderationLiabilitiesMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001776661us-gaap:EmployeeStockOptionMember2023-12-310001776661us-gaap:FairValueInputsLevel2Memberadv:NewTermLoanCreditFacilityMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001776661adv:OtherAccruedExpensesMember2022-12-310001776661adv:MarketingMember2022-12-310001776661us-gaap:CommonClassAMember2023-01-012023-12-310001776661adv:InitialFirstLientErmLoansMember2023-01-012023-12-310001776661adv:DeferredPaymentOfSecurityTaxesMember2022-12-310001776661adv:PublicWarrantsMember2023-01-012023-12-310001776661us-gaap:RevolvingCreditFacilityMemberadv:BorrowerHoldingsMemberus-gaap:PrimeRateMemberadv:BankOfAmericaMember2022-12-022022-12-020001776661adv:TwoThousandAndTwentyOneBusinessAcquisitionsMemberus-gaap:TradeNamesMember2021-12-310001776661adv:SalesBrandCentricServicesMemberadv:SalesRevenuesMember2022-01-012022-12-310001776661us-gaap:CustomerRelationshipsMemberadv:TwoThousandAndTwentyTwoBusinessAcquisitionsMember2022-12-310001776661adv:CommonSeriesCUnitsMember2023-12-310001776661us-gaap:LeaseholdImprovementsMembersrt:MinimumMember2023-12-310001776661adv:OtherLongTermLiabilitiesMember2023-12-310001776661adv:RedeemableNonControllingInterestMember2022-12-310001776661us-gaap:BaseRateMemberus-gaap:ContractualInterestRateReductionMember2021-10-270001776661us-gaap:NotesPayableOtherPayablesMember2022-12-310001776661adv:NewTermLoanFacilityMembersrt:MaximumMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember2023-01-012023-12-310001776661us-gaap:CommonClassAMember2022-12-310001776661us-gaap:NoncontrollingInterestMember2023-01-012023-12-310001776661us-gaap:ComputerEquipmentMembersrt:MinimumMember2023-12-310001776661adv:MarketingRevenuesMember2021-01-012021-12-310001776661adv:TwoThousandAndTwentyThreeFoodserviceBusinessesHeldForSaleMemberus-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2023-12-310001776661us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberadv:DerivativeFinancialInstrumentsMember2022-12-310001776661adv:ClientCompanyOneMember2023-12-310001776661us-gaap:DomesticCountryMember2022-01-012022-12-310001776661adv:LoansToParentMemberMember2021-12-310001776661srt:ParentCompanyMember2022-01-012022-12-3100017766612023-01-012023-12-310001776661adv:SalesRevenuesMember2021-01-012021-12-310001776661us-gaap:FairValueInputsLevel1Memberadv:WarrantLiabilityMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-3100017766612022-01-012022-03-310001776661adv:ContingentConsiderationLiabilitiesMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001776661adv:WorkerCompensationProgramsMember2022-12-310001776661us-gaap:AdditionalPaidInCapitalMember2020-12-310001776661us-gaap:ForeignCountryMember2021-01-012021-12-310001776661country:US2022-01-012022-12-310001776661us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-01-012021-12-310001776661adv:TwoThousandTwentyIncentiveAwardPlanMember2022-01-012022-12-310001776661us-gaap:MajorityOwnedSubsidiaryUnconsolidatedMember2023-12-310001776661us-gaap:InterestRateFloorMemberus-gaap:ContractualInterestRateReductionMember2021-10-270001776661us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001776661us-gaap:LeaseholdImprovementsMember2022-12-310001776661us-gaap:EmployeeStockOptionMember2022-12-3100017766612022-01-012022-12-310001776661adv:TwoThousandAndTwentyTwoBusinessAcquisitionsMemberus-gaap:TradeNamesMember2022-12-310001776661us-gaap:RestrictedStockUnitsRSUMember2022-12-310001776661us-gaap:SalesMember2023-12-310001776661us-gaap:CommonClassAMemberadv:TopcoMember2023-12-310001776661adv:CoronavirusAidReliefAndEconomicSecurityActMember2023-12-310001776661us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberadv:DerivativeFinancialInstrumentsMember2023-12-310001776661us-gaap:RevolvingCreditFacilityMemberadv:RevolvingCreditFacilityCovenantMemberadv:AdvantageSalesAndMarketingIncMember2023-12-310001776661us-gaap:AdditionalPaidInCapitalMember2023-12-310001776661us-gaap:TradeNamesMember2023-12-310001776661adv:ClientCompanyTwoMember2023-01-012023-12-310001776661srt:NorthAmericaMember2022-01-012022-12-310001776661us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001776661adv:InternationalMember2023-12-310001776661us-gaap:DevelopedTechnologyRightsMember2022-12-310001776661adv:JapaneseSupermarketChainsMember2023-12-310001776661adv:InterestRateCollarMember2023-04-030001776661us-gaap:RetainedEarningsMember2021-01-012021-12-310001776661adv:CommonSeriesCUnitsMember2022-12-310001776661adv:InternationalMember2022-12-310001776661us-gaap:CommonStockMember2023-12-310001776661srt:NorthAmericaMember2023-01-012023-12-310001776661adv:AdvantageSolutionsFincoLlcMemberadv:SeniorSecuredNotesMemberadv:AdvantageSalesAndMarketingIncMember2020-10-280001776661adv:GshMember2023-12-310001776661country:US2021-01-012021-12-310001776661adv:SalesReportingUnitMember2022-01-012022-12-310001776661adv:LoansToParentMemberMember2020-12-310001776661adv:InternationalMember2023-01-012023-12-310001776661adv:EmployeeStockPurchasePlanMember2023-12-310001776661adv:AdvantageSmollanLimitedMember2023-12-310001776661us-gaap:SellingAndMarketingExpenseMember2022-01-012022-12-310001776661us-gaap:InterestRateCapMember2023-01-012023-12-310001776661adv:PrivatePlacementWarrantsMember2022-01-012022-12-310001776661us-gaap:SalesMember2022-01-012022-12-31adv:Businessesadv:Segmentxbrli:purexbrli:sharesiso4217:USDxbrli:sharesiso4217:USD

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2023

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

ADVWW

Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

 


 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ No

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ No

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, smaller reporting company, or an emerging growth company. See the definitions 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

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 June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting and non-voting common stock held by non-affiliates, computed by reference to the closing sales price of $2.34 reported on the Nasdaq Global Select Market, was approximately $204 million.

As of February 29, 2024, there were 320,426,923 shares of the registrant’s common stock, $0.0001 par value per share, issued and outstanding.

 

 

 

 

 

 

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Definitive Proxy Statement for the 2024 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31, 2023, are incorporated by reference in Part III of this report to the extent stated.

 


 

Advantage Solutions Inc.

TABLE OF CONTENTS

 

 

 

Page

PART I

Item 1. Business

2

Item 1A. Risk Factors

7

Item 1B. Unresolved Staff Comments

27

Item 1C. Cybersecurity

27

Item 2. Properties

28

Item 3. Legal Proceedings

28

Item 4. Mine Safety Disclosures

29

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

29

Item 6. [Reserved]

31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

31

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

51

Item 8. Financial Statements and Supplementary Data

53

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

105

Item 9A. Controls and Procedures

105

Item 9B. Other Information

106

 

 

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

106

PART III

Item 10. Directors, Executive Officers and Corporate Governance

106

Item 11. Executive Compensation

106

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

106

Item 13. Certain Relationships and Related Transactions, and Director Independence

106

Item 14. Principal Accountant Fees and Services

106

PART IV

Item 15. Exhibits, Financial Statement Schedules

107

Item 16. Form 10-K Summary

110

Signatures

 

 

 


 

Part I

Forward-Looking Statements

This Annual Report on Form 10-K (“Annual Report”) and other documents we file with the Securities and Exchange Commission (“SEC”) contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, our beliefs and our management’s assumptions. In addition, we, or others on our behalf, may make forward-looking statements in press releases, written statements or our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls and conference calls. Such words as “expect,” “anticipate,” “outlook,” “could,” “target,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “should,” “may,” “assume” and “continue” as well as variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and they involve certain risks, uncertainties and assumptions that are difficult to predict. We describe our respective risks, uncertainties and assumptions that could affect the outcome or results of operations in Part I, Item 1A. Risk Factors. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecasted by our forward-looking statements. Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise.

Item 1. Business

Our Company

We are a leading business solutions provider to consumer goods manufacturers and retailers. We have a strong platform of competitively advantaged sales and marketing services built over multiple decades – essential, business critical services like headquarter sales, retail merchandising, in-store sampling, digital commerce and shopper marketing. For brands and retailers of all sizes, we help get the right products on the shelf (whether physical or digital) and into the hands of consumers (however they shop). We use a scaled platform to innovate as a trusted partner with our clients, solving problems to increase their efficiency and effectiveness across a broad range of channels.

At the most fundamental level:

We sit at the nexus of consumer goods companies and retailers and serve as a trusted partner to both.
We help our clients sell more while spending less. We make them more effective and more efficient.
We win by providing best-in-class service every day and innovating on a nimble operating platform.
We drive productivity to provide fuel for reinvestment and growth.
Simply put, we are built to do it better, cheaper and faster.

We offer headquarter sales representation services to consumer goods manufacturers, for whom we prepare and present to retailers a business case to increase distribution of manufacturers’ products and optimize how they are displayed, priced and promoted. We also make in-store merchandising visits for both manufacturer and retailer clients to ensure the products we represent are adequately stocked and properly displayed.

Within our marketing services, our largest service offering is retail experiential, also known as in-store sampling or demonstrations, through which we create and manage highly customized large-scale sampling programs (both in-store and on-line) for leading retailers. We also have a collection of specialized agency businesses, where we provide private label services to retailers and develop granular marketing programs for brands and retailers through our shopper, consumer and digital marketing agencies.

Our expertise and scale have compounded over decades, built on differentiated business systems, talent, relationships, and technology. We listen, learn and invest in capabilities that allow us to meet the evolving needs of brands and retailers – solving existing problems better and new problems quickly, to navigate change in an increasingly omni-channel world. This, in turn, helps us compound our relationships with clients. These relationships are enhanced by a suite of technology offerings which leverage data and analytics solutions to support our associates in creating, executing and measuring insight-based plans to grow our clients’ businesses.

2


 

Our Solutions

Our services are provided across two segments — sales and marketing.

Sales Segment

Through our sales segment, we provide our clients with a full suite of outsourced solutions to enhance sales in the traditional retail, foodservice and e-commerce channels. Within our sales segment, we typically generate revenues on a commission, fee-for-service or cost-plus basis. Our primary sales services include:

Brand-Centric Services

Our service offerings have been predominately centered around providing solutions to branded consumer goods manufacturers (i.e., non-private label manufacturers). These brand-centric services include:

Headquarter Relationship Management

We act as a representative of our consumer goods manufacturer clients and facilitate relationships with retailers across a range of matters, including business development and sales planning efforts. We prepare customized, data-driven business plans on behalf of our manufacturer clients and present a business case to increase distribution of their products, and optimize the shelf placement, pricing and promotion of their products, to our extensive network of industry contacts spanning retailer buying organizations and senior executive ranks. Our services are enhanced by our in-depth understanding of both the manufacturers’ and retailers’ strategic priorities, which is supported by our close physical proximity to our clients’ offices, as well as our proactive approach in identifying business-building opportunities. Our scale allows us to offer these services on a local, regional or national level, as well as for a client’s designated product, brand or entire portfolio.

Analytics, Insights and Intelligence

To support our sales efforts, we field a team of analytics professionals who provide category and space management services. These professionals analyze consumer purchase and retailer data to identify opportunities to increase the sales of our clients’ products and categories. We use analytical tools, which aggregate data to guide sales strategies to expand product distribution and optimize other factors such as assortment, planograms, pricing and trade promotions. We also use post-promotion analytical tools to evaluate promotion effectiveness and work with clients and retailers to make the adjustments necessary to meet sales and profit objectives at the product and category level. Our teams of category managers are available in every market, including some who sit onsite with retailers and assist in developing analysis to support recommendations. We also conduct advanced analytical services for clients such as retailer point-of-sale and shopper card analytics and primary market and shopper research.

Brand-Centric Merchandising

We deploy teams in retail locations to support manufacturers’ in-store sales strategies. Our associates conduct both cyclical and ad hoc store visits to manage product availability and positioning, implement promotions, install point-of-purchase displays and perform other value-added merchandising services. Tablet technology and software are used extensively in the workflow. For example, routing software helps guide our associates from location to location in the most efficient and effective way based on factors such as store volume, sales velocity, store location and in-store conditions. In store, our associates use our merchandising application and scanners to efficiently and effectively execute a range of activities such as distribution tasks, validating promotional compliance or answering survey questions.

We leverage software for daily point-of-sale store data, supply chain data and advanced algorithms to target and correct potential store-level merchandising issues in real time, such as stock keeping units that are void, out of stock or past expiration. We use this information to improve the routing of our retail teams to stores where issues exist, or may soon exist, as well as prioritize our associates’ work to address the highest-value opportunities while conducting a store visit.

We offer our clients a full spectrum of flexible service models for our retail services coverage. In our dedicated coverage model, our associates perform services exclusively for a particular client and have intimate knowledge of its categories and products. Our syndicated coverage model utilizes shared teams in particular channels to perform services for multiple clients while in a store. Finally, we offer hybrid coverage models whereby clients can choose to have dedicated teams covering designated channels or retailers and syndicated coverage for other channels. Our retail services teams focus either on manufacturers or particular retail channels, such as grocery, drug, mass, convenience, club and natural/specialty, which allows them to develop expertise in either manufacturer products or a particular class of trade.

3


 

Retailer-Centric Services

We leverage our strategic position with retailers to develop solutions that address their needs. Our retailer-centric services include:

Retailer-Centric Merchandising

We serve select retailers as their exclusive provider, and other retailers as an authorized provider, of in-store merchandising or reset services. For some of our retailer clients, we perform other in-store services, such as compliance audits, data collection and in-store product assembly, and certain advisory services, such as analytics and planogram services intended to increase sales and optimize inventory and space management, so that the retailer’s personnel can focus on interacting with and servicing its shoppers.

In-Store Media

We manage a wide variety of media, merchandising and display platforms for retailers, including multi-manufacturer circular programs.

In addition to our brand-centric and retailer-centric sales services, we have a portfolio of other broadly applicable offerings that are designed to grow sales and reduce costs for clients. These services include:

Marketing Segment

We believe that our marketing segment is differentiated from our competition by our people, retail connectivity, entrepreneurial marketing mindset and scale. We launched our marketing business in 2000 in response to our observation of the challenges that our clients were experiencing by working with traditional marketing agencies that were not effectively connecting brand marketing strategies, sales planning efforts and retailer strategies to offer cohesive brand marketing. Our position as an intermediary in the market gives us deep insight and understanding into manufacturers’ needs from a sales perspective, their marketing and promotion strategies, as well as retailer strategies. We believe this position enables us to create more effective, shopper- focused marketing promotions by connecting client sales and marketing strategies with those of retailers.

We believe that our marketing business is differentiated from traditional marketing agencies in that it is built upon our insights and understanding of manufacturer and retailer strategies, leverages our ability to design and execute coordinated, large-scale marketing platforms in retail and combines capabilities from across the various disciplines in our portfolio to influence consumers at critical points along the purchase journey through execution platforms that reach audiences in-store and out of store to deliver superior client results.

Since founding our marketing business, we have grown to become a national agency collective and are the agency of record for many of the most recognized brands across the retail, packaged goods, technology, apparel, automotive, travel, entertainment, education and healthcare industries. We were ranked by Ad Age as the largest U.S. promotions agency and the largest U.S. experiential and event marketing agency from 2014 to 2023 based on prior year revenues.

Within our marketing segment, we typically generate revenues on a fee-for-service, cost-plus or commission basis.

Brand-Centric Services

Shopper and Consumer Marketing

For manufacturer clients, we analyze shopper behavior and apply our deep retailer knowledge and expertise to offer planning, execution and measurement of insight-based, retailer-specific promotions that target a retailer’s specific shopper base to drive product sales. We combine an understanding of how a brand’s consumers behave as shoppers in different channels, formats and retailers (mined from data resources) with an understanding of retailer objectives, strategies and preferred programming tactics (informed by our connectivity and resources in the field) to develop programs that successfully promote the sales of clients’ products at retail. Manufacturers also hire us for national consumer promotions, which are designed to stimulate demand for, and awareness of, their products more broadly.

Brand Experiential

We design and execute brand experiences in retail and non-retail settings in order to help brands engage, educate, acquire and retain consumers and impact purchase behavior.

4


 

Our brand experiential solutions include large-scale festivals and mobile tours, as well as assisted sales programs whereby our associates act as extensions of client sales teams, educating consumers as well as store employees.

Retailer-Centric Services

Retail Experiential

We design and execute one-to-one engagement strategies in order to drive product trial and sales and help retailers differentiate their in-store experience and generate more loyalty from shoppers. This includes in-store sampling and demo programs with fully-scaled operations including staffing, training, field management, assembly, fulfillment, technology and reporting. We deploy teams at certain retailers that develop event concepts in conjunction with marketing, merchandising and store operations and then secure supplier support and funding for the programs. Our other retail experiential solutions include premium advisors who provide assistance in complex categories (such as beauty and adult beverages), virtual advisors who provide assistance via text messaging or web and curated sampling boxes for online grocery pick-up and delivery orders. Retail experiential constitutes the largest service in the marketing segment, representing more than half of our retailer-centric and marketing revenues.

Private Label

We help maximize the market potential of private label portfolios by providing comprehensive private label strategy, development and management services to retailers and private label manufacturers. By leveraging our analytical capabilities and expertise, we develop strategies and provide insights that help retailers establish and grow productive and profitable private label programs across new and existing product categories. This process often begins with a thorough analysis of the marketplace to develop a private label portfolio strategy that aligns with a client’s priorities. We help identify the most compelling product categories to target and specific products to develop. We also provide packaging and design services to bring our clients’ brands to life through strong brand identities. Our retailer clients are supported by analytical teams and associates who execute strategies through assortment planning, product sourcing and marketing and ongoing program management.

In addition to our brand-centric and retailer-centric marketing services, we have a portfolio of other broadly applicable offerings that are designed to engage consumers and enhance marketing efforts for clients. These services include:

Digital Marketing

Using advanced analytics, our digital marketing teams provide a wide range of services to clients, including: interactive design and development across mobile, tablet and desktop platforms; application development; content management solutions; paid media, including search engine marketing, and programmatic and direct media; and social media development and management.

Digital Media and Advertising

We offer targeted media and advertising solutions powered by our proprietary data that deliver to curated, custom audiences from first and third-party data sources. Our cross-screen advertising capabilities enable advertisers to target and engage with custom audience segments across devices via rich media, display, email and value exchange ads.

Organizational Changes

During the fourth quarter of 2023, certain organizational changes were announced that will impact our future internal reporting. As a result of these changes, we expect to have three reportable segments. We expect that any operational changes impacting our reportable segments will be effective in the first quarter of 2024.

Government Regulation

In connection with the services we provide, we must comply with various laws and regulations from federal, state, local and foreign regulatory agencies. We believe that we are in material compliance with regulatory requirements applicable to our business. These regulatory requirements include, without limitation:

federal, state, local and foreign laws and regulations involving minimum wage, health care, overtime, sick leave, lunch and rest breaks and other similar wage, benefits and hour requirements and other similar laws;

5


 

Title VII of the Civil Rights Act and the Americans with Disabilities Act and regulations of the U.S. Department of Labor, the Occupational Safety & Health Administration, the U.S. Equal Employment Opportunity Commission and the equivalent state agencies and other similar laws;
food safety matters (e.g., federal, state and local certification and training and inspection and enforcement of standards for our associates, facilities, equipment and the products we promote), alcohol beverage marketing regulations, food and permitting matters (e.g., licensing under the Perishable Agricultural Commodities Act and regulations from the U.S. Department of Agriculture), custom and import matters with respect to products imported to and exported across international borders;
the U.S. Foreign Corrupt Practices Act, the UK Bribery Act and other similar anti-bribery and antikickback laws and regulations that generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business; and
federal, state and foreign anticorruption, data protection, privacy, consumer protection, content regulation and other laws and regulations, including without limitation, GDPR and the CCPA.

Human Capital Management

Our people represent one of the most important assets to our business. As of December 31, 2023, we employed approximately 70,000 associates. Approximately 20,000 are full-time and approximately 50,000 are part-time. Approximately 59,000 of our associates are in the United States. As of December 31, 2023, none of our associates in the United States were represented by a trade union or were the subject of a collective bargaining agreement.

We are committed to creating a performance culture with a high degree of associate engagement. Our talent and leadership development programs are intended to foster our associates’ ambitions, help develop their careers and support their changing needs and the needs of the business. We believe that our associates’ contributions and active engagement with their fellow associates are important to our operational performance. Furthermore, as our company, industry and clients evolve, we are focused at all levels on improving turnover, retention, development, and the overall associate experience.

We experience meaningful turnover among our entry-level associates each year, and the turnover is most significant among those who work part-time. We experience less turnover among our mid-level and senior-level associates. Given the nature of these needs, our recruiting and retention practices are important to meeting the needs and expectations of our clients and customers. As such, we set clear objectives with our associates, analyze performance and reward and recognize associates who outperform. At the same time, we remain committed to providing opportunities for our associates to grow and develop their careers with us and encourage internal promotions to leadership roles within our business units for high-performing or motivated associates. No matter their career goals, we are committed to developing, rewarding and retaining high-quality associates as we transform our business in response to the ever-changing needs of our clients and industry.

We strive to cultivate respect, trust and transparency, and we embrace a diversity of thought and of people. We are committed to creating a workplace where everyone is respected, valued, feels a sense of belonging and has an equitable opportunity to succeed. We believe diversity, equity and inclusion are important components of our commitment to put people first and our long-term success as an enterprise. We believe that a diverse workforce that is reflective of our diverse customer base will position us to better understand customers’ wants and needs, which we believe drives our ability to deliver superior customer value and successfully innovate. Diverse perspectives amongst our team allows them to evaluate issues through different experiences and perspectives and help guide us in a thoughtful way. Our diversity, equity and inclusion efforts include enterprise-wide training, a DE&I board, and eight distinct employee resource groups, and we encourage a culture of inclusivity.

Intellectual Property

We own or have the rights to use certain trade names and trademarks that are registered with the U.S. Patent and Trademark Office or other foreign trademark registration offices or exist under common law in the United States and other jurisdictions. Trade names that are important in identifying and distinguishing our business include, but are not limited to, Advantage Solutions, Advantage Sales, Daymon, SAS and, Club Demonstration Services. Our rights to some of these trade names and trademarks may be limited to select markets. We also own domain names, including advantagesolutions.net.

We rely on trade secrets, including unpatented know-how, and proprietary systems and information, to maintain and develop our technology-enabled services. We try to protect trade secrets and know-how by taking reasonable steps to keep them confidential, including entering into nondisclosure and confidentiality agreements with our employees, contractors and associates that contain

6


 

confidentiality obligations and entering into invention assignment commitments that obligate employees, contractors and associates to assign to us any inventions developed in the course of their work for us.

Available Information

We maintain a link to investor relations information on our website, www.advantagesolutions.net, where we make available, free of charge, SEC filings, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. All SEC filings are also available at the SEC’s website at www.sec.gov. our website and the information contained on or connected to our website are not incorporated by reference herein, and our web address is included as an inactive textual reference only.

Item 1A. Risk Factors

Investing in our securities involves risks. Before you make a decision regarding our securities, in addition to the risks and uncertainties discussed above under “Forward-Looking Statements,” you should carefully consider the specific risks set forth herein. If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of operations. As a result, the market price of our securities could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties described in this Annual Report are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.

Summary of Principal Risks Associated with Our Business

Set forth below is a summary of some of the principal risks we face:

market-driven wage changes or changes to labor laws or wage or job classification regulations, including minimum wage;
our ability to hire, timely train, and retain talented individuals for our workforce, and to maintain our corporate culture as we grow;
the effects of the COVID-19 pandemic or future pandemics and the measures taken to mitigate its spread including its adverse effects on our business, results of operations, financial condition and liquidity;
developments with respect to retailers that are out of our control;
our ability to continue to generate significant operating cash flow;
consolidation within the industry of our clients creating pressure on the nature and pricing of our services;
consumer goods manufacturers and retailers reviewing and changing their sales, retail, marketing, and technology programs and relationships;
our 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;
client procurement strategies putting additional operational and financial pressure on our services;
our ability to avoid or manage business conflicts among competing brands;
limitations, restrictions, and business decisions involving our joint ventures and minority investments;
our ability to identify attractive acquisition targets, acquire them at attractive prices, and successfully integrate the acquired businesses;
difficulties in integrating acquired businesses;
complications with the design or implementation of our new enterprise resource planning system;
changes in applicable laws or regulations;
the possibility that we may be adversely affected by other political, economic, business, and/or competitive factors;

7


 

potential and actual harms to our business arising from the matter related to the 2018 acquisition of Take 5 Media Group (the “Take 5 Matter”);
failure to meet environmental, social and governance (“ESG”) expectations or standards could adversely affect our business, results of operations, financial condition, or stock price;
our ability to respond to changes in digital practices and policies;
exposure to foreign currency exchange rate fluctuations and risks related to our international operations;
our substantial indebtedness and our ability to refinance at favorable rates;
our ability to maintain proper and effective internal control over financial reporting in the future; and
the ability to maintain applicable listing standards.

Risks Related to the Company’s Business and Industry

Market-driven wage increases and changes to wage or job classification regulations, including minimum wages could adversely affect our business, financial condition or results of operations.

Market competition has caused and may continue to cause us to increase the salaries or wages paid to our associates or the benefits packages that they receive. If we experience further market-driven increases in salaries, wage rates or benefits packages or if we fail to increase our offered salaries, wages or benefits packages competitively, the quality of our workforce could decline, causing our standards of client service to suffer. Low unemployment rates or lower levels of labor force participation rates may increase the likelihood or impact of such market pressures. Any of these changes affecting wages or benefits for our associates could adversely affect our business, financial condition or results of operations.

Changes in labor laws related to employee hours, wages, job classification and benefits, including health care benefits, could adversely affect our business, financial condition or results of operations. As of December 31, 2023, we employed approximately 70,000 associates, many of whom are paid above, but near, applicable minimum wages, and their wages may be affected by changes in minimum wage laws.

Additionally, many of our salaried associates are paid at rates that could be impacted by changes to minimum pay levels for exempt roles. Certain state or municipal jurisdictions in which we operate have recently increased their minimum wage by a significant amount, and other jurisdictions are considering or plan to implement similar actions, which may increase our labor costs. Any increases at the federal, state or municipal level to the minimum pay rate required to remain exempt from overtime pay may adversely affect our business, financial condition or results of operations.

An inability to hire, timely train and retain talented individuals for our workforce could slow our growth and adversely impact our ability to operate our business.

Our ability to meet our workforce needs, while controlling associate-related costs, including salaries, wages and benefits, is subject to numerous external factors, including the availability of talented persons in the workforce in the local markets in which we operate, prevailing unemployment rates and competitive wage rates in such markets. We may find that there is an insufficient number of qualified individuals to fill our associate positions with the qualifications we seek. Competition in these communities for qualified staff could require us to pay higher wages and provide greater benefits, especially if there is significant improvement in regional or national economic conditions. We must also train and, in some circumstances, certify these associates under our policies and practices and any applicable legal requirements. If we are unable to hire, timely train or retain talented individuals we may face higher turnover and increased labor costs, which could compromise the quality of our service, and could adversely affect our business.

Future pandemics may have an adverse effect on our business, results of operations, financial condition and liquidity.

The COVID-19 pandemic, including the measures taken to mitigate its spread, had, and may continue to have, adverse effects on our business and operations. A resurgence of the COVID-19 pandemic, or a future pandemic or health epidemic, could adversely impact our business and results of operations in a number of ways . For example, the COVID-19 pandemic and measures taken to mitigate the spread of COVID-19, including restrictions on large gatherings, closures of face-to-face events and indoor dining facilities, “shelter in place” health orders and travel restrictions, had far-reaching direct and indirect impacts on many aspects of our operations, including temporary termination of certain in-store demonstration services and other services, as well as on consumer behavior and purchasing patterns. In particular, our marketing segment experienced a significant decline in revenues, primarily due to the temporary suspension or reduction of certain in-store demonstration services and decreased demand in our digital marketing

8


 

services, both of which we believe were caused by the COVID-19 pandemic and the various governmental and private responses to the pandemic. In our sales segment, we experienced significant shifts in consumer spending preferences and habits.

We cannot predict the full extent to which a resurgence of the COVID-19 pandemic, or any future pandemic or health epidemic, may have similar or other adverse effects on our business, financial condition, results of operations and liquidity, and the degree to which it may impact other risk factors described in this Annual Report.

Our business and results of operations are affected by developments with and policies of retailers that are out of our control.

A limited number of national retailers account for a large percentage of sales for our consumer goods manufacturer clients. We expect that a significant portion of these clients’ sales will continue to be made through a relatively small number of retailers and that this percentage may increase if the growth of mass retailers and the trend of retailer consolidation continues. As a result, changes in the strategies of large retailers, including a reduction in the number of brands that these retailers carry or an increase in shelf space that they dedicate to private label products, could materially reduce the value of our services to these clients or these clients’ use of our services and, in turn, our revenues and profitability. Many retailers have critically analyzed the number and variety of brands they sell, and have reduced or discontinued the sale of certain of our clients’ product lines at their stores, and more retailers may continue to do so. If this continues to occur and these clients are unable to improve distribution for their products at other retailers, our business or results of operations could be adversely affected.

Additionally, many retailers, including several of the largest retailers in North America, which own and operate a significant number of the locations at which we provide our services, have implemented or may implement in the future, policies that designate certain service providers to be the exclusive provider or one of their preferred providers for specified services, including many of the services that we provide to such retailers or our clients.

Some of these designations apply across all of such retailers’ stores, while other designations are limited to specific regions. If we are unable to respond effectively to the expectations and demands of such retailers or if retailers do not designate us as their exclusive provider or one of their preferred providers for any reason, they could reduce or restrict the services that we are permitted to perform for our clients at their facilities or require our clients to purchase services from other designated services providers, which include our competitors, either of which could adversely affect our business or results of operations.

Consolidation in the industries we serve could put pressure on the pricing of our services, which could adversely affect our business, financial condition or results of operations.

Consolidation in the consumer goods and retail industries we serve could reduce aggregate demand for our services in the future and could adversely affect our business or our results of operations. When companies consolidate, the services they previously purchased separately are often purchased by the combined entity, leading to the termination of relationships with certain service providers or demands for reduced fees and commissions. The combined company may also choose to insource certain functions that were historically outsourced, resulting in the termination of existing relationships with third-party service providers. While we attempt to mitigate the revenue impact of any consolidation by maintaining existing or winning new service arrangements with the combined companies, there can be no assurance as to the degree to which we will be able to do so as consolidation continues in the industries we serve, and our business, financial condition or results of operations may be adversely affected.

Consumer goods manufacturers and retailers may periodically review and change their sales, retail, marketing and technology programs and relationships to our detriment.

The consumer goods manufacturers and retailers to whom we provide our business solutions operate in highly competitive and rapidly changing environments. From time to time these parties may put their sales, retail, marketing and technology programs and relationships up for competitive review. We have occasionally lost accounts with significant clients as a result of these reviews in the past, and our clients are typically able to reduce or cancel current or future spending on our services on short notice for any reason. We believe that key competitive considerations for retaining existing and winning new accounts include our ability to develop solutions that meet the needs of these manufacturers and retailers in this environment, the quality and effectiveness of our services and our ability to operate efficiently. To the extent that we are not able to develop these solutions, maintain the quality and effectiveness of our services or operate efficiently, we may not be able to retain key clients, and our business, financial condition or results of operations may be adversely affected.

Our largest clients generate a significant portion of our revenues.

Our five largest clients generated approximately 18.8% of our revenues, none of which individually generated more than 5%, in the fiscal year ended December 31, 2023. These clients are generally able to reduce or cancel spending on our services on short notice

9


 

for any reason. A significant reduction in spending on our services by our largest clients, or the loss of one or more of our largest clients, if not replaced by new clients or an increase in business from existing clients, would adversely affect our business and results of operations. In addition, when large retailers suspend or reduce in-store demonstration services, such as in response to the COVID-19 pandemic, our business and results of operations can be adversely affected.

The retail industry is evolving, and if we do not successfully develop and maintain relevant omni-channel services for our clients, our business, financial condition or results of operations could be adversely impacted.

Historically, substantially all of our sales segment revenues were generated by sales and services that ultimately occurred in traditional retail stores. The retail industry is evolving, as demonstrated by the number of retailers that offer both traditional retail stores and e-commerce platforms or exclusively e-commerce platforms. In addition, the COVID-19 pandemic placed pressure on the traditional retail store model, including store closures, changes in consumer spending, health and safety risks and compliance requirements. Consumers are increasingly using electronic devices to comparison shop, determine product availability and complete purchases online, a trend that has accelerated during the COVID-19 pandemic, and which may continue thereafter. If consumers continue to purchase more products online and e-commerce continues to displace brick-and-mortar retail sales, there may be a decrease in the demand for certain of our services. Omni-channel retailing is rapidly evolving and we believe we will need to keep pace with the changing consumer expectations and new developments by our competitors.

While we continue to seek to develop effective omni-channel solutions for our clients that support both their e-commerce and traditional retail needs, there can be no assurances that these efforts will result in revenue gains sufficient to offset potential decreases associated with a decline in traditional retail sales or that we will be able to maintain our position as a leader in our industry. If we are unable to provide, improve or develop innovative digital services and solutions in a timely manner or at all, our business, financial condition or results of operations could be adversely impacted.

We may be unable to adapt to significant technological change, which could adversely affect our business, financial condition or results of operations.

We operate businesses that require sophisticated data collection, processing and software for analysis and insights. Some of the technologies supporting the industries we serve are changing rapidly. We will be required to continue to adapt to changing technologies, either by developing and marketing new services or by enhancing our existing services, to meet client demand.

Moreover, the introduction of new services embodying new technologies, including automation of certain of our in-store services, and the emergence of new industry standards could render existing services obsolete. Our continued success will depend on our ability to adapt to changing technologies, manage and process increasing amounts of data and information and improve the performance, features and reliability of our existing services in response to changing client and industry demands. We may experience difficulties that could delay or prevent the successful design, development, testing, introduction or marketing of our services. New services or enhancements to existing services may not adequately meet the requirements of current and prospective clients or achieve market acceptance.

Our ability to maintain our competitive position depends on our ability to attract and retain talented executives.

We believe that our continued success depends to a significant extent upon the efforts, abilities and relationships of our senior executives and the strength of our middle management team. Although we have entered into employment agreements with certain of our senior executives, each of them may terminate their employment with us at any time. The replacement of any of our senior executives likely would involve significant time and costs and may significantly delay or prevent the achievement of our business objectives and could therefore have an adverse impact on our business. In addition, we do not carry any “key person” insurance policies that could offset potential loss of service under applicable circumstances. Furthermore, if we are unable to attract and retain a talented team of middle management executives, it may be difficult to maintain the expertise and industry relationships that our clients value, and they may terminate or reduce their relationship with us.

Client procurement and fee reduction strategies could put additional operational and financial pressure on our services or negatively impact our relationships, business, financial condition or results of operations.

Many of our clients seek opportunities to reduce their costs through procurement strategies that reduce fees paid to third-party service providers. As a result, certain of our clients have sought, and may continue to seek, more aggressive terms from us, including with respect to pricing and payment terms. Such activities put operational and financial pressure on our business, which could limit the amounts we earn or delay the timing of our cash receipts. Such activities may also cause disputes with our clients or negatively impact our relationships or financial results. Our clients have experienced, and may continue to experience, increases in their expenses associated with materials and logistics, which may cause them to reduce expenses elsewhere. While we attempt to mitigate negative

10


 

implications to client relationships and the revenue impact of any pricing pressure by aligning our revenues opportunity with satisfactory client outcomes, there can be no assurance as to the degree to which we will be able to do so successfully. Additionally, price concessions can lead to margin compression, which in turn could adversely affect our business, financial condition or results of operations.

If we fail to offer high-quality customer service, our business and reputation may suffer.

High-quality education, training and customer service are important for successful marketing and sales and for the renewal of existing customers and for the pursuit of new customers. Providing this education, training and service requires that our personnel who manage our online training resource or provide customer service have specific inbound experience domain knowledge and expertise, making it more difficult for us to hire qualified personnel and to scale up our support operations. If we do not help our customers use multiple applications and provide effective ongoing service, our ability to sell additional functionality and services to, or to retain, existing customers may suffer and our reputation with existing or potential customers may be harmed.

We may be adversely affected if clients reduce their outsourcing of sales and marketing functions.

Our business and growth strategies depend in large part on companies continuing to elect to outsource sales and marketing functions. Our clients and potential clients will outsource if they perceive that outsourcing may provide quality services at a lower overall cost and permit them to focus on their core business activities and have done so in the past. We cannot be certain that the industry trend to outsource will continue or not be reversed or that clients that have historically outsourced functions will not decide to perform these functions themselves. Unfavorable developments with respect to outsourcing could adversely affect our business, financial conditions and results of operations.

 

Divestitures or other dispositions could negatively impact our business, financial condition or results of operations.

We continually assess the strategic fit of our existing businesses and may divest, spin-off, split-off or otherwise dispose of businesses that are deemed not to fit with our strategic plan or are not achieving the desired return on investment. For example, in January 2024, we completed the disposition of a collection of our foodservice businesses, most notably Waypoint, within the sales segment. Such transactions pose risks and challenges that could negatively impact our business and financial statements. For example, when we decide to sell or otherwise dispose of a business or assets, we may be unable to do so on satisfactory terms within our anticipated timeframe or at all, and even after reaching a definitive agreement to sell or dispose a business the sale is typically subject to satisfaction of pre-closing conditions which may not become satisfied. During the year ended December 31, 2023, the Company recognized a non-cash intangible asset impairment charge of $43.5 million related to the Company's indefinite-lived sales trade name, in connection with the Company’s deconsolidation of its European joint venture and planned disposition of its foodservice businesses. In addition, divestitures or other dispositions could decrease our Adjusted EBITDA or have other adverse financial, tax and accounting impacts and distract management, and disputes can arise with buyers. The resolution of any such disputes could adversely affect for our business, financial condition or results of operations.

Divestitures or other dispositions could have significant accounting and tax implications that could negatively impact our business, financial condition or results of operations.

If we approve plans to divest or dispose a business unit, accounting rules require us to reclassify assets associated with such business unit, including the value of contracts, client relationships, goodwill, and other intangible assets, as assets held for sale. Assets held for sale are recorded at the lower of their carrying value or fair value, less estimated costs to sell, and any required impairment charge is recorded upon reclassification of the assets to held for sale. Allocating goodwill to assets held for sale requires us to make certain assumptions about a business unit, including the financial performance of such business unit against our company as a whole. There are inherent uncertainties related to these estimates and assumptions. If actual results differ from our estimates or assumptions, including our estimated costs to sell, additional charges may be required in the future. If future charges are significant, this could have a material adverse effect on our results of operations. We will assess each divestiture or other disposition from a tax perspective and such assessment will rely on certain facts, assumptions, representations and undertakings regarding the past and future conduct of our businesses and other matters. If any of these facts, assumptions, representations or undertakings are incorrect or not satisfied, we could be subject to significant tax liabilities that minimize the benefits of such divestiture or other disposition.

Our corporate culture has contributed to our success and, if we are unable to maintain it as we evolve, our business, operating results and financial condition could be harmed.

We believe our corporate culture has been a significant factor in our success. However, as our company evolves, including through acquisitions, divestitures and the impacts of the COVID-19 pandemic, such as working remotely and reductions in workforce, it may be difficult to maintain our culture, which could reduce our ability to innovate and operate effectively. The failure to maintain

11


 

the key aspects of our culture as our organization evolves could result in decreased employee satisfaction, increased difficulty in attracting top talent, increased turnover and compromised the quality of our client service, all of which are important to our success and to the effective execution of our business strategy. If we are unable to maintain our corporate culture as we evolve and execute our growth strategies, our business, operating results and financial condition could be harmed.

Acquiring new clients and retaining existing clients depends on our ability to avoid or manage business conflicts among competing brands.

Our ability to acquire new clients and to retain existing clients, whether by expansion of our own operations or through an acquired business may in some cases be limited by the other parties’ perceptions of, or policies concerning, perceived competitive conflicts arising from our other relationships. Some of our contracts expressly restrict our ability to represent competitors of the counterparty. These perceived competitive conflicts may also become more challenging to avoid or manage as a result of continued consolidation in the consumer goods and retail industries and our own acquisitions. If we are unable to avoid or manage business conflicts among competing manufacturers and retailers, we may be unable to acquire new clients or be forced to terminate existing client relationships, and in either case, our business and results of operations may be adversely affected.

Limitations, restrictions and business decisions involving our joint ventures and minority investments may adversely affect our growth and results of operations.

We have made substantial investments in joint ventures and minority investments and may use these and other similar methods to expand our service offerings and geographical coverage in the future. These arrangements typically involve other business services companies as partners that may be competitors of ours in certain markets. Joint venture agreements may place limitations or restrictions on our services. For example, as part of our joint venture with, and investments in Smollan, we are restricted under certain circumstances from making direct acquisitions and otherwise expanding many of our service offerings into markets outside of North America. The limitations and restrictions tied to our joint venture and minority investments limit our potential business opportunities and reduce the economic opportunity for certain prospective international investments and operations.

Additionally, we may rely upon our equity partners or local management for operational and compliance matters associated with our joint ventures or minority investments. Moreover, our other equity partners and minority investments may have business interests, strategies or goals that are inconsistent with ours. Business decisions, including actions or omissions, of a joint venture or other equity partner or management for a business unit may adversely affect the value of our investment, result in litigation or regulatory action against us or adversely affect our growth and results of operations.

Our international operations and investments expose us to risks that could impede growth in the future, and our attempts to grow our business internationally may not be successful.

We continue to explore opportunities in major international markets. International operations expose us to various additional risks that could adversely affect our business, including:

costs of customizing services for clients outside of the United States;
the burdens of complying with a wide variety of foreign laws;
potential difficulty in enforcing contracts;
being subject to U.S. laws and regulations governing international operations, including the U.S. Foreign Corrupt Practices Act and sanctions regimes;
being subject to foreign anti-bribery laws in the jurisdictions in which we operate, such as the UK Bribery Act;
reduced protection for intellectual property rights;
increased financial accounting and reporting complexity;
additional legal compliance requirements, including custom and import requirements with respect to products imported to and exported across international borders;
exposure to foreign currency exchange rate fluctuations;
exposure to local economic conditions;
limitations on the repatriation of funds or profits from foreign operations;
exposure to local political conditions, including adverse tax policies, civil unrest and war; and

12


 

the risks of a natural disaster, public health crisis (including the occurrence of a contagious disease or illness, such as the coronavirus), an outbreak of war, the escalation of hostilities and acts of terrorism in the jurisdictions in which we operate.

Additionally, in many countries outside of the United States, there has not been a historical practice of using third parties to provide sales and marketing services. Accordingly, while it is part of our strategy to expand certain services into international markets, it may be difficult for us to grow our international business units on a timely basis, or at all.

If we are unable to identify attractive acquisition targets, acquire them at attractive prices or successfully integrate the acquired businesses, we may be unsuccessful in growing our business.

A significant portion of our growth has been as a result of our acquisition of complementary businesses that grow our service offerings, expand our geographic reach and strengthen valuable relationships with clients. However, there can be no assurance that we will find attractive acquisition targets, that we will acquire them at attractive prices, that we will succeed at effectively managing the integration of acquired businesses into our existing operations or that such acquired businesses or technologies will be well received by our clients, potential clients or our investors. We could also encounter higher-than-expected earn-out payments, unforeseen transaction- and integration-related costs or delays or other circumstances such as disputes with or the loss of key or other personnel from acquired businesses, challenges or delays in integrating systems or technology of acquired businesses, a deterioration in our associate and client relationships, harm to our reputation with clients, interruptions in our business activities or unforeseen or higher-than-expected inherited liabilities. Many of these potential circumstances are outside of our control and any of them could result in increased costs, decreased revenue, decreased synergies or the diversion of management time and attention.

In order for us to continue to grow our business through acquisitions we will need to identify appropriate acquisition opportunities and acquire them at attractive prices. We may choose to pay cash, incur debt or issue equity securities to pay for any such acquisition. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations. The sale of equity to finance any such acquisition could result in dilution to our stockholders.

We may encounter significant difficulties integrating acquired businesses.

The integration of any businesses is a complex, costly and time-consuming process. As a result, we have devoted, and will continue to devote, significant management attention and resources to integrating acquired businesses. The failure to meet the challenges involved in integrating businesses and to realize the anticipated benefits of any acquisition could cause an interruption of, or a loss of momentum in, the activities of our combined business and could adversely affect our results of operations. The difficulties of combining acquired businesses with our own include, among others:

the diversion of management attention to integration matters;
difficulties in integrating functional roles, processes and systems, including accounting systems;
challenges in conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures between the two companies;
difficulties in assimilating, attracting and retaining key personnel;
challenges in keeping existing clients and obtaining new clients;
difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from an acquisition;
difficulties in managing the expanded operations of a significantly larger and more complex business;
contingent liabilities, including contingent tax liabilities or litigation, that may be larger than expected; and
potential unknown liabilities, adverse consequences or unforeseen increased expenses associated with an acquisition, including possible adverse tax consequences to the combined business pursuant to changes in applicable tax laws or regulations.

Many of these factors are outside of our control, and any one of them could result in increased costs, decreased expected revenues and diversion of management time and energy, all of which could adversely impact our business and results of operations.

13


 

If we are not able to successfully integrate an acquisition, if we incur significantly greater costs to achieve the expected synergies than we anticipate or if activities related to the expected synergies have unintended consequences, our business, financial condition or results of operations could be adversely affected.

Complications with the design or implementation of our new enterprise resource planning system could adversely impact our business and operations.

We rely extensively on information systems and technology to manage our business and summarize operating results. We are in the process of a multi-year implementation of a new enterprise resource planning (“ERP”) system. which is expected to replace our existing operating and financial systems. The ERP system implementation process has required, and will continue to require, the investment of significant personnel and financial resources. We may not be able to successfully implement the ERP system without experiencing delays, increased costs and other difficulties. If we are unable to successfully design and implement the new ERP system as planned, our financial positions, results of operations and cash flows could be negatively impacted. Additionally, if we do not effectively implement the ERP system as planned or the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess those controls adequately could be further delayed.

We may be subject to unionization, work stoppages, slowdowns or increased labor costs.

Currently, none of our associates in the United States are represented by a union. However, our associates have the right under the National Labor Relations Act to choose union representation. If all or a significant number of our associates become unionized and the terms of any collective bargaining agreement were significantly different from our current compensation arrangements, it could increase our costs and adversely impact our profitability. Moreover, if a significant number of our associates participate in labor unions, it could put us at increased risk of labor strikes and disruption of our operations or adversely affect our growth and results of operations. In December 2019, a union which commonly represents employees in the supermarket industry filed a petition with the National Labor Relations Board to represent approximately 120 of our associates who work in and around Boston. An election was held, and based on certified results of the election we prevailed in this election. Notwithstanding this successful election, we could face future union organization efforts or elections, which could lead to additional costs, distract management or otherwise harm our business.

If goodwill or other intangible assets in connection with our acquisitions become impaired, we could take significant non-cash charges against earnings.

We have made acquisitions to complement and expand the services we offer and intend to continue to do so when attractive acquisition opportunities exist in the market. As a result of prior acquisitions, including the acquisition of our business in 2014 by our current majority stockholder, Karman Topco L.P. (“Topco”), we have goodwill and intangible assets recorded on our balance sheet of $0.9 billion and $1.6 billion, respectively, as of December 31, 2023, as further described in Note 3, Goodwill and Intangible Assets to our consolidated financial statements for the year ended December 31, 2023.

Under accounting guidelines, we must assess, at least annually, whether the value of goodwill and other indefinite-lived intangible assets has been impaired. For example, during the year ended December 31, 2023, we recognized a non-cash intangible asset impairment charge of $43.5 million related to our indefinite-lived sales trade name, in connection with our deconsolidation of the European joint venture and planned disposition of the foodservice businesses. Additionally, during the year ended December 31, 2022, and in connection with our annual impairment assessment of goodwill and indefinite-lived intangible assets, we recognized non-cash goodwill and non-cash intangible asset impairment charges of $1,367.5 million and $205.0 million, respectively, in our reporting units and indefinite-lived trade names. While there was no single determinative event or factor, the consideration of the weight of evidence of several factors included: (a) sustained decline in our share price; (b) challenges in the labor market and continued inflationary pressures; and (c) an increase to the discount rate as a result of the recent increases in the interest rates which adversely affected the results of the quantitative impairment tests.

We can make no assurances that we will not record any additional impairment charges in the future. Any future reduction or impairment of the value of goodwill or other intangible assets will similarly result in charges against earnings, which could adversely affect our reported financial results in future periods.

Failures in, data breaches of, or incidents involving, our technology infrastructure could damage our business, reputation and brand and substantially harm our business and results of operations.

Our business is highly dependent on our ability to manage operations and process a large number of transactions on a daily basis. We rely heavily on our operating, payroll, financial, accounting and other data processing systems which require substantial support and maintenance, and may be subject to disabilities, errors, or other harms. If our data and network infrastructure were to fail,

14


 

or if we were to suffer a data security breach, or an interruption or degradation of services in our data center, third-party cloud, and other infrastructure environments, we could lose important data, which could harm our business and reputation, and cause us to incur significant liabilities. Our facilities, as well as the facilities of third-parties that provide or maintain, or have access to our data or network infrastructure, are vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, cyber security attacks, terrorist attacks, power losses, telecommunications failures and similar events. In the event that our or any third-party provider’s systems or service abilities are hindered by any of the events discussed above, our ability to operate may be impaired. Our information technology systems, and the information technology systems of our current or future third-party vendors, collaborators, consultants and service providers, could be penetrated by internal or external parties intent on extracting information, corrupting information, stealing intellectual property or trade secrets, or disrupting business processes. A third party’s decision to close facilities or terminate services without adequate notice, or other unanticipated problems, could adversely impact our operations. Any of the aforementioned risks may be augmented if our or any third-party provider’s business continuity and disaster recovery plans prove to be inadequate in preventing the loss of data, service interruptions, disruptions to our operations or damages to important systems or facilities. Our data center, third-party cloud, and managed service provider infrastructure also could be subject to break-ins, cyber-attacks (including through the use of malware, software bugs, computer viruses, ransomware, social engineering, and denial of service), sabotage, intentional acts of vandalism and other misconduct, from a spectrum of actors ranging in sophistication from threats common to most industries to more advanced and persistent, highly organized adversaries. Any security breach or incident, including personal data breaches, that we experience could result in unauthorized access to, or misuse, modification, destruction or unauthorized acquisition of, our internal sensitive corporate data, such as personal data, financial data, trade secrets, intellectual property, or other competitively sensitive or confidential data. Such unauthorized access, misuse, acquisition, or modification of sensitive data may result in data loss, corruption or alteration, interruptions in our operations or damage to our computer hardware or systems or those of our employees or customers. Our systems have been the target of cyber-attacks. Although we have taken and continue to take steps to enhance our cybersecurity posture, we cannot assure that future cyber incidents will not occur or that our systems will not be targeted or breached in the future. Any such breach or unauthorized access could result in a disruption of the Company’s operations, the theft, unauthorized use or publication of the Company’s intellectual property, other proprietary information or the personal information of customers, employees, licensees or suppliers, a reduction of the revenues the Company is able to generate from its operations, damage to the Company’s brand and reputation, a loss of confidence in the security of the Company’s business and products, and significant legal and financial exposure. If any such incident results in litigation, we may be required to make significant expenditures in the course of such litigation and may be required to pay significant amounts in damages. We may not carry sufficient business interruption insurance to compensate us for losses that may occur as a result of any events that cause interruptions in our service. There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information. Significant unavailability of our services due to attacks could cause us to incur significant liability, could cause users to cease using our services and materially and adversely affect our business, prospects, financial condition and results of operations.

We use complex software in our technology infrastructure, which we seek to continually update and improve. Replacing such systems is often time-consuming and expensive and can also be intrusive to daily business operations. Further, we may not always be successful in executing these upgrades and improvements, which may result in a failure of our systems. We may experience periodic system interruptions from time to time. Any slowdown or failure of our underlying technology infrastructure could harm our business and reputation, which could materially adversely affect our results of operations. Our disaster recovery plan or those of our third-party providers may be inadequate, and our business interruption insurance may not be sufficient to compensate us for the losses that could occur.

Failure to comply with federal, state and foreign laws and regulations relating to privacy, data protection and consumer protection, or the expansion of current or the enactment of new laws or regulations relating to privacy, data protection and consumer protection, could adversely affect our business and our financial condition.

A variety of federal, state and foreign laws and regulations govern the collection, use, retention, sharing and security of personal information. The information, security and privacy requirements imposed by such governmental laws and regulations relating to privacy, data protection and consumer protection are increasingly demanding, quickly evolving and may be subject to differing interpretations. These requirements may not be harmonized, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices. As a result, our practices may not have complied or may not comply in the future with all such laws, regulations, requirements and obligations. Our actual or perceived failure to comply with such laws and regulations could result in fines, investigations, enforcement actions, penalties, sanctions, claims for damages by affected individuals, and damage to our reputation, among other negative consequences, any of which could have a material adverse effect on its financial performance.

We are subject to the California Consumer Protection Act of 2018, which became effective in 2020, as well as its amendment, the California Privacy Rights Act of 2020 (“CPRA,” and together, the “CCPA”), which went into effect on January 1, 2023. The CCPA regulates the collection, use and processing of personal information relating to California residents, and which grants certain

15


 

privacy rights to California residents, including rights to request access to and to request deletion of personal information relating to such individuals under certain circumstances. Compliance with the new obligations imposed by the CCPA depends in part on how its requirements are interpreted and applied by the California attorney general, courts, and the new California Privacy Protection Agency. Alleged violations of the CCPA may result in substantial civil penalties or statutory damages when applied at scale, up to $2,500 per violation or $7,500 per intentional violation of any CCPA requirement, which may be applied on a per-person or per-record basis. The CCPA also establishes a private right of action if certain personal information of individuals is subject to an unauthorized access and exfiltration, theft, or disclosure as a result of a business’s violation of the duty to implement and maintain reasonable security procedures and practices, which authorizes statutory damages $100 to $750 per person per incident even if there is no actual harm or damage to plaintiffs. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. Further, the CPRA includes additional and strengthened privacy rights for California residents, new requirements regarding sensitive data and data sharing for digital advertising, and tripled damages for violations involving children’s data.

The selling and sharing of personal information by businesses for digital advertising and marketing purposes remains a priority of regulators, including the Federal Trade Commission and California Attorney General. In August 2022, the California Attorney General announced its first enforcement action under the CCPA against a retailer that to pay penalties and comply with injunctive terms, including overhauling its online disclosures and opt-out rights and providing regular reports to the California Attorney General regarding its data sharing practices. On January 27, 2023, the California Attorney General announced another CCPA enforcement sweep targeted at businesses with mobile apps, including popular apps in the retail, travel, and foodservice industries.

Four other states –Virginia, Colorado, Connecticut, and Utah – passed their own comprehensive privacy laws that went into effect throughout 2023. Seven states (Texas, Tennessee, Oregon, Montana, Iowa, Indiana, Delaware) passed their own comprehensive privacy laws in 2023 which will go into effect throughout 2024-2026. Like the CCPA, these laws regulate the collection, use and processing of personal information relating to residents of the respective states, and grants certain privacy rights to those residents. Other states are expected to consider and potentially pass similar privacy laws in 2024 and future years.

We are also subject to international privacy laws and regulations, many of which, such as the General Data Privacy Regulation (“GDPR”) and national laws implementing or supplementing the GDPR, such as the United Kingdom Data Protection Law 2018 (which retains key features of GDPR post-Brexit), are significantly more stringent than those currently enforced in the United States. The GDPR requires companies to meet requirements regarding the handling of personal data of individuals located in the European Economic Area (the “EEA”). The GDPR imposes mandatory data breach notification requirements subject to a 72-hour notification deadline. The GDPR also includes significant penalties for noncompliance, which may result in monetary penalties of up to the higher of €20.0 million or 4% of a group’s worldwide turnover for the preceding financial year for the most serious violations. The GDPR and other similar regulations require companies to give specific types of notice and informed consent is required for the placement of a cookie or similar technologies on a user’s device for online tracking for behavioral advertising and other purposes and for direct electronic marketing, and the GDPR also imposes additional conditions in order to satisfy such consent, such as a prohibition on pre-checked tick boxes and bundled consents. Enforcement of the GDPR and related regulations varies by each EU Member State and is ongoing. Further laws and regulations on these topics are forthcoming, including the Regulation on Privacy and Electronic Communications (“ePrivacy Regulation”), Digital Services Act (“DSA”), and Digital Markets Act (“DMA”). The GDPR may increase our responsibility and liability in relation to personal data that we process where that processing is subject to the GDPR. In addition, we may be required to put in place additional mechanisms to ensure compliance with the GDPR, including GDPR requirements as implemented by individual countries. Compliance with the GDPR will be a rigorous and time-intensive process that may increase our cost of doing business or require us to change our business practices.

In addition, under GDPR, transfers of personal data are prohibited to countries outside of the EEA that have not been determined by the European Commission to provide adequate protections for personal data, including the United States. There are mechanisms to permit the transfer of personal data from the EEA to the United States, but there is also uncertainty as to the future of such mechanisms, which have been under consistent scrutiny and challenge. In July 2020, a decision of the Court of Justice of the European Union invalidated the EU-U.S. Privacy Shield Framework, a means that previously permitted transfers of personal data from the EEA to companies in the United States that certified adherence to the Privacy Shield Framework. In July 2023, the European Union and the United States agreed to replace the Privacy Shield Framework by implementing the E.U.-U.S. Data Privacy Framework. Standard contractual clauses approved by the European Commission to permit transfers from the EU to third countries currently remain as a basis on which to transfer personal data from the EEA to other countries. However, the standard contractual clauses are also subject to legal challenge, and in November 2020, the European Commission published a draft of updated standard contractual clauses. In January 2022, for example, Austria’s data protection authority determined that the use of Google Analytics violated the GDPR and the Court of Justice of the European Union’s “Schrems II” decision on international data transfers. We presently rely on standard contractual clauses to transfer personal data from EEA member countries, and we may be impacted by changes in law as a result of future review or invalidation of, or changes to, this mechanism by European courts or regulators. While we will continue to undertake efforts to conform to current regulatory obligations and evolving best practices, we may be unsuccessful in conforming to permitted means of transferring personal data from the European Economic Area. We may also experience hesitancy,

16


 

reluctance, or refusal by European or multi-national customers to continue to use some of our services due to the potential risk exposure of personal data transfers and the current data protection obligations imposed on them by certain data protection authorities. Such customers may also view any alternative approaches to the transfer of any personal data as being too costly, too burdensome, or otherwise objectionable, and therefore may decide not to do business with us if the transfer of personal data is a necessary requirement.

Data protection requirements in China continued to change in 2023 and are expected change further in 2024. In 2023 new cross-border data transfer requirements came into force in China, and draft requirements for audit requirements for transborder data flows have been released, were not final at the end of 2023.

Although we take reasonable efforts to comply with all applicable laws and regulations and have invested and continue to invest human and technology resources into data privacy compliance efforts, there can be no assurance that we will not be subject to regulatory action, including fines, in the event of an incident or other claim. Data protection laws and requirements may also be enacted, interpreted or applied in a manner that creates inconsistent or contradictory requirements on companies that operate across jurisdictions. We or our third-party service providers could be adversely affected if legislation or regulations are expanded to require changes in our or our third-party service providers’ business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our or our third-party service providers’ business, results of operations or financial condition. For example, we may find it necessary to establish alternative systems to maintain personal data in the EEA, which may involve substantial expense and may cause us to divert resources from other aspects of our business, all of which may adversely affect our results from operations. Further, any inability to adequately address privacy concerns in connection with our solutions, or comply with applicable privacy or data protection laws, regulations and policies, could result in additional cost and liability to us, and adversely affect our ability to offer our solutions. GDPR, CCPA and other similar laws and regulations, as well as any associated inquiries or investigations or any other government actions, may be costly to comply with, result in negative publicity, increase our operating costs, require significant management time and attention and subject us to remedies that may harm our business, including fines or demands or orders that we modify or cease existing business practices. Our systems may not be able to satisfy these changing requirements and manufacturer, retailer and associate expectations, or may require significant additional investments or time in order to do so.

We expect that new industry standards, laws and regulations will continue to be proposed regarding privacy, data protection and information security in many jurisdictions, including the European e-Privacy Regulation, which is currently in draft form, as well as at the U.S. federal and state levels. In addition, new data processes and datasets associated with emerging technologies are coming under increased regulatory scrutiny, such as biometrics and automated decision-making. We cannot yet determine the impact such future laws, regulations and standards may have on our business. Complying with these evolving obligations is challenging, time consuming and expensive, and federal regulators, state attorneys general and plaintiff’s attorneys have been, and will likely continue to be, active in this space. Expanding definitions and interpretations of what constitutes “personal data” (or the equivalent) within the United States, the EEA and elsewhere may increase our compliance costs and legal liability. For example, various state privacy proposals have included a private right of action for basic privacy violations which, if passed, would dramatically increase both the legal costs of defending frivolous lawsuits and the penalties and costs associated with alleged violations.

Civil litigation, including class actions, remains another source of potential liability under privacy laws. For example, cases filed under Illinois’ Biometric Information Privacy Act have resulted in large settlement amounts and damages awards against other companies due to the presence of statutory damages under that law. As another example, website owners and operators saw a wave of putative class actions filed against them in 2022 under the California Invasion of Privacy Act and similar federal and state surveillance and wiretapping laws, with claims centering on websites’ deployment of session monitoring, keylogging, chatbots, and other tracking and monitoring technologies. The inconsistency among court rulings regarding these legal claims renders the likelihood and dollar amount of potential liability and/or settlement value difficult to accurately quantify.

A data breach or any failure, or perceived failure, by us to comply with any federal, state or foreign privacy or consumer protection-related laws, regulations or other principles or orders to which we may be subject or other legal obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and may result in fines, enforcement actions, sanctions, claims (including claims for damages by affected individuals), investigations, proceedings or actions against us by governmental entities or others, or other penalties or liabilities or require us to change our operations and/or cease using certain data sets, among other negative consequences, any of which could have a material adverse effect on our business. Moreover, the proliferation of supply chain-based cyber-attacks and vendor security incidents increases these potential risks and costs even in cases where the attack did not target us, occur on our systems, or result from any action or inaction by us. Depending on the nature of the information compromised, we may also have obligations to notify users, law enforcement, regulators, business partners or payment companies about the incident and provide some form of remedy, such as refunds or identity theft monitoring services, for the individuals affected by the incident.

17


 

The Take 5 Matter may lead to additional harms, risks and uncertainties for us, including litigation and governmental investigations, a reduction in revenue, a potential deterioration in our relationships or reputation and a loss in investor confidence.

As further described elsewhere in this Annual Report, we acquired the business of Take 5 Media Group in April 2018, and a result of an investigation into that business, we terminated all operations of the Take 5, including the use of its associated trade names and the offering of its services to its clients and offered refunds to clients of collected revenues attributable to the period after our acquisition. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Take 5 Matter” and “Legal Proceedings.”

As a result of these matters, we may be subject to a number of additional harms, risks and uncertainties, including substantial costs for legal fees in connection with or related to the potential lawsuits by clients or other interested parties who claim to have been harmed by the misconduct at Take 5, other costs and fees related to the Take 5 Matter (in excess of the amounts already being offered as refunds), potential governmental investigations arising from the Take 5 Matter. In addition, if we do not prevail in any such litigation related to these matters, we could be subject to costs related to such litigation, including equitable relief, civil monetary damages, treble damages, or repayment, which may not be covered by insurance or may materially increase our insurance costs. We have incurred and will continue to incur additional costs regardless of the outcome of any such litigation or governmental investigation. In addition, there can be no assurance to what degree, if any, we will be able to recover any such costs or damages from the former owners of Take 5 or whether such former owners of Take 5 engaged in further unknown improper activities that may subject us to further costs or damages, including potential reputational harm. Likewise, such events have caused and may cause further diversion of our management’s time and attention. Any adverse outcome related to these matters cannot be predicted at this time, and may materially harm our business, reputation, financial condition and/or results of operations, or the trading price of our securities.

Our business is seasonal in nature and quarterly operating results can fluctuate.

Our services are seasonal in nature, with the fourth fiscal quarter typically generating a higher proportion of our revenues than other fiscal quarters. Adverse events, such as deteriorating economic conditions, higher unemployment, higher gas prices, public transportation disruptions, public health crises (including the COVID-19 pandemic) or unanticipated adverse weather, could result in lower-than-planned sales during key revenue-producing seasons. For example, frequent or unusually heavy snowfall, ice storms, rainstorms, windstorms or other extreme weather conditions over a prolonged period could make it difficult for consumers to travel to retail stores or foodservice locations. Such events could lead to lower revenues, negatively impacting our financial condition and results of operations.

Our business is competitive, and increased competition could adversely affect our business and results of operations.

The sales, marketing and merchandising services industry is competitive. We face competition from a few other large, national or super-regional agencies as well as many niche and regional agencies. Remaining competitive in this industry requires that we closely monitor and respond to trends in all industry sectors. We cannot assure you that we will be able to anticipate and respond successfully to such trends in a timely manner. Moreover, some of our competitors may choose to sell services competitive to ours at lower prices by accepting lower margins and profitability or may be able to sell services competitive to ours at lower prices due to proprietary ownership of data or technical superiority, which could negatively impact the rates that we can charge. If we are unable to compete successfully, it could have a material adverse effect on our business, financial condition and our results of operations. If certain competitors were to combine into integrated sales, marketing and merchandising services companies, additional sales, marketing and merchandising service companies were to enter the market or existing participants in this industry were to become more competitive, including through technological innovation such as social media and crowdsourcing, it could have a material adverse effect on our business, financial condition or results of operations.

Our business is subject to risks associated with climate change.

The effects of climate change, and a resulting shift to a lower carbon economy, could present several climate-related risks for our business. Physical risks from climate change could result in both chronic and acute perils including, but not limited to, extreme weather, changes in precipitation and temperature, and rising sea levels, all of which may result in a decrease in demand for our services from or our ability to provide services to our clients, many of whom are in the retail industry, located in the areas affected by these conditions. Should the impact of climate change be severe or occur for lengthy periods of time, climate change could further adversely impact business continuity for ourselves and our clients, which, in turn, could similarly adversely affect our financial condition or results of operations.

Failure to meet environmental, social and governance (“ESG”) expectations or standards could adversely affect our business, results of operations, financial condition, or stock price.

18


 

In recent years, there has been an increased focus from stakeholders, regulators and the public in general on ESG matters, including greenhouse gas emissions and climate-related risks, renewable energy, water stewardship, waste management, diversity, equality and inclusion, responsible sourcing and supply chain, human rights, and social responsibility, including changes in laws and regulations related to compliance and disclosure obligations related thereto. We actively seek to address this focus and comply with the evolving laws and regulations related thereto. However, compliance with such laws and regulations may result in increased operating costs for us. In addition, if we are unable to comply with laws and regulations or implement effective ESG strategies, our reputation among our clients and investors may be damaged and we may incur fines and/or penalties. Moreover, there can be no assurance that any of our ESG strategies will result in improved results.

Damage to our reputation could negatively impact our business, financial condition and results of operations.

Our reputation and the quality of our brand are critical to our business and success in existing markets and will be critical to our success as we enter new markets. We believe that we have built our reputation on the high quality of our sales and marketing services, our commitment to our clients and our performance-based culture, and we must protect and grow the value of our brand in order for us to continue to be successful. Any incident that erodes client loyalty to our brand could significantly reduce its value and damage our business. Also, there has been a marked increase in the use of social media platforms and similar devices, including blogs, social media websites, and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. Many social media platforms immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. Information concerning us may be posted on such platforms at any time. Information posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may be immediate without affording us an opportunity for redress or correction.

We rely on third parties to provide certain data and services in connection with the provision of our services.

We rely on third parties to provide certain data and services for use in connection with the provision of our services. For example, we contract with third parties to obtain the raw data on retail product sales and inventories. These suppliers of data may impose restrictions on our use of such data, fail to adhere to our quality control standards, increase the price they charge us for this data or refuse altogether to license the data to us. If we are unable to use such third-party data and services or if we are unable to contract with third parties, when necessary, our business, financial condition or our results of operations could be adversely affected. In the event that such data and services are unavailable for our use or the cost of acquiring such data and services increases, our business could be adversely affected.

We may be unable to timely and effectively respond to changes in digital practices and policies, which could adversely affect our business, financial condition or results of operations.

Changes to practices and policies of operating systems, websites and other digital platforms, including, without limitation, Apple’s or Android’s transparency policies, may reduce the quantity and quality of the data and metrics that can be collected or used by us and our clients or reduce the value of our digital services. These limitations may adversely affect both our and our clients’ ability to effectively target and measure the performance of our digital services. In addition, our clients and third-party vendors routinely evaluate their digital practices and policies, and if in the future they determine to modify such practices and policies for any reasons, including, without limitation, privacy, targeting, age or content concerns, this could decrease the desire for our digital services as compared to other alternatives. If we are unable to timely or effectively respond to changes in digital practices and policies, or if our clients do not believe that our digital services will generate a competitive return on investment relative to alternatives, then our business, financial condition or results of operations could be adversely affected.

We may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect our business.

Our ability to implement our business plan successfully depends in part on our ability to further build brand recognition using our trade names, service marks, trademarks, proprietary products and other intellectual property, including our name and logos. We rely on U.S. and foreign trademark, copyright and trade secret laws, as well as license agreements, nondisclosure agreements and confidentiality and other contractual provisions to protect our intellectual property. Nevertheless, these laws and procedures may not be adequate to prevent unauthorized parties from attempting to copy or otherwise obtain our processes and technology or deter our competitors from developing similar business solutions and concepts, and adequate remedies may not be available in the event of an unauthorized use or disclosure of our trade secrets and other intellectual property.

The success of our business depends on our continued ability to use our existing trademarks and service marks to increase brand awareness and further develop our brand in both domestic and international markets. We have registered and applied to register our trade names, service marks and trademarks in the United States and foreign jurisdictions. However, the steps we have taken to protect

19


 

our intellectual property in the United States and in foreign countries may not be adequate, and third parties may misappropriate, dilute, infringe upon or otherwise harm the value of our intellectual property. If any of our registered or unregistered trademarks, trade names or service marks is challenged, infringed, circumvented or declared generic or determined to be infringing on other marks, it could have an adverse effect on our sales or market position. In addition, the laws of some foreign countries do not protect intellectual property to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain jurisdictions. This could make it difficult to stop the infringement or misappropriation of our intellectual property rights in foreign jurisdictions.

We rely upon trade secrets and other confidential and proprietary know‑how to develop and maintain our competitive position. While it is our policy to enter into agreements imposing nondisclosure and confidentiality obligations upon our employees and third parties to protect our intellectual property, these obligations may be breached, may not provide meaningful protection for our trade secrets or proprietary know‑how, or adequate remedies may not be available in the event of an unauthorized access, use or disclosure of our trade secrets and know‑how. Furthermore, despite the existence of such nondisclosure and confidentiality agreements, or other contractual restrictions, we may not be able to prevent the unauthorized disclosure or use of our confidential proprietary information or trade secrets by consultants, vendors and employees. In addition, others could obtain knowledge of our trade secrets through independent development or other legal means.

Any claims or litigation initiated by us to protect our proprietary technology could be time consuming, costly and divert the attention of our technical and management resources. If we choose to go to court to stop a third party from infringing our intellectual property, that third party may ask the court to rule that our intellectual property rights are invalid and/or should not be enforced against that third party. Even if the action that we take to protect our intellectual property rights is successful, any infringement may still have a material adverse effect on our business, financial condition and results of operations.

We may be subject to claims of infringement of third-party intellectual property rights that are costly to defend, result in the diversion of management’s time and efforts, require the payment of damages, limit our ability to use particular technologies in the future or prevent us from marketing our existing or future products and services.

Third parties may assert that we infringe, misappropriate or otherwise violate their intellectual property, including with respect to our digital solutions and other technologies that are important to our business, and may sue us for intellectual property infringement. We may not be aware of whether our products or services do or will infringe existing or future intellectual property rights of others. In addition, there can be no assurance that one or more of our competitors who have developed competing technologies or our other competitors will not be granted intellectual property rights for their technology and allege that we have infringed on such rights.

Any claims that our business infringes the intellectual property rights of others, regardless of the merit or resolution of such claims, could incur substantial costs, and the time and attention of our management and other personnel may be diverted in pursuing these proceedings. An adverse determination in any intellectual property claim could require us to pay damages, be subject to an injunction, and/or stop using our technologies, trademarks, copyrighted works and other material found to be in violation of another party’s rights, and could prevent us from licensing our technologies to others unless we enter into royalty or licensing arrangements with the prevailing party or are able to redesign our products and services to avoid infringement. With respect to any third-party intellectual property that we use or wish to use in our business (whether or not asserted against us in litigation), we may not be able to enter into licensing or other arrangements with the owner of such intellectual property at a reasonable cost or on reasonable terms. Any of the foregoing could harm our commercial success.

We are dependent on proprietary technology licensed from others. If we lose our licenses, we may not be able to continue developing our products.

We have obtained licenses that give us rights to third party intellectual property that is necessary or useful to our business. These license agreements may impose various royalty and other obligations on us. One or more of our licensors may allege that we have breached our license agreement with them, and could seek to terminate our license, which could adversely affect our competitive business position and harm our business prospects. In addition, any claims brought against us by our licensors could be costly, time-consuming and divert the attention of our management and key personnel from our business operations.

Consumer goods manufacturers and retailers, including some of our clients, are subject to extensive governmental regulation and we and they may be subject to enforcement in the event of noncompliance with applicable requirements.

Consumer goods manufacturers and retailers are subject to a broad range of federal, state, local and international laws and regulations governing, among other things, the research, development, manufacture, distribution, marketing and post-market reporting of consumer products. These include laws administered by the U.S. Food and Drug Administration (the “FDA”), the U.S. Drug Enforcement Administration, the U.S. Federal Trade Commission, the U.S. Department of Agriculture and other federal, state, local

20


 

and international regulatory authorities. For example, certain of our clients market and sell products containing cannabidiol (“CBD”). CBD products are subject to a number of federal, state, local and international laws and regulations restricting their use in certain categories of products and in certain jurisdictions. In particular, the FDA has publicly stated it is prohibited to sell into interstate commerce food, beverages or dietary supplements that contain CBD. These laws are broad in scope and subject to evolving interpretations, which could require us to incur costs associated with new or modified compliance requirements or require us or our clients to alter or limit our activities, including marketing and promotion, of such products, or to remove them from the market altogether.

If a regulatory authority determines that we or our current or future clients have not complied with the applicable regulatory requirements, our business may be materially impacted, and we or our clients could be subject to enforcement actions or loss of business. We cannot predict the nature of any future laws, regulations, interpretations or applications of the laws, nor can we determine what effect additional laws, regulations or administrative policies and procedures, if and when enacted, promulgated and implemented, could have on our business.

We may be subject to claims for products for which we are the vendor of record or may otherwise be in the chain of title.

For certain of our clients’ products, we become the vendor of record or otherwise may be in the chain of title. For these products, we could be subject to potential claims for misbranded, adulterated, contaminated, damaged or spoiled products, or could be subject to liability in connection with claims related to infringement of intellectual property, product liability, product recalls or other liabilities arising in connection with the sale or marketing of these products. As a result, we could be subject to claims or lawsuits (including potential class action lawsuits), and we could incur liabilities that are not insured or exceed our insurance coverage or for which the manufacturer of the product does not indemnify us. Even if product claims against us are not successful or fully pursued, these claims could be costly and time consuming and may require our management to spend time defending the claims rather than operating our business.

A product that has been actually or allegedly misbranded, adulterated or damaged or is actually or allegedly defective could result in product withdrawals or recalls, destruction of product inventory, negative publicity and substantial costs of compliance or remediation. Any of these events, including a significant product liability judgment against us, could result in monetary damages and/or a loss of demand for our products, both of which could have an adverse effect on our business or results of operations.

We generate revenues and incur expenses throughout the world that are subject to exchange rate fluctuations, and our results of operations may suffer due to currency translations.

Our U.S. operations earn revenues and incur expenses primarily in U.S. dollars, while our international operations earn revenues and incur expenses in the local currency, including Canadian dollars, Mexican pesos or euros. Because of currency exchange rate fluctuations, including possible devaluations, we are subject to currency translation exposure on the results of our operations, in addition to economic exposure. These risks could adversely impact our business or results of operations.

Fluctuations in our tax obligations and effective tax rate and realization of our deferred tax assets may result in volatility of our operating results.

We are subject to taxes by the U.S. federal, state, local and foreign tax authorities, and our tax liabilities will be affected by the allocation of expenses to differing jurisdictions. We record tax expense based on our estimates of future payments, which may include reserves for uncertain tax positions in multiple tax jurisdictions, and valuation allowances related to certain net deferred tax assets. At any one time, many tax years may be subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate settlement of these matters. We expect that throughout the year there could be ongoing variability in our quarterly tax rates as events occur and exposures are evaluated. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

changes in the valuation of our deferred tax assets and liabilities;
expected timing and amount of the release of any tax valuation allowance;
tax effects of equity-based compensation;
changes in tax laws, regulations or interpretations thereof; or
future earnings being lower than anticipated in jurisdictions where we have lower statutory tax rates and higher than anticipated earnings in jurisdictions where we have higher statutory tax rates.

21


 

In addition, our effective tax rate in a given financial statement period may be materially impacted by a variety of factors including but not limited to changes in the mix and level of earnings, varying tax rates in the different jurisdictions in which we operate, fluctuations in the valuation allowance, deductibility of certain items or changes to existing accounting rules or regulations. Further, tax legislation may be enacted in the future which could negatively impact our current or future tax structure and effective tax rates. We may be subject to audits of our income, sales and other transaction taxes by U.S. federal, state, local and foreign taxing authorities. Outcomes from these audits could have an adverse effect on our operating results and financial condition.

Risks Related to Ownership of Our Common Stock

We are controlled by Topco, the Advantage Sponsors, and the CP Sponsor, whose economic and other interests in our business may be different from yours.

Our authorized capital stock consists of 3,290,000,000 shares of common stock and 10,000,000 shares of preferred stock. As of February 29, 2024, the equity holders of Topco that participated in the PIPE Investment (as defined below) (collectively, the “Advantage Sponsors”, Topco and Conyers Park II Sponsor LLC, an affiliate of Centerview Capital Management, LLC and Conyers Park’s sponsor (the “CP Sponsor”) collectively own 232,361,313 shares, or 72.5% (including 58.3% held by Topco), of our outstanding common stock. Subject to applicable law, the Advantage Sponsors, through their direct ownership of our common stock and their ownership of equity interests of Topco, and the CP Sponsor are able to exert significant influence in the election of our directors and control actions to be taken by our stockholders, including amendments to our third amended and restated certificate of incorporation and approval of mergers, sales of substantially all of our assets, and other significant corporate transactions. It is possible that the interests of Topco, the Advantage Sponsors and the CP Sponsor may in some circumstances conflict with our interests and the interests of our other stockholders, including you.

We are a controlled company within the meaning of the Nasdaq Stock Market LLC listing requirements and as a result, may rely on exemptions from certain corporate governance requirements. To the extent we rely on such exemptions, you will not have the same protections afforded to stockholders of companies that are subject to such corporate governance requirements.

Because of the voting power over our company held by Topco, the Advantage Sponsors, and the CP Sponsor and the voting arrangement between such parties, we are considered a controlled company for the purposes of the Nasdaq Global Select Market (“Nasdaq”) listing requirements. As such, we are exempt from the corporate governance requirements that our board of directors, compensation committee, and nominating and corporate governance committee meet the standard of independence established by those corporate governance requirements. The independence standards are intended to ensure that directors who meet the independence standards are free of any conflicting interest that could influence their actions as directors.

We do not currently utilize the exemptions afforded to a controlled company, though we are entitled to do so. To the extent we utilize these exemptions, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq.

The anti-takeover provisions of our certificate of incorporation and bylaws could prevent or delay a change in control of us, even if such change in control would be beneficial to our stockholders.

Provisions of our certificate of incorporation and bylaws, as well as provisions of Delaware law, could discourage, delay, or prevent a merger, acquisition, or other change in control of us, even if such change in control would be beneficial to our stockholders. These include:

authorizing the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt;
provision for a classified board of directors so that not all members of our board of directors are elected at one time;
not permitting the use of cumulative voting for the election of directors;
permitting the removal of directors only for cause;
limiting the ability of stockholders to call special meetings;
requiring all stockholder actions to be taken at a meeting of our stockholders;
requiring approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend, or repeal the proposed bylaws or repeal the provisions of the third amended and restated certificate of incorporation regarding the election and removal of directors; and

22


 

establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

In addition, although we have opted out of Section 203 of the Delaware General Corporation Law, our certificate of incorporation contains similar provisions providing that we may not engage in certain “business combinations” with any “interested stockholder” for a three-year period following the time that the stockholder became an interested stockholder, subject to certain exceptions. Generally, a “business combination” includes a merger, asset, or stock sale or other transaction resulting in a financial benefit to the interested stockholder.

Subject to certain exceptions, an “interested stockholder” is a person who, together with that person’s affiliates and associates, owns, or within the previous three years owned, 15% or more of our outstanding voting stock.

Under certain circumstances, this provision will make it more difficult for a person who would be an “interested stockholder” to effect various business combinations with us for a three-year period. These provisions also may have the effect of preventing changes in our board of directors and may make it more difficult to accomplish transactions which stockholders may otherwise deem to be in their best interests.

Moreover, our certificate of incorporation provides that Topco and its affiliates do not constitute “interested stockholders” for purposes of this provision, and thus any business combination transaction between us and Topco and its affiliates would not be subject to the protections otherwise provided by this provision. Topco and its affiliates are not prohibited from selling a controlling interest in us to a third party and may do so without your approval and without providing for a purchase of your shares of common stock, subject to the lock-up restrictions applicable to Topco. Accordingly, your shares of common stock may be worth less than they would be if Topco and its affiliates did not maintain voting control over us.

The provisions of our certificate of incorporation and bylaws requiring exclusive venue in the Court of Chancery in the State of Delaware or the federal district courts of the United States of America for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers.

Our certificate of incorporation and bylaws require, to the fullest extent permitted by law, that (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws, or (iv) any action asserting a claim against us governed by the internal affairs doctrine will have to be brought only in the Court of Chancery in the State of Delaware (or the federal district court for the District of Delaware or other state courts of the State of Delaware if the Court of Chancery in the State of Delaware does not have jurisdiction). Our certificate of incorporation and bylaws also require that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended (the “Securities Act”); however, there is uncertainty as to whether a court would enforce such provision, and investors cannot waive compliance with federal securities laws and the rules and regulations thereunder. Although we believe these provisions benefit us by providing increased consistency in the application of applicable law in the types of lawsuits to which they apply, the provisions may have the effect of discouraging lawsuits against our directors and officers. These provisions do not apply to any suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts of the United States have exclusive jurisdiction.

Because we have no current plans to pay cash dividends on our Class A common stock, you may not receive any return on investment unless you sell your Class A common stock for a price greater than that which you paid for it.

We have no current plans to pay cash dividends on our Class A common stock. The declaration, amount and payment of any future dividends on our Class A common stock will be at the discretion of our board of directors and will depend upon our results of operations, financial condition, capital requirements, and other factors that our board of directors deems relevant. The payment of cash dividends is also restricted under the terms of the agreements governing our debt and our ability to pay dividend may also be restricted by the terms of any future credit agreement or any securities we or our subsidiaries may issue.

An active, liquid trading market for our Class A common stock may not be available.

We cannot predict the extent to which investor interest in our company will lead to availability of a trading market on Nasdaq or otherwise in the future or how active and liquid that market may be for our Class A common stock. If an active and liquid trading market is not available, you may have difficulty selling any of our Class A common stock. Among other things, in the absence of a liquid public trading market:

23


 

you may not be able to liquidate your investment in shares of Class A common stock;
you may not be able to resell your shares of Class A common stock at or above the price attributed to them when we became a publicly traded company;
the market price of shares of Class A common stock may experience significant price volatility; and
there may be less efficiency in carrying out your purchase and sale orders.

The trading price of our Class A common stock may be volatile or may decline regardless of our operating performance.

The market prices for our Class A common stock are likely to be volatile and may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

quarterly variations in our operating results compared to market expectations;
changes in preferences of our clients;
announcements of new products or services or significant price reductions;
the size of our public float;
fluctuations in stock market prices and volumes;
defaults on our indebtedness;
changes in senior management or key personnel;
the granting, vesting, or exercise of employee stock options, restricted stock, or other equity rights;
the payment of any dividends thereon in shares of our common stock;
changes in financial estimates or recommendations by securities analysts;
negative earnings or other announcements by us;
downgrades in our credit ratings;
material litigation or governmental investigations;
issuances of capital stock;
global economic, legal, and regulatory factors unrelated to our performance, including the COVID-19 pandemic; or
the realization of any risks described in this Annual Report under “Risk Factors.”

In addition, in the past, stockholders have instituted securities class action litigation against companies following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

We cannot provide any guaranty that we will continue to repurchase our common stock pursuant to our stock repurchase program.

In November 2021, our board of directors authorized a share repurchase program, under which we may repurchase up to $100 million of our outstanding Class A common stock (the “2021 Share Repurchase Program”). As of December 31, 2023, the remaining amount available for repurchase pursuant to the 2021 Share Repurchase Program is $81.1 million. However, we are not obligated to make any further purchases under the 2021 Share Repurchase Program and we may suspend or permanently discontinue this program at any time or significantly reduce the amount of repurchases under the program. Any announcement of a suspension, discontinuance or reduction of this program may negatively impact our reputation and investor confidence.

The valuation of our private placement warrants could increase the volatility in our net (loss) income in our consolidated statements of (loss) earnings.

We determine the fair value of the liability classified private placement warrants by approximating the value with the price of the public warrants at the respective period end. The change in fair value of warrant liability represents the mark-to-market fair value adjustments to the outstanding private placement warrants issued in connection with the initial public offering of Conyers Park.

24


 

Significant changes in the price of the public warrants and the number of private placement warrants outstanding may adversely affect the volatility in our net (loss) income in our Consolidated Statements of Operations and Comprehensive (Loss) Income.

Risks Related to Indebtedness

We need to continue to generate significant operating cash flow in order to fund our internal investments and acquisitions and to service our debt.

Our business currently generates operating cash flow, which we use to fund our internal investments and acquisitions to grow our business and to service our substantial indebtedness. If, because of loss of revenue, pressure on pricing from customers, increases in our costs (including increases in costs related to servicing our indebtedness or labor costs), general economic, financial, competitive, legislative, regulatory conditions or other factors, many of which are outside of our control our business generates less operating cash flow, we may not have sufficient funds to grow our business or to service our indebtedness.

If we are unable to generate sufficient cash flow or are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants in the agreements governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the lenders under our credit facilities could elect to terminate their commitments thereunder, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to obtain waivers from the required lenders under our credit agreements to avoid being in default. If we or any of our subsidiaries breach the covenants under our credit agreements and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under our credit agreements, the lenders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation.

Our substantial indebtedness could adversely affect our financial health, restrict our activities, and affect our ability to meet our obligations.

We have a significant amount of indebtedness. As of December 31, 2023, we had total indebtedness of $1.9 billion, excluding debt issuance costs, with an additional $44.1 million of letters of credit outstanding under our revolving credit facility. The agreements governing our indebtedness contain customary covenants that restrict us from taking certain actions, such as incurring additional debt, permitting liens on pledged assets, making investments, paying dividends or making distributions to equity holders, prepaying junior debt, engaging in mergers or restructurings, and selling assets, among other things, which may restrict our ability to successfully execute on our business plan. For a more detailed description of the covenants and material terms of our material indebtedness, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in this Annual Report.

Despite current indebtedness levels, we and our subsidiaries may still be able to incur additional indebtedness, which could increase the risks associated with our indebtedness.

We and our subsidiaries may be able to incur additional indebtedness in the future because the terms of our indebtedness do not fully prohibit us or our subsidiaries from doing so. Subject to covenant compliance and certain conditions, as of December 31, 2023, the agreements governing our indebtedness would have permitted us to borrow up to an additional $455.9 million under our revolving credit facility. In addition, we and our subsidiaries have, and will have, the ability to incur additional indebtedness as incremental facilities under our credit agreement and we or our subsidiaries may issue additional notes in the future. If additional debt is added to our current debt levels and our subsidiaries’ current debt levels, the related risks that we and they now face could increase.

Failure to maintain our credit ratings could adversely affect our liquidity, capital position, ability to hedge certain financial risks, borrowing costs, and access to capital markets.

Our credit risk is evaluated by the major independent rating agencies, and such agencies have in the past downgraded, and could in the future downgrade, our ratings. Our credit rating may impact the interest rates on any future indebtedness as well as the applicability of certain covenants in the agreements governing our indebtedness. We cannot assure you that we will be able to maintain our current credit ratings, and any additional, actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under further review for a downgrade, may have a negative impact on our liquidity, capital position, ability to hedge certain financial risks, and access to capital markets.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

25


 

Borrowings under our credit facilities are at variable rates of interest and expose us to interest rate risk. If interest rates were to increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. On a pro forma basis, assuming no other prepayments of the credit facility and that our revolving credit facility is fully drawn (and to the extent that SOFR, is in excess of the 0.00% and 0.75% floors applicable to our revolving credit facility and our term loan credit facility, respectively), each one-eighth percentage point change in interest rates would result in an approximately $0.9 million change in annual interest expense on the indebtedness under our credit facilities. In the future, we may enter into interest rate swaps that involve the exchange of floating- for fixed-rate interest payments in order to reduce interest rate volatility or risk. However, we may not maintain interest rate swaps with respect to any of our variable rate indebtedness, and any swaps we enter into may not fully or effectively mitigate our interest rate risk.

General Risk Factors

Our business and financial results may be affected by various litigation and regulatory proceedings.

We are subject to litigation and regulatory proceedings in the normal course of business and could become subject to additional claims in the future. These proceedings have included, and in the future may include, matters involving personnel and employment issues, workers’ compensation, personal and property injury, disputes relating to acquisitions (including contingent consideration), governmental investigations and other proceedings. Some historical and current legal proceedings and future legal proceedings may purport to be brought as class actions or representative basis on behalf of similarly situated parties including with respect to employment-related matters. We cannot be certain of the ultimate outcomes of any such claims, and resolution of these types of matters against us may result in significant fines, judgments or settlements, which, if uninsured, or if the fines, judgments and settlements exceed insured levels, could adversely affect our business or financial results. See “Legal Proceedings.”

We are subject to many federal, state, local and international laws with which compliance is both costly and complex.

Our business is subject to various, and sometimes complex, laws and regulations, including those that have been or may be implemented in response to the COVID-19 pandemic. In order to conduct our operations in compliance with these laws and regulations, we must obtain and maintain numerous permits, approvals and certificates from various federal, state, local and international governmental authorities. We may incur substantial costs in order to maintain compliance with these existing laws and regulations. In addition, our costs of compliance may increase if existing laws and regulations are revised or reinterpreted or if new laws and regulations become applicable to our operations. These costs could have an adverse impact on our business or results of operations. Moreover, our failure to comply with these laws and regulations, as interpreted and enforced, could lead to fines, penalties or management distraction or otherwise harm our business.

Our insurance may not provide adequate levels of coverage against claims.

We believe that we maintain insurance customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure. Further, insurance may not continue to be available to us on acceptable terms, if at all, and, if available, coverage may not be adequate. If we are unable to obtain insurance at an acceptable cost or on acceptable terms, we could be exposed to significant losses.

We have incurred and will continue to incur increased costs as a public company.

As a public company, we have incurred and will continue to incur significant legal, accounting, insurance, and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with the Sarbanes-Oxley Act and related rules implemented by the SEC. The expenses incurred by public companies for reporting and corporate governance purposes generally have been increasing. Laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on our board committees, or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our Class A common stock, fines, sanctions, and other regulatory action and potentially civil litigation.

If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our common stock, the price of our Class A common stock could decline.

26


 

The trading market for our Class A common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. If few analysts commence coverage of us, the trading price of our stock could be negatively affected. Even with analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our Class A common stock could decline. If one or more of these analysts cease to cover our common stock, we could lose visibility in the market for our Class A common stock, which in turn could cause our Class A common stock price to decline.

Substantial future sales of our Class A common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares. Certain shares of our common stock are freely tradable without restriction under the Securities Act, except for any shares of our common stock that may be held or acquired by our directors, executive officers, and other affiliates, as that term is defined in the Securities Act, which are to be restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available. Topco, the Advantage Sponsors, the CP Sponsor and members of our management have rights, subject to certain conditions, to require us to file registration statements covering Topco’s shares of our common stock or to include shares in registration statements that we may file for ourselves or other stockholders. In each of November 2020 and March 2021, we filed a registration statement on Form S-1 under which certain of our stockholders may sell, from time to time, 50,000,000 shares and 255,465,000 shares of our Class A common stock, respectively, that, if sold, will be freely tradable without restriction under the Securities Act. In the event a large number of shares of Class A common stock are sold in the public market, such sales could reduce the market price of our Class A common stock.

We may also issue shares of our common stock or securities convertible into our common stock from time to time in connection with financings, acquisitions, investments, or otherwise. Any such issuance could result in ownership dilution to you as a stockholder and cause the trading price of our common stock to decline.

Item 1B. Unresolved Staff Comments.

None

Item 1C. Cybersecurity

Cybersecurity Risk Management and Strategy

We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information. Our cybersecurity risk management program includes a cybersecurity incident response plan.

We design and assess our program based on the National Institute of Standards and Technology Cybersecurity Framework the (“NIST CSF”). This does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.

Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.

Our cybersecurity risk management program includes:

risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment;
a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents;
the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls;
cybersecurity awareness training of our employees, incident response personnel, and senior management; and
a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents.

27


 

We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition. We face risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. See “Risk Factors – Failures in, data breaches of, or incidents involving, our technology infrastructure could damage our business, reputation and brand and substantially harm our business and results of operations.”

Cybersecurity Governance

Our Board considers cybersecurity risk as part of its risk management oversight function and has delegated risk management to the Audit Committee of the Board of Directors. In 2024, the Audit Committee’s charter was updated to expressly state that this oversight function includes cybersecurity risk.

The Audit Committee oversees management’s implementation of our cybersecurity risk management program. The Audit Committee receives periodic reports from management on our cybersecurity risks. In addition, management updates the Audit Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential.

The Committee reports to the full Board regarding its activities, including those related to risk management and cybersecurity. All board members are permitted to attend the meetings of the Audit Committee and certain board members who do not serve on the Audit Committee have attended cybersecurity risks presentations. In addition, cybersecurity risk briefing materials are made available to all board members. At any time, Board members may raise concerns regarding our cybersecurity posture and recommend future changes to, among other things, personnel, practices, controls or procedures.

Our management team, including our Chief Digital Officer (“CDO”) and Chief Information Security Officer (“CISO”), is responsible for assessing and managing our material risks from cybersecurity threats. The Company’s cybersecurity program is primarily managed by a dedicated cybersecurity function reporting to our CISO who reports to our CDO. Our CISO has over 20 years of executive experience in IT security, and previously served as the CISO of Blue Shield of California and Kellogg Company. Our CDO has over 30 years of executive experience in IT operations and was previously the Global Chief Information Officer of Walgreens-Boots Alliance, Inc., The Kraft Heinz Company and Kraft Foods Group.

Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.

Item 2. Properties

Our corporate headquarters are located in Irvine, California, where we rent approximately 22,000 square feet pursuant to a lease agreement that is scheduled to expire in May 2026. We anticipate that we will complete the relocation of our corporate headquarters to Clayton, Missouri, in the St. Louis-metropolitan area in 2024.

As of December 31, 2023, we operated more than 70 offices, including in the United States and internationally.

We lease all of our properties, except for a property in Connecticut that we own. Leases on these offices expire at various dates from 2024 to 2034, excluding any options for renewal. We typically seek office space in proximity to retailers’ headquarters or buying offices, to aid our associates in acting as sales representatives for our manufacturer clients.

Item 3. Legal Proceedings

We are involved in various legal matters that arise in the ordinary course of our business. Some of these legal matters purport or may be determined to be class and/or representative actions or seek substantial damages or penalties. Some of these legal matters relate to disputes regarding acquisitions. In connection with certain of the below matters and other legal matters, we have accrued amounts that we believe are appropriate. There can be no assurance, however, that the above matters and other legal matters will not result in us having to make payments in excess of such accruals or that the above matters or other legal matters will not materially or adversely affect our business, financial position, results of operations, or cash flows.

28


 

Commercial Matters

We have been involved in various litigation matters and arbitrations with respect to commercial matters arising with clients, vendors and third-party sellers of businesses. We have retained outside counsel to represent us in these matters and we are vigorously defending our interests.

Employment-Related Matters

We have also been involved in various litigation, including purported class or representative actions with respect to matters arising under the U.S. Fair Labor Standards Act, California Labor Code and Private Attorneys General Act (“PAGA”). Many involve allegations for allegedly failing to pay wages and/or overtime, failing to provide meal and rest breaks and failing to pay reporting time pay, waiting time penalties and other penalties.

Proceedings Relating to Take 5

The following proceedings relate to the Take 5 Matter, which is discussed in greater detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Take 5 Matter” and “Risk Factors — Risks Related to the Company’s Business and Industry” in this Annual Report. In connection with the Take 5 Matter, we voluntarily disclosed to the United States Attorney’s Office and the Federal Bureau of Investigation certain misconduct occurring at Take 5. We intend to cooperate in this and any other governmental investigation that may arise in connection with the Take 5 Matter. At this time, we cannot predict the ultimate outcome of any investigation related to the Take 5 Matter and are unable to estimate the potential impact such an investigation may have on us. In August 2019, as a result of the Take 5 Matter, we provided a written indemnification claim notice to the sellers of Take 5, or the Take 5 Sellers, seeking monetary damages (including interest, fees and costs) based on allegations of breach of the asset purchase agreement (the “Take 5 APA”), as well as fraud. We and the Take 5 Sellers engaged in arbitration proceedings. In October 2022, the arbitrator made a final award in our favor. We are actively pursuing the collection of this award in state court in Florida. We are currently unable to estimate if or when we will be able to collect any amounts associated with this arbitration. The Take 5 Matter may result in additional litigation against us, including lawsuits from clients, or governmental investigations, which may expose us to potential liability in excess of the amounts being offered by us as refunds to Take 5 clients. We are currently unable to determine the amount of any potential liability, costs or expenses (above the amounts already being offered as refunds) that may result from any lawsuits or investigations associated with the Take 5 Matter or determine whether any such issues will have any future material adverse effect on our financial position, liquidity or results of operations. Although we have insurance covering certain liabilities, we cannot assure that the insurance will be sufficient to cover any potential liability or expenses associated with the Take 5 Matter.

Item 4. Mine Safety Disclosures.

Not applicable.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our Class A common stock and Warrants are currently listed on the Nasdaq Global Select Market under the symbols “ADV” and “ADVWW,” respectively. As of December 31, 2023, there were 30 holders of record of our Class A common stock and 2 holders of record of our Warrants.

Dividend Policy

We have not paid any cash dividends on our Class A common stock to date. We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of the Board of Directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding

29


 

indebtedness we or our subsidiaries incur. We do not anticipate declaring any cash dividends to holders of the Class A common stock in the foreseeable future.

Stock Price Performance

https://cdn.kscope.io/bf6677c0100f83358173690da1a6305d-img182782360_0.jpg 

The graph above compares the cumulative total stockholder return on our Class A common stock with the cumulative total return on the Standard & Poor’s (“S&P”) 500 Stock Index and the S&P Consumer Staples Select Sector Index. The graph assumes an initial investment of $100 in our Class A common stock at the market close on July 18, 2019, which was our initial trading day. Data for the S&P 500 Stock Index and S&P Consumer Staples Select Sector Index assume reinvestment of dividends. Total return equals stock price appreciation plus reinvestment of dividends. Note that past stock price performance is not necessarily indicative of future stock price performance.

Purchases of equity securities by the issuer and affiliated purchasers

On November 9, 2021, we announced that our board of directors authorized a share repurchase program (the “2021 Share Repurchase Program”) pursuant to which we may repurchase up to $100 million of our Class A common stock.

The 2021 Share Repurchase Program does not have an expiration date, but provides for suspension or discontinuation at any time. The 2021 Share Repurchase Program permits the repurchase of our Class A common stock on the open market and by other means from time to time. The timing and amount of any share repurchase is subject to prevailing market conditions, relevant securities laws and other considerations, and we are under no obligation to repurchase any specific number of shares.

 

30


 

During the year ended December 31, 2023, we executed open market purchases of $6.4 million of our Class A common stock under the 2021 Share Repurchase Program. As of December 31, 2023, there remained $81.1 million of share repurchase availability under the 2021 Share Repurchase Program as of December 31, 2023. The following tables sets forth repurchases of our Class A common stock during the year ended December 31, 2023:

Period

 

Total number of shares purchased

 

 

Average price paid per share

 

 

Total number of shares purchased as part of publicly announced program

 

 

Approximate dollar value of shares that may yet to be purchased under the program
(in thousands)

 

November 21, 2023 to November 30, 2023(1)

 

 

378,382

 

 

$

2.71

 

 

 

1,988,396

 

 

$

86,407

 

December 1, 2023 to December 31, 2023(1)

 

 

1,611,679

 

 

$

3.32

 

 

 

3,600,075

 

 

$

81,051

 

Total

 

 

1,990,061

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)
Open market and privately negotiated purchases

In December 2023, the Company entered into a trading plan under Rule 10b5-1 of the Exchange Act authorizing the repurchase of shares of our Class A common stock. From January 2, 2024 to February 29, 2024, we purchased 3.0 million shares of our Class A common stock. No stock repurchases were made pursuant to this plan for the year ended December 31, 2023.

Recent Sales of Unregistered Equity Securities

None.

Item 6. [Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto included in Item 8 “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 1, 2023.

Executive Overview

We are a leading business solutions provider to consumer goods manufacturers and retailers. We have a strong platform of competitively advantaged sales and marketing services built over multiple decades – essential, business critical services like headquarter sales, retail merchandising, in-store sampling, digital commerce and shopper marketing. For brands and retailers of all sizes, we help get the right products on the shelf (whether physical or digital) and into the hands of consumers (however they shop). We use a scaled platform to innovate as a trusted partner with our clients, solving problems to increase their efficiency and effectiveness across a broad range of channels.

For 2023 and 2022, we had two reportable segments: sales and marketing.

Through our sales segment, which generated approximately 57.9% of our total revenues in the year ended December 31, 2023, we offer headquarter sales representation services to consumer goods manufacturers, for whom we prepare and present to retailers a business case to increase distribution of manufacturers’ products and optimize how they are displayed, priced and promoted. We also make in-store merchandising visits for both manufacturer and retailer clients to ensure the products we represent are adequately stocked and properly displayed.

Through our marketing segment, which generated approximately 42.1% of our total revenues in the year ended December 31, 2023, we help brands and retailers reach consumers through two main categories within the marketing segment. The first and largest category is our retail experiential business, also known as in-store sampling or demonstrations, where we manage highly customized large-scale sampling programs (both in-store and online) for leading retailers. The second category is our collection of specialized

31


 

agency services, in which we provide private label services to retailers and develop granular marketing programs for brands and retailers through our shopper, consumer and digital marketing agencies.

During the fourth quarter of 2023, certain organizational changes were announced that will impact our future internal reporting. As a result of these changes, we expect to have three reportable segments. We expect that any operational changes impacting our reportable segments will be effective in the first quarter of 2024.

Items Affecting Comparability of Financial Results

2024 Divestiture of Foodservice Businesses

We have included businesses classified as held for sale within continuing operations as their dispositions do not represent a strategic shift that will have a major effect on our operations and financial results.

As of December 31, 2023, certain assets and liabilities of a collection of foodservice businesses were classified as held for sale in Prepaid expenses and other current assets and Other accrued expenses on our Consolidated Balance Sheet. The collection of foodservice businesses were sold during the first quarter of 2024. As part of the sale, the foodservice businesses were combined with an entity owned by the buyer, and we received approximately $91.0 million, less estimated working capital adjustment and an ongoing 7.5% stake in the entity with which the foodservice businesses will be combined.

2023 Deconsolidation of ASL

On November 30, 2023, we reduced our equity interest in Advantage Smollan Limited (“ASL”), our European joint venture, from a majority interest of under 60% to a minority interest of 49.6% in exchange for $1.0 million in cash. We also removed certain participating rights with ASL related to capital allocation and certain of our decision making rights. Therefore, in accordance with Accounting Standards Codification 810 (“ASC 810”), Consolidation, ASL was deconsolidated from our consolidated financial statements. Effective December 1, 2023, our investment in ASL is accounted for under the equity method of accounting, with the investment reported in “Investments in unconsolidated affiliates” on the Consolidated Balance Sheets and Equity income (loss) reported in “Income from unconsolidated investments” on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

Impacts of the COVID-19 Pandemic

Our services experienced the effects from reductions in client spending due to the economic impact related to the COVID-19 pandemic. While mixed by services and geography, the spending reductions impacted all of our services and markets, which particularly impacted our operations in 2021. Globally, the most impacted services were our in-store sampling and demonstration services, which have continued to improve in 2023.

Summary

Our financial performance for the year ended December 31, 2023 as compared to the year ended December 31, 2022 includes:

Revenues increased by $175.1 million, or 4.3%, to $4,224.8 million;
Operating loss decreased by $1,515.6 million to $76.2 million of operating income;
Net loss decreased by $1,317.0 million to $60.3 million;
Adjusted Net Income decreased by $82.8 million, or 40.1%, to $123.8 million; and
Adjusted EBITDA decreased by $11.6 million, or 2.7%, to $424.3 million.

Factors Affecting Our Business and Financial Reporting

There are a number of factors, in addition to the deconsolidation of ASL, the impact of the COVID-19 pandemic and, inflation, that affect the performance of our business and the comparability of our results from period to period including:

Organic Growth. Part of our strategy is to generate organic growth by expanding our existing client relationships, continuing to win new clients, pursuing channel expansion, enhancing our service offerings, developing our international platform, delivering operational efficiencies and expanding into logical adjacencies. We believe that by pursuing these

32


 

organic growth opportunities we will be able to continue to enhance our value proposition to our clients and thereby grow our business.
Acquisitions and Divestitures. We have grown our business in part by acquiring businesses, both domestic and international. Many of our acquisition agreements include contingent consideration arrangements, which are described below. We have completed acquisitions at what we believe are attractive purchase prices and have regularly structured our agreements to result in the generation of long-lived tax assets, which have in turn reduced our effective purchase prices when incorporating the value of those tax assets. We continue to look for strategic acquisitions that can be completed at attractive purchase prices. We continue to evaluate opportunities to further simplify our operations so we can focus more resources on our core businesses.
Contingent Consideration. Many of our acquisition agreements include contingent consideration arrangements, which are generally based on the achievement of financial performance thresholds by the operations attributable to the acquired businesses. The contingent consideration arrangements are based upon our valuations of the acquired businesses and are intended to share the investment risk with the sellers of such businesses if projected financial results are not achieved. The fair values of these contingent consideration arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. For each transaction, we estimate the fair value of contingent consideration payments as part of the initial purchase price. We review and assess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from our initial estimates. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in “Selling, general and administrative expenses” in the Consolidated Statements of Operations and Comprehensive (Loss) Income.
Depreciation and Amortization. As a result of the acquisition of our business by Topco on July 25, 2014 (the “2014 Topco Acquisition”), we acquired significant intangible assets, the value of which is amortized, on a straight-line basis, over 15 years from the date of the 2014 Topco Acquisition, unless determined to be indefinite-lived. The amortization of such intangible assets recorded in our consolidated financial statements has a significant impact on our operating (loss) income and net loss. Our historical acquisitions have increased, and future acquisitions likely will increase, our intangible assets. We do not believe the amortization expense associated with the intangible assets created from our purchase accounting adjustments reflect a material economic cost to our business. Unlike depreciation expense which has an economic cost reflected by the fact that we must re-invest in property and equipment to maintain the asset base delivering our results of operations, we do not have any capital re-investment requirements associated with the acquired intangible assets, such as client relationships and trade names, that comprise the majority of the finite-lived intangible assets that create our amortization expense.
Impairment of Goodwill and Indefinite-Lived Assets. We recognized a non-cash intangible asset impairment charge of $43.5 million related to our indefinite-lived sales trade name during the year ended December 31, 2023. We recognized $1,275.7 million and $91.8 million impairment charges in the sales and marketing reporting units, respectively, for the year ended December 31, 2022. We recognized non-cash intangible asset impairment charges of $146.0 million and $59.0 million related to our indefinite-lived sales and marketing trade names, respectively, during the year ended December 31, 2022. The impairment charges have been reflected in “Impairment of goodwill and indefinite-lived assets” in our Consolidated Statements of Comprehensive (Loss) Income.
Foreign Exchange Fluctuations. Our financial results are affected by fluctuations in the exchange rate between the U.S. dollar and other currencies, primarily the Canadian dollars, British pounds and euros, due to our operations in such foreign jurisdictions. See also “—Quantitative and Qualitative Disclosure of Market Risk—Foreign Currency Risk.
Seasonality. Our quarterly results are seasonal in nature, with the fourth fiscal quarter typically generating a higher proportion of our revenues than other fiscal quarters, as a result of higher consumer spending. We generally record slightly lower revenues in the first fiscal quarter of each year, as our clients begin to roll out new programs for the year, and consumer spending generally is less in the first fiscal quarter than other quarters. The timing of our clients’ marketing expenses, associated with marketing campaigns and new product launches, can also result in fluctuations from one quarter to another.

How We Assess the Performance of Our Business

Revenues

Revenues related to our sales segment are primarily comprised of commissions, fee-for-service and cost-plus fees for providing retail services, category and space management, headquarter relationship management and technology solutions. A small portion of our arrangements include performance incentive provisions, which allow us to earn additional revenues on our performance relative to specified quantitative or qualitative goals. We recognize the incentive portion of revenues under these arrangements when the related services are transferred to the customer.

33


 

Marketing segment revenues are primarily recognized in the form of a fee-for-service (including retainer fees, fees charged to clients based on hours incurred, project-based fees or fees for executing in-person consumer engagements or experiences, which engagements or experiences we refer to as events), commissions or on a cost-plus basis, in each case, related to services including experiential marketing, shopper and consumer marketing services, private label development or our digital, social and media services.

We analyze our financial performance, in part, by measuring revenue growth in two ways—revenue growth attributable to organic activities and revenue growth and declines attributable to acquisitions, which we refer to as organic revenues and acquired revenues, respectively.

We define organic revenues as any revenues that are not acquired revenues. Our organic revenues exclude the impacts of acquisitions and divestitures, when applicable, which improves comparability of our results from period to period.

In general, when we acquire a business, the acquisition includes a contingent consideration arrangement (e.g., an earn-out provision) and, accordingly, we separately track the financial performance of the acquired business. In such cases, we consider revenues generated by such a business during the 12 months following its acquisition to be acquired revenues. For example, if we completed an acquisition on July 1, 2022 for a business that included a contingent consideration arrangement, we would consider revenues from the acquired business from July 1, 2022 to June 30, 2023 to be acquired revenues. We generally consider growth attributable to the financial performance of an acquired business after the 12-month anniversary of the date of acquisition to be organic.

If an acquisition of an acquired business does not include a contingent consideration arrangement, or we otherwise do not separately track the financial performance of the acquired business due to operational integration, we consider the revenues that the business generated in the 12 months prior to its acquisition to be our acquired revenues for the 12 months following its acquisition, and any differences in revenues actually generated during the 12 months after its acquisition to be organic. For example, if we completed an acquisition on July 1, 2022 for a business that did not include a contingent consideration arrangement, we would consider the amount of revenues from the acquired business from July 1, 2021 to June 30, 2022 to be acquired revenues during the period from July 1, 2022 to June 30, 2023, with any differences from that amount actually generated during the latter period to be organic revenues.

All revenues generated by our acquired businesses are considered to be organic revenues after the 12-month anniversary of the date of acquisition.

When we divest a business, we consider the revenues that the divested business generated in the 12 months prior to its divestiture to be subtracted from acquired revenues for the 12 months following its divestiture. For example, if we completed a divestiture on July 1, 2022 for a business, we would consider the amount of revenues from the divested business from July 1, 2021 to June 30, 2022 to be subtracted from acquired revenues during the period from July 1, 2022 to June 30, 2023.

We measure organic revenue growth and acquired revenue growth by comparing the organic revenues or acquired revenues, respectively, period over period, net of any divestitures.

Cost of Revenues

Our cost of revenues consists of both fixed and variable expenses primarily attributable to the hiring, training, compensation and benefits provided to both full-time and part-time associates, as well as other project-related expenses. A number of costs associated with our associates are subject to external factors, including inflation, increases in market specific wages and minimum wage rates at federal, state and municipal levels and minimum pay levels for exempt roles. Additionally, when we enter into certain new client relationships, we may experience an initial increase in expenses associated with hiring, training and other items needed to launch the new relationship.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries, payroll taxes and benefits for corporate personnel. Other overhead costs include information technology, professional services fees, including accounting and legal services, and other general corporate expenses. We also incur expenses operating as a public company, including expenses necessary to comply with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, as well as higher expenses for general and director and officer insurance, investor relations, and professional services. Additionally, included in selling, general and administrative expenses are costs associated with the changes in fair value of the contingent consideration of acquisitions and other costs related to acquisition or divestiture

34


 

transactions. These transaction-related costs are comprised of fees related to change of equity ownership, professional fees, due diligence and integration or divestiture activities.

Impairment of Goodwill and Indefinite-lived Assets

Goodwill represents the excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired in an acquisition. We test for impairment of goodwill at the reporting unit level. We generally combine components that have similar economic characteristics, nature of services, types of clients, distribution methods and regulatory environment. For 2023 and 2022 we had two reporting units, sales and marketing, which were also our operating segments. We test our goodwill for impairment at the beginning of the fourth quarter of a given fiscal year, and whenever events or changes in circumstances indicate that the carrying value of a reporting unit may exceed its fair value.

Other Expenses

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability represents a non-cash (income) expense resulting from a fair value adjustment to warrant liability with respect to the private placement warrants. Based on the availability of sufficient observable information, we determine the fair value of the liability classified private placement warrants by approximating the value with the price of the public warrants at the respective period end, which is inherently less subjective and judgmental given it is based on observable inputs. We believe these amounts are not correlated to future business operations.

Interest Expense

Interest expense relates primarily to borrowings under our material debt agreements as described below. See “ —Liquidity and Capital Resources.

Depreciation and Amortization

Amortization Expense

As a result of the 2014 Topco Acquisition, we acquired significant intangible assets, the value of which is amortized, on a straight-line basis, over 15 years from the date of the 2014 Topco Acquisition, unless determined to be indefinite-lived. Included in our depreciation and amortization expense is amortization of acquired intangible assets. We have ascribed value to identifiable intangible assets other than goodwill in our purchase price allocations for companies we have acquired. These assets include, but are not limited to, client relationships and trade names. To the extent we ascribe value to identifiable intangible assets that have finite lives, we amortize those values over the estimated useful lives of the assets. Such amortization expense, although non-cash in the period expensed, directly impacts our results of operations. It is difficult to predict with any precision the amount of expense we may record relating to future acquired intangible assets.

Depreciation Expense

Depreciation expense relates to the property and equipment that we own, which represented less than 1% of our total assets at December 31, 2023.

Income Taxes

Income tax (benefit) expense and our effective tax rates can be affected by many factors, including state apportionment factors, our acquisition strategy, tax incentives and credits available to us, changes in judgment regarding our ability to realize our deferred tax assets, changes in our worldwide mix of pre-tax losses or earnings, changes in existing tax laws and our assessment of uncertain tax positions.

Cash Flows

We have positive cash flow characteristics, as described below, due to the limited required capital investment in the fixed assets and working capital needs to operate our business in the normal course. See “ —Liquidity and Capital Resources.

35


 

Our principal sources of liquidity are cash flows from operations, borrowings under the Revolving Credit Facility (as defined below), and other debt. Our principal uses of cash are operating expenses, working capital requirements, acquisitions and repayment of debt.

Adjusted Net Income

Adjusted Net Income is a non-GAAP financial measure. Adjusted Net Income means net loss before (i) impairment of goodwill and indefinite-lived assets, (ii) gain on deconsolidation of subsidiaries, (iii) loss on divestitures, (iv) amortization of intangible assets, (v) equity-based compensation of Karman Topco L.P., (vi) changes in fair value of warrant liability, (vii) fair value adjustments of contingent consideration related to acquisitions, (viii) acquisition and divestiture related expenses, (ix) costs associated with COVID-19, net of benefits received, (x) net income attributable to noncontrolling interest, (xi) reorganization expenses, (xii) litigation expenses, (xiii) deferred financing fees, (xiv) gain on repurchases of Term Loan Facility and Senior Secured Notes debt, (xv) recovery from and costs associated with the Take 5 Matter, (xvi) other adjustments that management believes are helpful in evaluating our operating performance, and (xvii) related tax adjustments.

We present Adjusted Net Income because we use it as a supplemental measure to evaluate the performance of our business in a way that also considers our ability to generate profit without the impact of items that we do not believe are indicative of our operating performance or are unusual or infrequent in nature and aid in the comparability of our performance from period to period. Adjusted Net Income should not be considered as an alternative for net loss, our most directly comparable measure presented on a GAAP basis.

Adjusted EBITDA and Adjusted EBITDA by Segment

Adjusted EBITDA and Adjusted EBITDA by segment are supplemental non-GAAP financial measures of our operating performance. Adjusted EBITDA means net loss before (i) interest expense, net, (ii) (benefit from) provision for 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, (xviii) recovery from and costs associated with the Take 5 Matter and (xix) other adjustments that management believes are helpful in evaluating our operating performance.

We present Adjusted EBITDA and Adjusted EBITDA by segment because they are key operating measures used by us to assess our financial performance. These measures adjust for items that we believe do not reflect the ongoing operating performance of our business, such as certain non-cash items, unusual or infrequent items or items that change from period to period without any material relevance to our operating performance. We evaluate these measures in conjunction with our results according to GAAP because we believe they provide a more complete understanding of factors and trends affecting our business than GAAP measures alone. Furthermore, the agreements governing our indebtedness contain covenants and other tests based on measures substantially similar to Adjusted EBITDA. Neither Adjusted EBITDA nor Adjusted EBITDA by segment should be considered as an alternative for net loss or operating income (loss), respectively, our most directly comparable measures presented on a GAAP basis. 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 our non-GAAP measures may not be directly comparable to similarly titled measures of other companies.

For a reconciliation of Adjusted EBITDA to net loss and Adjusted EBITDA by segment to operating income (loss), see “ —Non-GAAP Financial Measures.

Take 5 Matter

On April 1, 2018, we acquired certain assets and assumed certain liabilities of Take 5 Media Group. In June 2019, as a result of a review of internal allegations related to inconsistency of data provided by Take 5 to its clients, we commenced an investigation into Take 5’s operations. In July 2019, as a result of our investigation, we terminated all operations of Take 5 and offered refunds to Take 5 clients of collected revenues attributable to Take 5 since our acquisition of Take 5. For the years ended December 31, 2023, 2022 and 2021, we incurred $0.3 million, $2.5 million, and $4.9 million, respectively, of costs associated with the investigation and remediation activities in connection with the Take 5 Matter, primarily professional fees and other related costs. These costs were recorded in “Selling, general, and administrative expenses” in the Consolidated Statements of Operations and Comprehensive (Loss) Income for such years.

36


 

Reorganization Charges

Reorganization charges include severance plans designed to integrate and reduce costs intended to further improve efficiencies in operational activities and align cost structures consistent with revenue levels associated with business changes. We recorded severance expenses of $15.4 million, $3.2 million, and $1.0 million included in “Selling, general, and administrative expenses” in the Consolidated Statements of Operations and Comprehensive (Loss) Income for the years ended December 31, 2023, 2022, and 2021, respectively.

Results of Operations for the Years Ended December 31, 2023 and 2022

 

 

 

Year Ended December 31,

 

(amounts in thousands)

 

2023

 

 

2022

 

Revenues

 

$

4,224,846

 

 

 

100.0

%

 

$

4,049,742

 

 

 

100.0

%

Cost of revenues

 

 

3,660,464

 

 

 

86.6

%

 

 

3,493,183

 

 

 

86.3

%

Selling, general, and administrative expenses

 

 

265,091

 

 

 

6.3

%

 

 

187,504

 

 

 

4.6

%

Impairment of goodwill and indefinite-lived assets

 

 

43,500

 

 

 

1.0

%

 

 

1,572,523

 

 

 

38.8

%

Depreciation and amortization

 

 

224,697

 

 

 

5.3

%

 

 

233,075

 

 

 

5.8

%

Gain on deconsolidation of subsidiaries

 

 

(58,891

)

 

 

(1.4

)%

 

 

 

 

 

0.0

%

Loss on divestitures

 

 

19,068

 

 

 

0.5

%

 

 

2,863

 

 

 

0.1

%

Income from unconsolidated investments

 

 

(5,273

)

 

 

(0.1

)%

 

 

 

 

 

0.0

%

Total expenses

 

 

4,148,656

 

 

 

98.2

%

 

 

5,489,148

 

 

 

135.5

%

Operating income (loss)

 

 

76,190

 

 

 

1.8

%

 

 

(1,439,406

)

 

 

(35.5

)%

Other (income) expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrant liability

 

 

(286

)

 

 

0.0

%

 

 

(21,236

)

 

 

(0.5

)%

Interest expense, net

 

 

165,802

 

 

 

3.9

%

 

 

104,459

 

 

 

2.6

%

Total other expenses

 

 

165,516

 

 

 

3.9

%

 

 

83,223

 

 

 

2.1

%

Loss before income taxes

 

 

(89,326

)

 

 

(2.1

)%

 

 

(1,522,629

)

 

 

(37.6

)%

Benefit from income taxes

 

 

(29,008

)

 

 

(0.7

)%

 

 

(145,337

)

 

 

(3.6

)%

Net loss

 

$

(60,318

)

 

 

(1.4

)%

 

$

(1,377,292

)

 

 

(34.0

)%

Other Financial Data

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Income(1)

 

$

123,834

 

 

 

2.9

%

 

$

206,599

 

 

 

5.1

%

Adjusted EBITDA(1)

 

$

424,347

 

 

 

10.0

%

 

$

435,995

 

 

 

10.8

%

(1)
Adjusted Net Income and Adjusted EBITDA are financial measures that are not calculated in accordance with GAAP. For a discussion of our presentation of Adjusted Net Income and Adjusted EBITDA and reconciliations of net loss to Adjusted Net Income and Adjusted EBITDA, see “—Non-GAAP Financial Measures.”

Comparison of the Years Ended December 31, 2023 and 2022

Revenues

 

 

Year Ended December 31,

 

 

Change

 

(amounts in thousands)

 

2023

 

 

2022

 

 

$

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

%

Total revenues increased by $175.1 million, or 4.3%, during the year ended December 31, 2023, as compared to the year ended December 31, 2022.

The sales segment revenues decreased $62.0 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022. Excluding $91.4 million of revenues from divested businesses and the deconsolidation of our European joint venture, net of acquired businesses and favorable foreign exchange rates of $1.3 million, the segment experienced an increase of $28.2 million in organic revenues primarily due to an increase in our retail-centric merchandising services with an increase in volume and pricing realization as well as growth in our European joint venture, partially offset by an intentional client exit.

The marketing segment revenues increased $237.1 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022, which includes revenues of $0.3 million from acquired businesses, net of a divested business. Excluding revenues from acquired businesses, net of a divested business and unfavorable foreign exchange rates of $9.1 million, the segment experienced an increase of $245.9 million in organic revenues. The increase in revenues was primarily due to an increase in our in-store sampling and demonstration services and pricing realization, partially offset by a decrease in certain of our digital services.

37


 

Cost of Revenues

Cost of revenues as a percentage of revenues for the year ended December 31, 2023 was 86.6%, as compared to 86.5% for the year ended December 31, 2022, which is consistent year over year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses as a percentage of revenues for the year ended December 31, 2023 was 6.3%, as compared to 4.6% for the year ended December 31, 2022. The increase as a percentage of revenues was primarily attributable to our internal reorganization activities, largely related to professional fees and severance, coupled with increased incentive compensation and technology expenses.

Impairment of Goodwill and Indefinite-lived Assets

We recognized a $43.5 million non-cash trade name intangible asset impairment charge during the year ended December 31, 2023. The impairment charges were due to the deconsolidation of our European joint venture and intended sale of the foodservice businesses. We recognized a $1,367.5 million non-cash goodwill impairment charge and a $205.0 million non-cash intangible asset impairment charge during the year ended December 31, 2022. The impairment charges were due to the confluence of sustained decline in our share price, challenges in the labor market and continued inflationary pressures, and an increase to the discount rate as a result of the increases in interest rates during 2022.

Depreciation and Amortization Expense

Depreciation and amortization expense was $224.7 million for the year ended December 31, 2023 as compared to $233.1 million, which was primarily due to a decrease in software amortization expenses and intangible assets amortization expense.

Gain on Deconsolidation of Subsidiaries

On November 30, 2023, we reduced our equity interest in ASL, our European joint venture, from a majority interest of under 60% to a minority interest of 49.6% in exchange for $1.0 million in cash. We also removed certain participating rights with ASL related to capital allocation and certain of our decision making rights, resulting in a loss of control. Therefore, in accordance with ASC 810, ASL was deconsolidated from our consolidated financial statements resulting in the recognition of a $58.9 million gain for the year ended December 31, 2023. Effective December 1, 2023, our investment in ASL is accounted for under the equity method of accounting.

Loss on Divestitures

During the year ended December 31, 2023, we recognized a loss on the sale of businesses of $19.1 million. We determined the sale of the businesses did not meet the criteria for classification as discontinued operations. We received $21.1 million of proceeds, which are net of transaction fees and holdbacks.

Income from Unconsolidated Investments

Income from unconsolidated investments increased by $5.3 million for the year ended December 31, 2023 due to the net income attributable from our unconsolidated affiliates as a result of the deconsolidation of ASL. Subsequent to the deconsolidation of ASL, we anticipate that over the next few years these investments will become a growing source of income and operating cash flows. For additional information see Item 8. Financial Statements And Supplementary Data — Note 10. Investments.

Operating Income (Loss)
 

 

 

Year Ended December 31,

 

 

Change

 

(amounts in thousands)

 

2023

 

 

2022

 

 

$

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

38,443

 

 

$

(1,323,192

)

 

$

1,361,635

 

 

 

102.9

%

Marketing

 

 

37,747

 

 

 

(116,214

)

 

 

153,961

 

 

 

132.5

%

Total operating income (loss)

 

$

76,190

 

 

$

(1,439,406

)

 

$

1,515,596

 

 

 

105.3

%

 

38


 

The change in operating income (loss) was primarily attributable to the non-cash goodwill and non-cash intangible asset impairment charges in the prior year and the gain on deconsolidation of ASL, partially offset by the charges in selling, general and administrative expenses and non-cash intangible asset impairment charges as described above.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability represents $0.3 million of non-cash gain resulting from a fair value adjustment to the warrant liability for the private placement warrants for the year ended December 31, 2023.

Interest Expense, Net

Interest expense, net increased $61.3 million, or 58.7%, to $165.8 million for the year ended December 31, 2023, from $104.5 million for the year ended December 31, 2022. The increase in interest expense, net was primarily due to the higher interest rates and a decrease in fair value in our derivative instruments, partially offset by gains associated with the repurchases of Term Loan Facility and Second Term debt for the year ended December 31, 2023.

Benefit from Income Taxes

Benefit from income taxes was $29.0 million for the year ended December 31, 2023 as compared to a benefit from income taxes of $145.3 million for the year ended December 31, 2022. The fluctuation was primarily attributable to the decrease in pre-tax loss for the year ended December 31, 2023 as compared to the year ended December 31, 2022. In addition, the variance is explained by the non-cash goodwill impairment charge for the year ended December 31, 2022 and the deconsolidation of our European joint venture for the year ended December 31, 2023.

Net Loss

Net loss was $60.3 million for the year ended December 31, 2023, compared to net loss of $1,377.3 million for the year ended December 31, 2022. The decrease in net loss was driven by the increase in operating income partially offset by the increase in interest expense as described above.

Adjusted Net Income

The decrease in Adjusted Net Income for the year ended December 31, 2023 was attributable to the decrease in Adjusted EBITDA as described below coupled with the increase in interest expense. For a reconciliation of Adjusted Net Income to Net loss, see “ —Non-GAAP Financial Measures”.

Adjusted EBITDA and Adjusted EBITDA by Segment
 

 

 

Year Ended December 31,

 

 

Change

 

(amounts in thousands)

 

2023

 

 

2022

 

 

$

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

%)

Adjusted EBITDA decreased $11.6 million, or 2.7% to $424.3 million for the year ended December 31, 2023, from $436.0 million for the year ended December 31, 2022.

In the sales segment, the decrease in Adjusted EBITDA during the year ended December 31, 2023 was primarily attributable to decline in revenues and increase in cost of revenues, largely due to inflationary pressures, increase in incentive compensation and technology expenses.

In the marketing segment, the increase in Adjusted EBITDA during the year ended December 31, 2023 was primarily attributable to the growth in revenues from the in-store sampling and demonstration services as described above, partially offset by headwinds in our higher-margin digital services.

39


 

For a reconciliation of Adjusted EBITDA to net income (loss), see “—Non-GAAP Financial Measures.”

Non-GAAP Financial Measures

Adjusted Net Income is a non-GAAP financial measure. Adjusted Net Income means net (loss) income before (i) amortization of intangible assets, (ii) impairment of goodwill and indefinite-lived assets (iii) gain on deconsolidation of subsidiaries, (iv) loss on divestitures (v) equity-based compensation of Karman Topco L.P., (vi) changes in fair value of warrant liability, (vii) fair value adjustments of contingent consideration related to acquisitions, (viii) acquisition and divestiture related expenses, (iv) costs associated with COVID-19, net of benefits received, (x) net income attributable to noncontrolling interest, (xi) reorganization expenses, (xii) litigation expenses, (xiii) gain on repurchases of Term Loan Facility and Senior Secured Notes debt, (xiv) deferred financing fees, (xv) recovery from and costs associated with the Take 5 Matter, (xvi) other adjustments that management believes are helpful in evaluating our operating performance, and (xvii) related tax adjustments.

We present Adjusted Net Income because we use it as a supplemental measure to evaluate the performance of our business in a way that also considers our ability to generate profit without the impact of items that we do not believe are indicative of our operating performance or are unusual or infrequent in nature and aid in the comparability of our performance from period to period. Adjusted Net Income should not be considered as an alternative for our net (loss) income, our most directly comparable measure presented on a GAAP basis.

A reconciliation of Adjusted Net Income to Net (loss) income is provided in the following table:
 

 

 

 

Year Ended December 31,

 

 

 

 

2023

 

 

2022

 

 

2021

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

 

$

(60,318

)

 

$

(1,377,292

)

 

$

57,549

 

Less: Net income attributable to noncontrolling interest

 

 

 

2,940

 

 

 

3,210

 

 

 

3,055

 

Add:

 

 

 

 

 

 

 

 

 

 

Impairment of goodwill and indefinite-lived assets

 

 

 

43,500

 

 

 

1,572,523

 

 

 

 

Gain on deconsolidation of subsidiaries

 

 

 

(58,891

)

 

 

 

 

 

 

Loss on divestitures

 

 

 

19,068

 

 

 

2,863

 

 

 

 

Change in fair value of warrant liability

 

 

 

(286

)

 

 

(21,236

)

 

 

955

 

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

 

 

 

(2,524

)

 

 

(6,934

)

 

 

(10,313

)

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

 

 

 

10,362

 

 

 

4,774

 

 

 

4,562

 

Acquisition and divestiture related expenses(c)

 

 

 

7,024

 

 

 

21,039

 

 

 

20,173

 

Reorganization expenses(d)

 

 

 

57,021

 

 

 

6,094

 

 

 

12,502

 

Litigation expenses (recovery)(e)

 

 

 

9,519

 

 

 

5,357

 

 

 

(910

)

Amortization of intangible assets(f)

 

 

 

196,424

 

 

 

200,836

 

 

 

198,946

 

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

 

 

 

3,283

 

 

 

7,208

 

 

 

(991

)

Deferred financing fees(h)

 

 

 

 

 

 

 

 

 

3,895

 

Gain on repurchases of Term Loan Facility and Senior Secured Notes debt(i)

 

 

 

(8,665

)

 

 

 

 

 

 

(Recovery from) costs associated with the Take 5 Matter(j)

 

 

 

(1,380

)

 

 

2,465

 

 

 

4,901

 

Tax adjustments related to non-GAAP adjustments(k)

 

 

 

(87,363

)

 

 

(207,888

)

 

 

(64,421

)

Adjusted Net Income

 

 

$

123,834

 

 

$

206,599

 

 

$

223,793

 

Adjusted EBITDA and Adjusted EBITDA by segment are supplemental non-GAAP financial measures of our operating performance. Adjusted EBITDA means net loss before (i) interest expense, net, (ii) (benefit from) provision for 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.

We present Adjusted EBITDA and Adjusted EBITDA by segment because they are key operating measures used by us to assess our financial performance. These measures adjust for items that we believe do not reflect the ongoing operating performance of our business, such as certain non-cash items, unusual or infrequent items or items that change from period to period without any material relevance to our operating performance. We evaluate these measures in conjunction with our results according to GAAP because we believe they provide a more complete understanding of factors and trends affecting our business than GAAP measures alone. Furthermore, the agreements governing our indebtedness contain covenants and other tests based on measures substantially similar to Adjusted EBITDA. Neither Adjusted EBITDA nor Adjusted EBITDA by segment should be considered as an alternative for our net

40


 

(loss) income or operating (loss) income, respectively, our most directly comparable measures presented on a GAAP basis. 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 our non-GAAP measures may not be directly comparable to similarly titled measures of other companies.

A reconciliation of Adjusted EBITDA to Net (loss) income is provided in the following table:
 

Consolidated

 

 

Year Ended December 31,

 

 

 

 

2023

 

 

2022

 

 

2021

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

 

$

(60,318

)

 

$

(1,377,292

)

 

$

57,549

 

Add:

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

165,802

 

 

 

104,459

 

 

 

137,927

 

(Benefit from) provision for income taxes

 

 

 

(29,008

)

 

 

(145,337

)

 

 

33,617

 

Depreciation and amortization

 

 

 

224,697

 

 

 

233,075

 

 

 

240,041

 

Impairment of goodwill and indefinite-lived assets

 

 

 

43,500

 

 

 

1,572,523

 

 

 

 

Gain on deconsolidation of subsidiaries, net

 

 

 

(58,891

)

 

 

 

 

 

 

Loss on divestitures

 

 

 

19,068

 

 

 

2,863

 

 

 

 

Change in fair value of warrant liability

 

 

 

(286

)

 

 

(21,236

)

 

 

955

 

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