[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section presents the company's unaudited financial statements, management's discussion, and market risk disclosures [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, equity, cash flows, and detailed accounting notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (in thousands) | | September 30, 2022 | December 31, 2021 | | :--------------- | :------------------- | :------------------ | | **ASSETS** | | | | Cash and cash equivalents | $96,215 | $164,622 | | Total current assets | $1,103,155 | $1,104,314 | | Goodwill | $2,246,053 | $2,206,004 | | Other intangible assets, net | $2,150,075 | $2,287,514 | | Total assets | $5,813,826 | $5,854,268 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Total current liabilities | $601,010 | $645,520 | | Long-term debt, net of current portion | $2,024,591 | $2,028,882 | | Total liabilities | $3,192,510 | $3,271,974 | | Total stockholders' equity | $2,617,963 | $2,580,401 | | Total liabilities, redeemable noncontrolling interest, and stockholders' equity | $5,813,826 | $5,854,268 | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) This section details the company's revenues, expenses, and net income over specific reporting periods Condensed Consolidated Statements of Operations and Comprehensive Income (in thousands, except share and per share data) | | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenues | $1,051,095 | $928,760 | $2,946,979 | $2,569,735 | | Total operating expenses | $1,004,253 | $863,158 | $2,848,847 | $2,424,098 | | Operating income | $46,842 | $65,602 | $98,132 | $145,637 | | Income before income taxes | $24,385 | $32,603 | $55,960 | $46,117 | | Net income | $23,227 | $24,327 | $44,437 | $29,535 | | Net income attributable to stockholders of Advantage Solutions Inc. | $21,059 | $23,311 | $43,395 | $29,316 | | Basic Net income per common share | $0.07 | $0.07 | $0.14 | $0.09 | | Diluted Net income per common share | $0.07 | $0.07 | $0.14 | $0.09 | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in stockholders' equity, including net income, stock-based compensation, and other adjustments - Total stockholders' equity increased from **$2,580,401 thousand** at January 1, 2022, to **$2,617,963 thousand** at September 30, 2022, primarily driven by net income of **$44,313 thousand** and stock-based compensation of **$29,021 thousand**, partially offset by foreign currency translation adjustments of **$(38,124) thousand** and equity-based compensation of Karman Topco L.P. of **$(7,142) thousand**[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | | Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2021 | | :--------------- | :----------------------------------- | :----------------------------------- | | Net cash provided by operating activities | $81,950 | $101,068 | | Net cash used in investing activities | $(103,062) | $(66,152) | | Net cash used in financing activities | $(32,920) | $(68,999) | | Net effect of foreign currency changes on cash | $(12,311) | $(1,476) | | Net change in cash, cash equivalents and restricted cash | $(66,343) | $(35,559) | | Cash, cash equivalents and restricted cash, end of period | $114,294 | $184,407 | [Notes to the Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the accounting policies, significant transactions, and other financial disclosures [1. Organization and Significant Accounting Policies](index=9&type=section&id=1.%20Organization%20and%20Significant%20Accounting%20Policies) This note describes the company's business, the impact of external events, and recently adopted accounting standards - Advantage Solutions Inc. provides outsourced solutions to consumer goods companies and retailers, with its **Class A common stock** and warrants listed on the **Nasdaq Global Select Market**[27](index=27&type=chunk) - The company's services were severely impacted by client spending reductions due to the **COVID-19 pandemic** from March 2020 through **Q1 2021**, with recovery continuing through **Q3 2022**[29](index=29&type=chunk) - The **war in Ukraine** led to **sanctions** and **currency restrictions**, creating uncertainty for the company's investment in Russian operations, with **pretax charges of $2.8 million** recorded in **Q1 2022** as the company intends to dispose of its ownership interests in local agencies in **Russia**[29](index=29&type=chunk) - The company adopted several new accounting standards (**ASU 2020-04, 2020-06, 2021-04, 2021-10**) on **January 1, 2022**, none of which had a **material impact** on its condensed consolidated financial statements[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) [2. Revenue Recognition](index=11&type=section&id=2.%20Revenue%20Recognition) This note details the company's revenue recognition policies and disaggregated revenue by service type and segment - Revenue is recognized when **control of promised goods or services** is transferred to the client, typically **over time** as the client simultaneously receives and consumes the benefits[37](index=37&type=chunk) - **Sales segment revenues** are primarily from **commissions**, **fee-for-service**, or **cost-plus** for services like **headquarter relationship management**, **retail merchandising**, and **digital solutions**[38](index=38&type=chunk) - **Marketing segment revenues** are primarily **fee-for-service** (including **retainer**, **hourly**, **project-based**, or **event fees**), **commissions**, or **cost-plus** for **experiential marketing**, **shopper/consumer marketing**, **private label development**, and **digital/social/media services**[38](index=38&type=chunk) Disaggregated Revenues by Service Type (in thousands) | | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Sales brand-centric services | $343,478 | $330,740 | $1,005,707 | $946,147 | | Sales retail-centric services | $302,768 | $266,399 | $836,640 | $746,960 | | Total sales revenues | $646,246 | $597,139 | $1,842,347 | $1,693,107 | | Marketing brand-centric services | $143,241 | $142,554 | $393,155 | $381,358 | | Marketing retail-centric services | $261,608 | $189,067 | $711,477 | $495,270 | | Total marketing revenues | $404,849 | $331,621 | $1,104,632 | $876,628 | | Total revenues | $1,051,095 | $928,760 | $2,946,979 | $2,569,735 | [3. Acquisitions](index=11&type=section&id=3.%20Acquisitions) This note provides details on business acquisitions, including purchase prices, goodwill, and pro-forma financial impacts - During the nine months ended September 30, 2022, the Company acquired **four businesses** (**two sales, two marketing**) for an **aggregate purchase price of $75.5 million**, including **$74.1 million in cash**, resulting in **Goodwill of $56.1 million**[41](index=41&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) - The 2022 acquisitions **contributed $12.8 million in revenues** for the three months ended September 30, 2022, and **$21.3 million** for the nine months ended September 30, 2022[47](index=47&type=chunk) - During the nine months ended September 30, 2021, the Company acquired **six businesses** for an **aggregate purchase price of $73.5 million**, including **$40.0 million in cash**[48](index=48&type=chunk) Pro-Forma Revenues and Net Income (in thousands) | | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Pro-Forma Revenues | $1,052,274 | $963,576 | $2,962,479 | $2,719,111 | | Pro-Forma Net income | $21,467 | $23,896 | $46,461 | $32,590 | [4. Goodwill and Intangible Assets](index=15&type=section&id=4.%20Goodwill%20and%20Intangible%20Assets) This note details the company's goodwill and other intangible assets, including their carrying values and amortization Goodwill by Segment (in thousands) | | Sales | Marketing | Total | | :--------------- | :------ | :-------- | :------ | | Balance at January 1, 2021 | $1,462,378 | $700,961 | $2,163,339 | | Acquisitions | $32,087 | $13,315 | $45,402 | | Balance at December 31, 2021 | $1,492,771 | $713,233 | $2,206,004 | | Acquisitions | $5,672 | $50,461 | $56,133 | | Balance at September 30, 2022 | $1,482,359 | $763,694 | $2,246,053 | - **Accumulated impairment losses** related to goodwill remained at **$652.0 million** as of September 30, 2022 and 2021[57](index=57&type=chunk) Other Intangible Assets, Net Carrying Value (in thousands) | | September 30, 2022 Net Carrying Value | December 31, 2021 Net Carrying Value | | :--------------------- | :------------------------------------ | :----------------------------------- | | Client relationships | $1,195,222 | $1,321,435 | | Trade names (finite-lived) | $51,204 | $59,851 | | Developed technology | $3,390 | $5,054 | | Covenant not to compete | $259 | $1,174 | | Total finite-lived intangible assets | $1,250,075 | $1,387,514 | | Indefinite-lived trade names | $900,000 | $900,000 | | Total other intangible assets | $2,150,075 | $2,287,514 | - **Amortization of intangible assets** was **$50.0 million** for the three months ended September 30, 2022 (vs. **$49.8 million** in 2021) and **$150.9 million** for the nine months ended September 30, 2022 (vs. **$148.4 million** in 2021)[61](index=61&type=chunk) Estimated Future Amortization Expense (in thousands) | | Estimated Future Amortization Expense | | :--------------- | :------------------------------------ | | Remainder of 2022 | $49,782 | | 2023 | $197,530 | | 2024 | $196,181 | | 2025 | $190,153 | | 2026 | $186,203 | | Thereafter | $430,226 | | Total amortization expense | $1,250,075 | [5. Debt](index=16&type=section&id=5.%20Debt) This note provides details on the company's long-term debt, including loan facilities, notes, and covenant compliance Long-Term Debt, Net of Current Portion (in thousands) | | September 30, 2022 | December 31, 2021 | | :--------------- | :------------------- | :------------------ | | Term Loan Facility | $1,301,813 | $1,311,750 | | Notes | $775,000 | $775,000 | | Government loans for COVID-19 relief | $4,113 | $5,212 | | Other | $1,492 | $1,113 | | Total long-term debt | $2,082,418 | $2,093,075 | | Less: current portion | $14,704 | $14,397 | | Less: debt issuance costs | $43,123 | $49,796 | | Long-term debt, net of current portion | $2,024,591 | $2,028,882 | - As of September 30, 2022, the Company had **$1.3 billion** outstanding under the Term Loan Facility (maturity **Oct 2027**) and **$775.0 million** under the Notes (maturity **Nov 2028**)[63](index=63&type=chunk) - The Company was **in compliance with all covenants** under the Term Loan Facility and Notes as of September 30, 2022, with **no payments under the excess cash flow calculation** required in the reported periods[63](index=63&type=chunk)[65](index=65&type=chunk) - **No borrowings were outstanding** under the Revolving Credit Facility as of September 30, 2022[65](index=65&type=chunk) [6. Fair Value of Financial Instruments](index=17&type=section&id=6.%20Fair%20Value%20of%20Financial%20Instruments) This note details the fair value measurements of financial instruments, including derivatives, warrants, and contingent liabilities Assets and Liabilities Measured at Fair Value (in thousands) | | September 30, 2022 Fair Value | December 31, 2021 Fair Value | | :--------------- | :---------------------------- | :--------------------------- | | **Assets measured at fair value** | | | | Derivative financial instruments | $49,149 | $10,164 | | Total assets measured at fair value | $49,149 | $10,164 | | **Liabilities measured at fair value** | | | | Warrant liability | $733 | $22,189 | | Contingent consideration liabilities | $40,431 | $58,366 | | Total liabilities measured at fair value | $41,164 | $80,555 | | Derivative financial instruments (liability) | N/A | $385 | - The Company uses **interest rate cap agreements** to manage exposure to variable interest rates, with an aggregate notional value of **$650.0 million** as of September 30, 2022, and recorded a **gain of $14.5 million** in **Q3 2022** from changes in fair value of derivative instruments[68](index=68&type=chunk)[70](index=70&type=chunk) - The **warrant liability decreased significantly** from **$22.2 million** (Dec 31, 2021) to **$0.7 million** (Sep 30, 2022), resulting in a **non-cash gain of $21.5 million** for the **nine months ended September 30, 2022**, with the valuation method for private placement warrants shifting from **Level 3 (Black-Scholes)** to **Level 2 (public warrant share price)** in **Q1 2022**[72](index=72&type=chunk)[73](index=73&type=chunk) - **Contingent consideration liabilities decreased** from **$58.4 million** (beginning of period) to **$40.4 million** (end of period) for the nine months ended September 30, 2022, primarily due to **payments of $23.2 million**[77](index=77&type=chunk) Fair Value of Long-Term Debt (in thousands) | | September 30, 2022 Carrying Value | September 30, 2022 Fair Value (Level 2) | | :--------------- | :-------------------------------- | :-------------------------------------- | | Term Loan Facility | $1,301,813 | $1,329,741 | | Notes | $775,000 | $723,486 | | Government loans for COVID-19 relief | $4,113 | $4,306 | | Other | $1,492 | $1,492 | | Total long-term debt | $2,082,418 | $2,059,025 | [7. Related Party Transactions](index=19&type=section&id=7.%20Related%20Party%20Transactions) This note discloses transactions with related parties, including board members' affiliations and revenues from client companies - **Nine members** of the Company's board of directors also serve on the boards of **eight client companies**[80](index=80&type=chunk) Revenues and Accounts Receivable from Related Party Clients (in thousands) | | Three Months Ended Sep 30, 2022 Revenues | Three Months Ended Sep 30, 2021 Revenues | Nine Months Ended Sep 30, 2022 Revenues | Nine Months Ended Sep 30, 2021 Revenues | As of Sep 30, 2022 Accounts Receivable | As of Dec 31, 2021 Accounts Receivable | | :--------------- | :--------------------------------------- | :--------------------------------------- | :-------------------------------------- | :-------------------------------------- | :------------------------------------ | :----------------------------------- | | Client 1 | $450 | $0 | $1,275 | $0 | $301 | $176 | | Client 2 | $136 | $42 | $668 | $75 | $289 | $160 | | Client 3 | $147 | $124 | $455 | $457 | $129 | $190 | | All other clients | $30 | $1,452 | $152 | $6,694 | $16 | $10 | | Total | $763 | $1,618 | $2,550 | $7,226 | $735 | $536 | - **Revenues from a parent company of an unconsolidated affiliate** were **$4.4 million** for both the three months ended September 30, 2022 and 2021, and for the nine months, revenues were **$11.1 million** in 2022 and **$13.7 million** in 2021[84](index=84&type=chunk) [8. Income Taxes](index=20&type=section&id=8.%20Income%20Taxes) This note explains the company's effective tax rates and the impact of tax law changes on its financial statements Effective Tax Rates | Period | Effective Tax Rate 2022 | Effective Tax Rate 2021 | | :----- | :---------------------- | :---------------------- | | Three Months Ended Sep 30 | 4.7% | 25.4% | | Nine Months Ended Sep 30 | 20.6% | 36.0% | - The **fluctuation in effective tax rates** was primarily due to differences in pretax book income and a **$5.0 million discrete impact** from remeasuring deferred tax liability due to a **Pennsylvania statutory tax rate change in 2022**[85](index=85&type=chunk) - The **Inflation Reduction Act (IRA)** is **not expected to have a material impact** on the Company's consolidated financial statements[85](index=85&type=chunk) [9. Segments](index=20&type=section&id=9.%20Segments) This note provides financial information for the company's sales and marketing reportable segments - The Company operates in **two reportable segments: sales and marketing**, with performance evaluated based on **revenues and operating income**[86](index=86&type=chunk)[88](index=88&type=chunk) Segment Revenues and Operating Income (Three Months Ended September 30, in thousands) | | Sales 3M Sep 30, 2022 | Marketing 3M Sep 30, 2022 | Total 3M Sep 30, 2022 | Sales 3M Sep 30, 2021 | Marketing 3M Sep 30, 2021 | Total 3M Sep 30, 2021 | | :--------------- | :-------------------- | :------------------------ | :-------------------- | :-------------------- | :------------------------ | :-------------------- | | Revenues | $646,246 | $404,849 | $1,051,095 | $597,139 | $331,621 | $928,760 | | Operating income | $31,765 | $15,077 | $46,842 | $51,906 | $13,696 | $65,602 | Segment Revenues and Operating Income (Nine Months Ended September 30, in thousands) | | Sales 9M Sep 30, 2022 | Marketing 9M Sep 30, 2022 | Total 9M Sep 30, 2022 | Sales 9M Sep 30, 2021 | Marketing 9M Sep 30, 2021 | Total 9M Sep 30, 2021 | | :--------------- | :-------------------- | :------------------------ | :-------------------- | :-------------------- | :------------------------ | :-------------------- | | Revenues | $1,842,347 | $1,104,632 | $2,946,979 | $1,693,107 | $876,628 | $2,569,735 | | Operating income | $65,915 | $32,217 | $98,132 | $131,727 | $13,910 | $145,637 | [10. Commitments and Contingencies](index=21&type=section&id=10.%20Commitments%20and%20Contingencies) This note details the company's legal matters, including employment class actions and the 'Take 5 Matter' investigations - The Company is involved in various legal matters, including **employment-related class actions** concerning wage and hour violations under the U.S. Fair Labor Standards Act and **California Labor Code** and **Private Attorneys General Act**[91](index=91&type=chunk)[92](index=92&type=chunk) - The **'Take 5 Matter'** involved the **termination of Take 5 Media Group's operations** in **July 2019** due to **revenue recognition inconsistencies** and **inaccurate client reports**, with the Company **voluntarily disclosed misconduct** to the **USAO and FBI**[93](index=93&type=chunk)[95](index=95&type=chunk) - In **October 2022**, an **arbitrator made a final award** in the Company's favor in arbitration proceedings against the **Take 5 Sellers**, who had alleged breach of contract and defamation[96](index=96&type=chunk) - The Take 5 Matter may lead to **additional litigation or governmental investigations**, with **potential liabilities exceeding current refund offers**, which may **not be fully covered by insurance**[97](index=97&type=chunk) [11. Stock-Based Compensation](index=22&type=section&id=11.%20Stock-Based%20Compensation) This note describes the company's stock-based compensation plans, including PSUs, RSUs, and stock options - **Total stock-based compensation expense** and **equity-based compensation expense for Karman Topco L.P.** was **$6.7 million** for the three months ended September 30, 2022 (vs. **$8.3 million** in 2021) and **$27.0 million** for the nine months ended September 30, 2022 (vs. **$28.5 million** in 2021)[98](index=98&type=chunk) - **Performance Restricted Stock Units (PSUs)** vest over **three years** based on **revenue and Adjusted EBITDA targets**, with 2021 PSU EBITDA achievement at **64.6%** of target and Revenue achievement at **126.2%** of target in Q1 2022[99](index=99&type=chunk)[102](index=102&type=chunk) - A **modification to 2021 PSUs** in **March 2022** resulted in a **$1.1 million gain** upon cancellation of the original award and a **$1.2 million intrinsic value** for the new award[103](index=103&type=chunk) Performance Share Unit Activity (Nine Months Ended September 30, 2022) | | Performance Share Units | Weighted Average Grant Date Fair Value | | :----------------------------------- | :---------------------- | :------------------------------------- | | Outstanding at January 1, 2022 | 2,609,079 | $13.07 | | Granted | 5,393,085 | $5.66 | | Distributed | 660,880 | $13.09 | | Forfeited | 684,261 | $8.19 | | PSU performance adjustment | (377,572) | $11.19 | | Outstanding at September 30, 2022 | 6,279,451 | $7.22 | - **Restricted Stock Units (RSUs)** are subject to continued service and generally vest over **three years**, with total unrecognized compensation cost for RSUs at **$30.4 million** as of September 30, 2022, amortized over **2.2 years**[107](index=107&type=chunk)[110](index=110&type=chunk) - **945,664 non-qualified stock options** were granted during the **nine months ended September 30, 2022**, with a **weighted average exercise price of $5.99 per share**, and unrecognized compensation expense for stock options was **$1.4 million**[111](index=111&type=chunk)[112](index=112&type=chunk) [12. Redeemable Noncontrolling Interest](index=24&type=section&id=12.%20Redeemable%20Noncontrolling%20Interest) This note explains the redeemable noncontrolling interest arising from a put and call option agreement - The Company has a **redeemable noncontrolling interest of $3.4 million** as of **September 30, 2022**, arising from a **put and call option agreement** related to a **majority-owned subsidiary**[113](index=113&type=chunk) - The fair value of the redeemable noncontrolling interest and put option at acquisition date was valued using a mix of income and market approaches, employing a **Monte Carlo simulation method** with **Level 3 inputs**[115](index=115&type=chunk) [13. Earnings Per Share](index=25&type=section&id=13.%20Earnings%20Per%20Share) This note details the calculation of basic and diluted earnings per share, including dilutive share adjustments - **Basic EPS** is calculated by dividing **net income attributable to stockholders** by weighted-average common shares outstanding, while **Diluted EPS** adjusts for **potential dilutive shares** (**PSUs, RSUs, warrants, stock options**) using the **treasury stock method**[116](index=116&type=chunk) Earnings Per Share Calculation (in thousands, except share and earnings per share data) | | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income attributable to stockholders of Advantage Solutions Inc. | $21,059 | $23,311 | $43,395 | $29,316 | | Weighted average common shares - basic | 318,821,895 | 318,563,497 | 318,345,565 | 318,213,337 | | Basic earnings per common share | $0.07 | $0.07 | $0.14 | $0.09 | | Weighted average common shares - diluted | 319,725,065 | 320,120,634 | 319,190,804 | 319,654,817 | | Diluted earnings per common share | $0.07 | $0.07 | $0.14 | $0.09 | - **18,578,321 warrants were excluded** from **diluted EPS calculation** as of **September 30, 2022**, because the market price of common stock did not exceed the exercise price[118](index=118&type=chunk) [14. Subsequent Events](index=26&type=section&id=14.%20Subsequent%20Events) This note discloses significant events that occurred after the reporting period, including new equity grants - In **October 2022**, the Company granted **2,153,900 RSUs** and **1,170,000 stock options**, with an **estimated aggregate grant date fair value of $4.8 million and $1.2 million**, respectively[120](index=120&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an executive overview, financial performance summary, factors affecting the business, assessment methods, segment results, and liquidity analysis [Executive Overview](index=27&type=section&id=Executive%20Overview) This section provides a high-level summary of the company's business model and service offerings - Advantage Solutions Inc. is a **leading business solutions provider** to **consumer goods manufacturers and retailers**, offering essential **sales and marketing services** like **headquarter sales**, **retail merchandising**, **in-store sampling**, **digital commerce**, and **shopper marketing**[124](index=124&type=chunk) - The company operates through **two reportable segments: sales (62.5% of 9M 2022 revenues) and marketing (37.5% of 9M 2022 revenues)**[125](index=125&type=chunk)[126](index=126&type=chunk) - The **COVID-19 pandemic** significantly impacted services, particularly **experiential services**, from **March 2020 through Q1 2021**, with recovery continuing through **Q3 2022**[129](index=129&type=chunk) [Summary](index=28&type=section&id=Summary) This section provides a concise summary of the company's key financial performance metrics for the periods presented Financial Performance Summary (Three Months Ended September 30, in millions) | Financial Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change ($) | Change (%) | | :--------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Revenues | $1,051.1 million | $928.8 million | $122.3 million | 13.2% | | Operating income | $46.8 million | $65.6 million | $(18.8) million | (28.6)% | | Net income | $23.2 million | $24.3 million | $(1.1) million | (4.5)% | | Adjusted Net Income | $62.7 million | $59.1 million | $3.6 million | 6.1% | | Adjusted EBITDA | $118.3 million | $133.8 million | $(15.5) million | (11.6)% | Financial Performance Summary (Nine Months Ended September 30, in millions) | Financial Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Change ($) | Change (%) | | :--------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Revenues | $2,947.0 million | $2,569.7 million | $377.2 million | 14.7% | | Operating income | $98.1 million | $145.6 million | $(47.5) million | (32.6)% | | Net income | $44.4 million | $29.5 million | $14.9 million | 50.5% | | Adjusted Net Income | $152.5 million | $146.8 million | $5.8 million | 3.9% | | Adjusted EBITDA | $323.3 million | $367.2 million | $(43.8) million | (11.9)% | - During the nine months ended September 30, 2022, the company acquired **four businesses** for an **aggregate purchase price of $75.5 million**[131](index=131&type=chunk) [Factors Affecting Our Business and Financial Reporting](index=28&type=section&id=Factors%20Affecting%20Our%20Business%20and%20Financial%20Reporting) This section discusses key internal and external factors influencing the company's business and financial outcomes - Key factors affecting performance include **organic growth strategies**, **acquisitions** (**73 completed since Jan 2014**, excluding Daymon), **contingent consideration arrangements**, **depreciation and amortization of acquired intangibles**, **foreign exchange fluctuations**, and **seasonality (Q4 typically highest revenue)**[132](index=132&type=chunk)[134](index=134&type=chunk) [How We Assess the Performance of Our Business](index=30&type=section&id=How%20We%20Assess%20the%20Performance%20of%20Our%20Business) This section explains the methodologies used to evaluate business performance, including revenue disaggregation and non-GAAP measures - Revenue is disaggregated into **organic and acquired revenues** to improve comparability, with acquired revenues generally referring to revenues from a newly acquired business for the **first 12 months post-acquisition**[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) - **Cost of revenues** includes fixed and variable expenses for **associate compensation, benefits, and project-related costs**, subject to external factors like **inflation and wage increases**[143](index=143&type=chunk) - **Selling, general and administrative expenses** include corporate personnel costs, IT, professional services, and fair value adjustments for **contingent consideration and acquisition-related costs**[144](index=144&type=chunk) - **Non-cash items** like **change in fair value of warrant liability** and **amortization of acquired intangible assets** significantly impact operating and net income but are not considered material economic costs to the business[145](index=145&type=chunk)[147](index=147&type=chunk)[149](index=149&type=chunk) - **Adjusted Net Income and Adjusted EBITDA** are **non-GAAP measures** used to evaluate performance by excluding certain non-cash, unusual, or infrequent items, and are also used for **debt covenant compliance**[153](index=153&type=chunk)[155](index=155&type=chunk)[157](index=157&type=chunk) [Results of Operations for the Three and Nine Months Ended September 30, 2022 and 2021](index=33&type=section&id=Results%20of%20Operations%20for%20the%20Three%20and%20Nine%20Months%20Ended%20September%2030%2C%202022%20and%202021) This section analyzes the company's financial results, including revenues, operating income, and net income, for the specified periods Results of Operations (Three Months Ended September 30, in thousands) | | 3M Ended Sep 30, 2022 | 3M Ended Sep 30, 2021 | Change ($) | Change (%) | | :--------------------- | :-------------------- | :-------------------- | :--------- | :--------- | | Sales Revenues | $646,246 | $597,139 | $49,107 | 8.2% | | Marketing Revenues | $404,849 | $331,621 | $73,228 | 22.1% | | Total Revenues | $1,051,095 | $928,760 | $122,335 | 13.2% | | Sales Operating Income | $31,765 | $51,906 | $(20,141) | (38.8)% | | Marketing Operating Income | $15,077 | $13,696 | $1,381 | 10.1% | | Total Operating Income | $46,842 | $65,602 | $(18,760) | (28.6)% | | Interest Expense, net | $23,557 | $36,490 | $(12,933) | (35.4)% | | Provision for Income Taxes | $1,158 | $8,276 | $(7,118) | (86.0)% | | Net Income | $23,227 | $24,327 | $(1,100) | (4.5)% | | Adjusted EBITDA | $118,268 | $133,756 | $(15,488) | (11.6)% | Results of Operations (Nine Months Ended September 30, in thousands) | | 9M Ended Sep 30, 2022 | 9M Ended Sep 30, 2021 | Change ($) | Change (%) | | :--------------------- | :-------------------- | :-------------------- | :--------- | :--------- | | Sales Revenues | $1,842,347 | $1,693,107 | $149,240 | 8.8% | | Marketing Revenues | $1,104,632 | $876,628 | $228,004 | 26.0% | | Total Revenues | $2,946,979 | $2,569,735 | $377,244 | 14.7% | | Sales Operating Income | $65,915 | $131,727 | $(65,812) | (50.0)% | | Marketing Operating Income | $32,217 | $13,910 | $18,307 | 131.6% | | Total Operating Income | $98,132 | $145,637 | $(47,505) | (32.6)% | | Interest Expense, net | $63,628 | $104,544 | $(40,916) | (39.1)% | | Provision for Income Taxes | $11,523 | $16,582 | $(5,059) | (30.5)% | | Net Income | $44,437 | $29,535 | $14,902 | 50.5% | | Adjusted EBITDA | $323,329 | $367,155 | $(43,826) | (11.9)% | - Sales segment organic revenues increased by **$42.5 million** (3M) and **$68.9 million** (9M) due to growth in retail merchandising and international businesses, despite unfavorable foreign exchange rates[163](index=163&type=chunk)[179](index=179&type=chunk) - Marketing segment organic revenues increased by **$67.9 million** (3M) and **$216.5 million** (9M), primarily driven by the recovery of in-store product demonstration and sampling services[164](index=164&type=chunk)[180](index=180&type=chunk) - Cost of revenues as a percentage of revenues increased for both periods due to changes in revenue mix, COVID-19 recoveries, and inflationary impacts on recruiting, wages, and employee benefits[165](index=165&type=chunk)[181](index=181&type=chunk) - The decrease in sales segment operating income was due to revenue mix shift, ongoing investment, and inflationary impact on expenses, while the increase in marketing segment operating income was due to revenue growth[168](index=168&type=chunk)[169](index=169&type=chunk)[184](index=184&type=chunk)[186](index=186&type=chunk) [Non-GAAP Financial Measures](index=38&type=section&id=Non-GAAP%20Financial%20Measures) This section reconciles non-GAAP financial measures like Adjusted Net Income and Adjusted EBITDA to GAAP equivalents - **Adjusted Net Income and Adjusted EBITDA** are **non-GAAP measures** used to assess financial performance by excluding items not indicative of ongoing operations, such as impairment, amortization of intangibles, equity-based compensation, changes in warrant liability fair value, acquisition-related expenses, and COVID-19 costs[195](index=195&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) Reconciliation of Net Income to Adjusted Net Income and Adjusted EBITDA (in thousands) | | 3M Ended Sep 30, 2022 | 3M Ended Sep 30, 2021 | 9M Ended Sep 30, 2022 | 9M Ended Sep 30, 2021 | | :--------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net income | $23,227 | $24,327 | $44,437 | $29,535 | | Adjusted Net Income | $62,682 | $59,101 | $152,541 | $146,762 | | Adjusted EBITDA | $118,268 | $133,756 | $323,329 | $367,155 | Segment Adjusted EBITDA (in thousands) | Sales Segment | 3M Ended Sep 30, 2022 | 3M Ended Sep 30, 2021 | 9M Ended Sep 30, 2022 | 9M Ended Sep 30, 2021 | | :--------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Operating income | $31,765 | $51,906 | $65,915 | $131,727 | | Sales Segment Adjusted EBITDA | $76,172 | $95,199 | $216,158 | $268,798 | | Marketing Segment | | | | | | Operating income | $15,077 | $13,696 | $32,217 | $13,910 | | Marketing Segment Adjusted EBITDA | $42,096 | $38,557 | $107,171 | $98,357 | [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's cash flows, debt facilities, and capital structure to assess its financial flexibility - **Principal liquidity sources** are cash flows from operations, Revolving Credit Facility, and other debt, while **principal uses** are operating expenses, working capital, acquisitions, interest, and debt repayment[207](index=207&type=chunk) Condensed Consolidated Statements of Cash Flows (in thousands) | | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $81,950 | $101,068 | | Net cash used in investing activities | $(103,062) | $(66,152) | | Net cash used in financing activities | $(32,920) | $(68,999) | | Net effect of foreign currency fluctuations on cash | $(12,311) | $(1,476) | | Net change in cash, cash equivalents and restricted cash | $(66,343) | $(35,559) | - Operating cash flow decreased in **9M 2022** primarily due to ongoing investment and inflationary impact on recruiting, wage, and employee benefit expenses[210](index=210&type=chunk) - Investing activities in **9M 2022** primarily included **$74.4 million for business purchases** and **$30.0 million for property and equipment**[211](index=211&type=chunk) - Financing activities in **9M 2022** were mainly payments of **contingent consideration and holdbacks ($31.7 million)** and **debt principal repayment ($9.9 million)**, partially offset by stock issuance proceeds and noncontrolling interest contributions[212](index=212&type=chunk) - The **Senior Secured Credit Facilities** include a **$400.0 million Revolving Credit Facility** (maturing Oct 2025) and a **$1.325 billion Term Loan Facility** (maturing Oct 2027), with **$400.0 million unused capacity** available under the **Revolving Credit Facility** as of Sep 30, 2022[214](index=214&type=chunk)[215](index=215&type=chunk)[223](index=223&type=chunk) - The Company also has **$775.0 million in 6.50% Senior Secured Notes due 2028**, which are redeemable under certain conditions and subject to restrictive covenants[230](index=230&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk) - As of September 30, 2022, **$71.6 million of cash and cash equivalents** were held by **foreign subsidiaries** and **$21.6 million by foreign branches**, with the Company asserting **indefinite reinvestment** for most foreign earnings, except for **Canada**, where a **$2.5 million deferred tax liability for withholding tax** was recorded[241](index=241&type=chunk)[242](index=242&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to foreign currency and interest rate risks, their management, and estimated financial impacts - The Company's foreign currency risk primarily stems from operations in Europe and Canada, with functional currencies including Canadian dollars, British pounds, and euros, and financial derivative instruments are used to hedge these risks[248](index=248&type=chunk)[249](index=249&type=chunk) - A hypothetical **10% unfavorable change in exchange rates** relative to the U.S. dollar would have decreased consolidated income before taxes by approximately **$2.5 million** for the nine months ended September 30, 2022[249](index=249&type=chunk) - Interest rate risk is managed through **interest rate cap agreements** on variable rate debt (Term Loan Facility, Revolving Credit Facility), with the Company having interest rate cap contracts on an additional **$650.0 million notional value** as of September 30, 2022[250](index=250&type=chunk)[251](index=251&type=chunk) - A **one-eighth percentage point increase** in the weighted average interest rate above the floor would have increased interest expense by approximately **$0.7 million** for the nine months ended September 30, 2022[251](index=251&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2022. No material changes in internal control over financial reporting occurred during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2022, ensuring timely and accurate reporting of information[254](index=254&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2022[255](index=255&type=chunk) [PART II—OTHER INFORMATION](index=48&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, and other disclosures [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) This section outlines the company's legal matters, including employment class actions and the 'Take 5 Matter,' and potential liabilities - The Company is involved in various legal matters, including **employment-related class actions** concerning wage and hour violations under the U.S. Fair Labor Standards Act and California's Labor Code[257](index=257&type=chunk)[258](index=258&type=chunk) - The **'Take 5 Matter'** involves **voluntary disclosure of misconduct** to the **United States Attorney's Office and FBI**, with ongoing cooperation in investigations[259](index=259&type=chunk)[260](index=260&type=chunk) - In **October 2022**, an **arbitrator ruled in the Company's favor** in arbitration proceedings against the **Take 5 Sellers**, who had alleged breach of contract and defamation[261](index=261&type=chunk)[263](index=263&type=chunk) - Additional litigation or governmental investigations related to the Take 5 Matter may expose the Company to **potential liability beyond current refund offers**, which may **not be fully covered by insurance**[264](index=264&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks to the company's business, including pandemic impacts, market dynamics, retailer relations, technology, international operations, legal, and financial risks - The **COVID-19 pandemic** continues to pose significant risks, including **adverse effects on business operations, client spending, consumer behavior**, and the company's ability to **adapt and retain talent**[269](index=269&type=chunk)[271](index=271&type=chunk) - **Market-driven wage increases, changes in labor laws, and inflation** could adversely affect operating results by **increasing labor costs and impacting margins**[272](index=272&type=chunk)[276](index=276&type=chunk) - **Reliance on a limited number of national retailers** and their **evolving strategies** (e.g., **private labels, exclusive service providers**) could **reduce demand for services** and **negatively impact revenues**[277](index=277&type=chunk) - The company faces risks from **consolidation in the consumer goods and retail industries**, which could lead to **reduced demand for services and pricing pressure**[279](index=279&type=chunk) - **Inability to adapt to significant technological changes**, **develop relevant omni-channel services**, or **protect intellectual property** could adversely affect business and competitive position[285](index=285&type=chunk)[288](index=288&type=chunk)[333](index=333&type=chunk) - **International operations** expose the company to risks such as **foreign currency fluctuations**, compliance with diverse foreign laws, **political instability (e.g., Russia-Ukraine conflict)**, and difficulties in enforcing contracts[306](index=306&type=chunk)[309](index=309&type=chunk)[341](index=341&type=chunk) - The **'Take 5 Matter'** continues to present risks of **additional litigation, governmental investigations, reputational harm, and substantial costs**[322](index=322&type=chunk)[324](index=324&type=chunk) - **Substantial indebtedness ($2.1 billion as of Sep 30, 2022)** could adversely affect financial health, restrict activities, and increase debt service obligations, especially with **variable interest rates** and the **upcoming LIBOR transition**[364](index=364&type=chunk)[370](index=370&type=chunk)[371](index=371&type=chunk) - The company is **controlled by Topco, Advantage Sponsors, and CP Sponsor**, whose interests may conflict with other stockholders, and as a **controlled company**, it may rely on exemptions from Nasdaq corporate governance requirements[347](index=347&type=chunk)[348](index=348&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=73&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - **No unregistered sales of equity securities or use of proceeds** were reported[382](index=382&type=chunk) [Item 3. Defaults Upon Senior Securities](index=73&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities during the reporting period - **No defaults upon senior securities** were reported[382](index=382&type=chunk) [Item 4. Mine Safety Disclosures](index=73&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section confirms that there are no mine safety disclosures to report - **No mine safety disclosures** were reported[382](index=382&type=chunk) [Item 5. Other Information](index=74&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - **No other information** was reported[384](index=384&type=chunk) [Item 6. Exhibits](index=74&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report, including certifications from the CEO and CFO, and Inline XBRL documents - The report includes **certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)** and various **Inline XBRL taxonomy extension documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)**[385](index=385&type=chunk) [Signatures](index=75&type=section&id=Signatures) This section provides the official signatures of the Chief Executive Officer and Chief Financial Officer - The report is signed by **Jill Griffin, Chief Executive Officer**, and **Brian Stevens, Chief Financial Officer and Chief Operating Officer**, on **November 9, 2022**[387](index=387&type=chunk)[388](index=388&type=chunk)

PART I—FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2021, and 2020 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a summary of the company's financial position as of March 31, 2021, and December 31, 2020 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $156,351 | $204,301 | | Total current assets | $887,191 | $899,751 | | Goodwill | $2,173,924 | $2,163,339 | | Other intangible assets, net | $2,412,136 | $2,452,796 | | **Total assets** | **$5,726,170** | **$5,777,492** | | **Liabilities & Equity** | | | | Total current liabilities | $522,139 | $574,989 | | Long-term debt, net | $2,028,090 | $2,029,328 | | **Total liabilities** | **$3,203,353** | **$3,258,703** | | **Total stockholders' equity** | **$2,520,944** | **$2,518,789** | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This section details the company's financial performance for the three months ended March 31, 2021, and 2020 Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Revenues | $791,021 | $879,396 | | Cost of revenues | $653,339 | $746,693 | | Operating income | $37,588 | $31,438 | | Interest expense, net | $30,865 | $51,794 | | Net loss | $(546) | $(21,723) | | Net loss attributable to stockholders | $(116) | $(21,708) | | Basic and diluted net loss per share | $(0.00) | $(0.11) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2021, and 2020 Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $29,887 | $50,965 | | Net cash used in investing activities | $(19,281) | $(59,842) | | Net cash (used in) provided by financing activities | $(54,514) | $71,152 | | Net change in cash, cash equivalents and restricted cash | $(46,142) | $55,392 | [Notes to the Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's accounting policies, significant transactions, and financial positions - The company, a provider of outsourced solutions to consumer goods companies and retailers, completed a merger on October 28, 2020, with Conyers Park II Acquisition Corp., which was renamed Advantage Solutions Inc., making Legacy Advantage a wholly owned subsidiary[21](index=21&type=chunk)[22](index=22&type=chunk) - In Q1 2021, the company acquired two sales agencies for an aggregate purchase price of **$18.2 million**, including **$14.0 million in cash**, **$2.7 million in contingent consideration**, and **$1.4 million in holdbacks**, adding **$11.5 million** to goodwill[36](index=36&type=chunk)[37](index=37&type=chunk)[39](index=39&type=chunk) - As of March 31, 2021, the company had **$2.1 billion** in total debt, primarily consisting of a **$1.32 billion** New Term Loan Facility and **$775 million** in Notes[53](index=53&type=chunk) - The company is involved in ongoing legal matters related to its acquisition of Take 5 Media Group, including a voluntary disclosure to the U.S. Attorney's Office and FBI, and arbitration proceedings with the sellers of Take 5[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) - In Q1 2021, the company recognized **$8.7 million** in stock-based compensation expense related to its 2020 Incentive Award Plan, under which it granted Performance Stock Units (PSUs) and Restricted Stock Units (RSUs)[90](index=90&type=chunk)[91](index=91&type=chunk)[93](index=93&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for Q1 2021, highlighting a 10.0% decrease in revenue to $791.0 million, primarily due to COVID-19's negative impact on the marketing segment's in-store sampling services, partially offset by a 5.2% revenue increase in the sales segment, driven by at-home consumption trends Q1 2021 vs Q1 2020 Financial Performance | Metric | Q1 2021 | Q1 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $791.0M | $879.4M | (10.0)% | | Operating Income | $37.6M | $31.4M | 19.6% | | Net Loss | $(0.5)M | $(21.7)M | 97.5% | | Adjusted EBITDA | $111.4M | $106.4M | 4.8% | - The COVID-19 pandemic had a mixed impact, causing a **30.9% revenue decline** in the marketing segment due to suspended in-store sampling services, while the sales segment saw a **5.2% revenue increase** from higher at-home food consumption and e-commerce growth[116](index=116&type=chunk)[117](index=117&type=chunk) - In October 2020, the company completed a business combination, repaying **$3.3 billion** of old debt and refinancing with new facilities, leading to a **$20.9 million (40.4%) decrease** in net interest expense for Q1 2021 compared to Q1 2020[112](index=112&type=chunk)[158](index=158&type=chunk) Revenues by Segment (in thousands) | Segment | Q1 2021 | Q1 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sales | $534,324 | $507,798 | $26,526 | 5.2% | | Marketing | $256,697 | $371,598 | $(114,901) | (30.9)% | | **Total** | **$791,021** | **$879,396** | **$(88,375)** | **(10.0)%** | [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company identifies its primary market risks as foreign currency fluctuations, equity price risk from its warrant liability, and interest rate risk on its variable-rate debt, actively managing these risks using derivative instruments - The company is exposed to foreign currency risk, primarily from operations in Europe and Canada, where a hypothetical **10% adverse change** in exchange rates would have decreased pre-tax income by approximately **$0.1 million** in Q1 2021[216](index=216&type=chunk)[217](index=217&type=chunk) - Interest rate risk is managed through derivative financial instruments, with the company holding interest rate cap agreements on **$2.2 billion** of notional principal as of March 31, 2021, where a **0.125% increase** in the average interest rate would have increased Q1 2021 interest expense by **$0.2 million**[220](index=220&type=chunk)[221](index=221&type=chunk)[223](index=223&type=chunk) - The company faces equity price risk from its **7,333,333 private placement warrants**, recorded as a liability at fair value, where a hypothetical **10% decrease** in the company's stock price would result in a **$5.6 million unrealized gain** from the change in the warrant liability's fair value[218](index=218&type=chunk) [Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) The company reports that material weaknesses in its internal control over financial reporting, first identified in relation to the Take 5 Matter and later regarding warrant accounting, persisted as of March 31, 2021, leading to a conclusion that disclosure controls were not effective, though financial statements are asserted to be fairly presented - Material weaknesses in internal control over financial reporting continue to exist as of March 31, 2021, stemming from issues identified in the Take 5 Matter and a recent re-evaluation of warrant accounting[225](index=225&type=chunk)[228](index=228&type=chunk) - Specific weaknesses include ineffective controls over acquisition due diligence, reliance on IT data for revenue recognition, the whistleblower complaint process, and the accounting evaluation of complex instruments like warrants[225](index=225&type=chunk)[228](index=228&type=chunk) - A remediation plan is in progress, focusing on enhancing due diligence, improving internal reporting controls, strengthening the whistleblower process, and implementing controls for complex accounting, with remediation not considered complete until controls are implemented and tested over a sustained period[230](index=230&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk) - Due to the material weaknesses, the CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2021[234](index=234&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal matters, including employment-related class action lawsuits in California concerning alleged wage and hour violations, and multiple proceedings related to the Take 5 Matter, including a voluntary disclosure to the USAO and FBI, and ongoing arbitration with the former owners of Take 5 - The company is defending against several purported class action lawsuits in California related to alleged wage and hour violations under the California Labor Code[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk) - In connection with the Take 5 Matter, the company voluntarily disclosed misconduct to the United States Attorney's Office and the FBI and is cooperating with investigations[242](index=242&type=chunk) - The company is in arbitration with the sellers of Take 5, seeking damages for breach of contract and fraud, while the sellers are seeking unpaid earn-out payments and damages for defamation, with the arbitration hearing scheduled for Q4 2021[244](index=244&type=chunk) [Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) The company states that there have been no material changes to the risk factors previously disclosed in its 2020 Annual Report on Form 10-K/A, though the known and unknown impacts of the COVID-19 pandemic could amplify the disclosed risks - No material changes have been made to the risk factors disclosed in the 2020 Annual Report on Form 10-K/A[246](index=246&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the reporting period - None[247](index=247&type=chunk) [Defaults Upon Senior Securities](index=51&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the reporting period - None[247](index=247&type=chunk) [Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable as the company has no mine safety disclosures to report - None[247](index=247&type=chunk) [Other Information](index=51&type=section&id=Item%205.%20Other%20Information) The company reported no other information required to be disclosed in this item - None[247](index=247&type=chunk) [Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, which include certifications by the CEO and CFO pursuant to the Securities Exchange Act of 1934 and various Inline XBRL data files - The exhibits filed with the report include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (101 series)[249](index=249&type=chunk)[250](index=250&type=chunk)

PART I [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements.) The SPAC reported **$454.7 million** in total assets as of September 30, 2020, a **$4.1 million** net loss for the nine-month period, and faces going concern uncertainty due to its business combination deadline [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets) Total assets reached **$454.7 million** as of September 30, 2020, primarily comprising **$453.7 million** in marketable securities, while total liabilities increased to **$20.6 million** Condensed Balance Sheet Data (in thousands) | Account | Sep 30, 2020 (Unaudited) | Dec 31, 2019 (Audited) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $515 | $951 | | Marketable securities held in Trust Account | $453,742 | $452,817 | | **Total Assets** | **$454,690** | **$454,110** | | **Liabilities & Equity** | | | | Total current liabilities | $4,869 | $228 | | Deferred underwriting commissions | $15,750 | $15,750 | | **Total Liabilities** | **$20,619** | **$15,978** | | Class A common stock subject to possible redemption | $429,070 | $433,132 | | **Total Stockholders' Equity** | **$5,000** | **$5,000** | [Condensed Statements of Operations](index=5&type=section&id=Condensed%20Statements%20of%20Operations) The company reported a **$5.0 million** net loss for the three months ended September 30, 2020, a significant decline from **$1.2 million** net income in the prior year, primarily due to increased general and administrative expenses and reduced interest income Statement of Operations Highlights (in thousands) | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | | General and administrative expenses | $4,968 | $138 | $5,290 | | Interest income earned on Trust Account | $34 | $1,697 | $1,705 | | **Net Income / (Loss)** | **($4,980)** | **$1,163** | **($4,061)** | [Condensed Statements of Cash Flows](index=7&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Net cash used in operating activities totaled **$1.2 million** for the nine months ended September 30, 2020, leading to a **$0.4 million** decrease in cash and cash equivalents, ending at **$0.5 million** Cash Flow Summary (Nine Months Ended Sep 30, 2020) | Cash Flow Category | Amount (in thousands) | | :--- | :--- | | Net cash used in operating activities | ($1,213) | | Net cash provided by investing activities | $777 | | Net cash provided by financing activities | $0 | | **Net change in cash and cash equivalents** | **($436)** | | Cash and cash equivalents at end of period | $515 | - The company entered a definitive merger agreement with Advantage Solutions Inc. on September 7, 2020, supported by a **$2.5 billion** debt commitment and a **$700 million** private placement[41](index=41&type=chunk)[47](index=47&type=chunk)[51](index=51&type=chunk) - Management identified substantial doubt about the company's ability to continue as a going concern due to liquidity and the mandatory liquidation deadline of July 22, 2021[40](index=40&type=chunk) - Subsequent to quarter-end, **$1.0 million** was withdrawn from trust account interest for working capital[99](index=99&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) The blank check company reported a **$5.0 million** net loss for Q3 2020 and a **$3.9 million** working capital deficit, raising substantial doubt about its going concern ability due to the July 22, 2021 liquidation deadline and **$15.75 million** in deferred underwriting fees - The company, a blank check entity, completed its IPO on July 22, 2019, raising **$450 million**, and must finalize a business combination by July 22, 2021, or face liquidation[102](index=102&type=chunk)[103](index=103&type=chunk)[105](index=105&type=chunk) - Liquidity concerns and the mandatory July 22, 2021 liquidation date raise substantial doubt about the company's ability to continue as a going concern[115](index=115&type=chunk) Results of Operations (Three Months Ended Sep 30) | Period | Net Income / (Loss) | Key Drivers | | :--- | :--- | :--- | | **2020** | ($4,980,376) | $4.97M in G&A costs, minimal interest income | | **2019** | $1,163,222 | $1.7M in interest income, low G&A costs | - A deferred underwriting commission of approximately **$15.75 million** is payable from the Trust Account only upon completion of a business combination[117](index=117&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the company is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company under Rule 12b-2 of the Exchange Act, the company is not required to provide market risk disclosures[129](index=129&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2020[130](index=130&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter[132](index=132&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings - No legal proceedings to report[133](index=133&type=chunk) [Item 1A. Risk Factors.](index=26&type=section&id=Item%201A.%20Risk%20Factors.) A new risk factor was added regarding the potential for negative interest rates on trust account securities, which could reduce the per-share redemption amount below **$10.00** - A new risk factor highlights the possibility of negative interest rates on trust account treasury obligations, potentially reducing the per-share redemption amount below **$10.00**[135](index=135&type=chunk)[136](index=136&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds%20from%20Registered%20Securities) The company reported unregistered sales of Class B common stock and **7,333,333** private placement warrants for **$11.0 million**, with **$450 million** from IPO and private placement proceeds placed in the Trust Account - The Sponsor purchased **7,333,333** Private Placement Warrants for **$11.0 million** in a private placement[138](index=138&type=chunk) - Net proceeds of **$450 million** from the IPO and Private Placement Warrants were placed in the Trust Account, with no change in planned use[141](index=141&type=chunk)[142](index=142&type=chunk) [Item 3. Defaults Upon Senior Securities](index=27&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[142](index=142&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[142](index=142&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) The company reported no other information - None[142](index=142&type=chunk) [Item 6. Exhibits.](index=28&type=section&id=Item%206.%20Exhibits.) The report includes CEO and CFO certifications as required by Sarbanes-Oxley, along with XBRL data files - Exhibits include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and various XBRL documents[144](index=144&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to CONYERS PARK II ACQUISITION CORP. (Exact name of registrant as specified in its charter) | --- | --- | --- | |----------------------------------------------------------- ...