Advantage Solutions(ADV) - 2023 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Presents Advantage Solutions Inc.'s unaudited consolidated financial statements and related notes on key accounting areas Item 1. Financial Statements (Unaudited) Presents Advantage Solutions Inc.'s unaudited consolidated financial statements, including balance sheets, income, equity, cash flows, and notes Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets | (in thousands) | June 30, 2023 | December 31, 2022 | |:---------------|:--------------|:------------------| | ASSETS | | | | Total current assets | $1,120,139 | $1,157,008 | | Total assets | $4,123,099 | $4,262,371 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | $595,523 | $600,701 | | Total liabilities | $2,921,709 | $3,032,901 | | Total stockholders' equity | $1,197,606 | $1,225,724 | | Total liabilities, redeemable noncontrolling interest, and stockholders' equity | $4,123,099 | $4,262,371 | Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income | (in thousands, except share and per share data) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:------------------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Revenues | $1,037,055 | $981,076 | $2,049,038 | $1,895,884 | | Operating income | $22,271 | $28,266 | $14,015 | $51,290 | | Net (loss) income | $(7,846) | $3,676 | $(55,524) | $21,210 | | Net (loss) income attributable to stockholders of Advantage Solutions Inc. | $(8,762) | $3,371 | $(56,349) | $22,336 | | Basic (loss) earnings per common share | $(0.03) | $0.01 | $(0.17) | $0.07 | | Diluted (loss) earnings per common share | $(0.03) | $0.01 | $(0.17) | $0.07 | Condensed Consolidated Statements of Stockholders' Equity - Total stockholders' equity decreased from $1.226 billion at January 1, 2023, to $1.198 billion at June 30, 2023, primarily due to a net loss of $56.3 million and equity-based compensation adjustments, partially offset by stock-based compensation expense and foreign currency translation adjustments[13] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows | (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---------------|:-------------------------------|:-------------------------------| | Net cash provided by operating activities | $104,990 | $29,992 | | Net cash used in investing activities | $(5,789) | $(89,144) | | Net cash (used in) provided by financing activities | $(57,075) | $18,781 | | Net change in cash, cash equivalents and restricted cash | $43,620 | $(46,974) | | Cash, cash equivalents and restricted cash, end of period | $182,152 | $133,663 | Notes to the Condensed Consolidated Financial Statements 1. Organization and Significant Accounting Policies - 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 under symbols "ADV" and "ADVWW" respectively[20] - Revenue is recognized when control of promised goods or services is transferred to the client, primarily over time as services are consumed. Revenues are disaggregated by sales and marketing segments, further broken down into brand-centric and retail-centric services[23][24][26] 1. Organization and Significant Accounting Policies | (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------| | Sales brand-centric services | $346,763 | $332,874 | $681,433 | $662,230 | | Sales retail-centric services | $253,065 | $271,258 | $531,739 | $533,871 | | Total sales revenues | $599,828 | $604,132 | $1,213,172 | $1,196,101 | | Marketing brand-centric services | $135,312 | $136,340 | $258,744 | $249,914 | | Marketing retail-centric services | $301,915 | $240,604 | $577,122 | $449,869 | | Total marketing revenues | $437,227 | $376,944 | $835,866 | $699,783 | | Total revenues | $1,037,055 | $981,076 | $2,049,038 | $1,895,884 | 2. Divestitures and Acquisitions - The Company recognized a loss on the sale of businesses of $1.1 million and $17.7 million for the three and six months ended June 30, 2023, respectively. During Q2 2023, a portion of the sales reporting unit was sold for $12.8 million in proceeds[28] - In the first half of 2022, the Company acquired one sales and two marketing businesses for an aggregate purchase price of $68.9 million, including $67.6 million in cash. These acquisitions resulted in $50.6 million in goodwill and $21.2 million in client relationships (amortized over 6 years)[29][31][33] 3. Goodwill and Intangible Assets 3. Goodwill and Intangible Assets | (in thousands) | Sales | Marketing | Total |\n|:---------------|:--------------|:--------------|:--------------|\n| Balance at January 1, 2022 | $1,492,771 | $713,233 | $2,206,004 |\n| Acquisitions | $5,732 | $52,855 | $58,587 |\n| Impairment charge | $(1,275,719) | $(91,804) | $(1,367,523) |\n| Balance at December 31, 2022 | $213,665 | $674,284 | $887,949 |\n| Divestitures | $(1,664) | — | $(1,664) |\n| Balance at June 30, 2023 | $216,002 | $674,284 | $890,286 | - Goodwill increased slightly from $887.9 million at December 31, 2022, to $890.3 million at June 30, 2023, primarily due to foreign exchange translation effects and measurement period adjustments, partially offset by divestitures[36] 3. Goodwill and Intangible Assets | (amounts in thousands) | June 30, 2023 Net Carrying Value | December 31, 2022 Net Carrying Value | |:-----------------------|:---------------------------------|:-------------------------------------| | Finite-lived intangible assets: | | | | Client relationships | $1,050,684 | $1,150,421 | | Trade names | $43,913 | $49,023 | | Developed technology | $2,398 | $3,059 | | Total finite-lived intangible assets | $1,096,995 | $1,202,503 | | Indefinite-lived intangible assets: | | | | Trade names | $695,000 | $695,000 | | Total other intangible assets | $1,791,995 | $1,897,503 | - Amortization of intangible assets was $49.5 million for Q2 2023 (down from $50.7 million in Q2 2022) and $99.3 million for H1 2023 (down from $100.9 million in H1 2022)[38] 4. Debt 4. Debt | (in thousands) | June 30, 2023 | December 31, 2022 | |:---------------|:--------------|:------------------| | Term Loan Facility | $1,237,479 | $1,298,500 |\n| Notes | $775,000 | $775,000 |\n| Government loans for COVID-19 relief | $5,296 | $4,480 |\n| Other | $2,085 | $1,207 |\n| Total long-term debt | $2,019,860 | $2,079,187 |\n| Less: current portion | $15,522 | $13,991 |\n| Less: debt issuance costs | $38,127 | $42,377 |\n| Long-term debt, net of current portion | $1,966,211 | $2,022,819 | - The Company had $1.2 billion outstanding under the Term Loan Facility (maturing Oct 2027) and $775.0 million under the Notes (maturing Nov 2028). The Term Loan Facility interest rate is Term SOFR + 4.50%, and Notes bear interest at 6.50% per annum[42] - The Company voluntarily repurchased $52.4 million and $54.4 million principal amount of its Term Loan Facility during Q2 and H1 2023, respectively, recognizing a gain of $4.7 million and $5.0 million[44] - As of June 30, 2023, there were no borrowings under the Revolving Credit Facility[45] 5. Fair Value of Financial Instruments 5. Fair Value of Financial Instruments | (in thousands) | June 30, 2023 Fair Value | December 31, 2022 Fair Value | |:---------------|:-------------------------|:-----------------------------| | Assets measured at fair value | | | | Derivative financial instruments | $43,989 | $47,493 | | Liabilities measured at fair value | | | | Warrant liability | $953 | $953 | | Contingent consideration liabilities | $23,057 | $20,334 | - The Company uses interest rate cap and collar agreements to manage interest rate risk, with an aggregate notional value of $650.0 million for caps and $300.0 million for collars as of June 30, 2023. Changes in fair value of these derivatives are recognized in interest expense, net[51] - Contingent consideration liabilities increased to $23.1 million at June 30, 2023, from $20.3 million at the beginning of the period, with a maximum potential payment outcome of $78.0 million[55][56] 6. Related Party Transactions - The Company recognized $1.1 million and $2.0 million in revenues from a client where an officer serves on the board during Q2 and H1 2023, respectively. Accounts receivable from this client were $0.6 million as of June 30, 2023[60] - Revenues from a parent company of an unconsolidated affiliate were $4.5 million (Q2 2023) and $8.3 million (H1 2023)[61] 7. Income Taxes - The effective tax rate for Q2 2023 was 5.0% (down from 26.4% in Q2 2022) and for H1 2023 was 12.7% (down from 32.8% in H1 2022), primarily due to differences in pre-tax income/loss and stock-based compensation shortfalls[62][63] 8. Segments - The Company operates in two reportable segments: sales and marketing, with performance evaluated based on revenues and operating (loss) income[64] 8. Segments | (in thousands) | Sales Q2 2023 | Marketing Q2 2023 | Total Q2 2023 | Sales Q2 2022 | Marketing Q2 2022 | Total Q2 2022 |\n|:---------------|:--------------|:------------------|:--------------|:--------------|:------------------|:--------------|\n| Revenues | $599,828 | $437,227 | $1,037,055 | $604,132 | $376,944 | $981,076 |\n| Operating income | $7,123 | $15,148 | $22,271 | $15,177 | $13,089 | $28,266 |\n\n| (in thousands) | Sales H1 2023 | Marketing H1 2023 | Total H1 2023 | Sales H1 2022 | Marketing H1 2022 | Total H1 2022 |\n|:---------------|:--------------|:------------------|:--------------|:--------------|:------------------|:--------------|\n| Revenues | $1,213,172 | $835,866 | $2,049,038 | $1,196,101 | $699,783 | $1,895,884 |\n| Operating income | $2,977 | $11,038 | $14,015 | $34,150 | $17,140 | $51,290 | 9. Commitments and Contingencies - The Company is involved in various legal matters, including class/representative actions and commercial disputes. The Take 5 Matter, involving past misconduct, resulted in a final arbitration award in the Company's favor in October 2022, and the Company received $1.7 million in insurance proceeds in June 2023[68] 10. Stock-Based Compensation 10. Stock-Based Compensation | (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 |\n|:---------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------|\n| Total share-based compensation before tax | $9,676 | $12,546 | $18,769 | $20,314 |\n| Total share-based compensation expense included in net income | $7,380 | $9,556 | $14,472 | $15,784 | - Performance Restricted Stock Units (PSUs) are subject to revenue and Adjusted EBITDA targets, with vesting over three years. For 2022, PSU EBITDA targets were not met, and PSU Revenues were 83.2% of Target Goals[72][73] - As of June 30, 2023, total unrecognized compensation cost for RSUs was $36.3 million (expected to be amortized over 2.3 years) and for stock options was $9.0 million (expected over 3.9 years)[78][81] 11. Earnings Per Share 11. Earnings Per Share | (in thousands, except share and earnings per share data) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 |\n|:---------------------------------------------------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------|\n| Net (loss) income attributable to stockholders of Advantage Solutions Inc. | $(8,762) | $3,371 | $(56,349) | $22,336 |\n| Weighted average common shares - basic | 324,178,691 | 318,418,746 | 322,665,312 | 318,103,452 |\n| Basic (loss) earnings per common share | $(0.03) | $0.01 | $(0.17) | $0.07 |\n| Diluted (loss) earnings per common share | $(0.03) | $0.01 | $(0.17) | $0.07 | - During periods of net loss, diluted loss per share equals basic loss per share as potential common shares are antidilutive. Warrants and certain stock-based awards were excluded from diluted EPS calculations due to antidilutive effects or unmet performance targets[83][86] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operational results, analyzing performance, non-GAAP measures, liquidity, and capital Executive Overview - Advantage Solutions Inc. is a leading business solutions provider to consumer goods manufacturers and retailers, offering essential sales and marketing services like headquarter sales, retail merchandising, in-store sampling, digital commerce, and shopper marketing[90] - The Company operates through two segments: sales (59.2% of H1 2023 revenues) focusing on headquarter sales representation and in-store merchandising, and marketing (40.8% of H1 2023 revenues) specializing in retail experiential marketing and specialized agency services[91][92] Impacts of the COVID-19 Pandemic - Client spending reductions due to the COVID-19 pandemic impacted all services and markets, with in-store sampling and demonstration services being the most affected, though they continued to improve through Q2 2023[94] Summary Summary | Financial Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change ($) | Change (%) |\n|:-----------------|:---------------------------------|:---------------------------------|:-----------|:-----------|\n| Revenues | $1,037.1 million | $981.1 million | $56.0 million | 5.7% |\n| Operating income | $22.3 million | $28.3 million | $(6.0) million | (21.2)% |\n| Net loss | $7.8 million | $3.7 million (Net Income) | $11.5 million | 313.4% |\n| Adjusted Net Income | $36.5 million | $40.7 million | $(4.2) million | (10.4)% |\n| Adjusted EBITDA | $104.2 million | $108.3 million | $(4.1) million | (3.8)% |\n\n| Financial Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change ($) | Change (%) |\n|:-----------------|:-------------------------------|:-------------------------------|:-----------|:-----------|\n| Revenues | $2,049.0 million | $1,895.9 million | $153.2 million | 8.1% |\n| Operating income | $14.0 million | $51.3 million | $(37.3) million | (72.7)% |\n| Net loss | $55.5 million | $21.2 million (Net Income) | $76.7 million | 361.8% |\n| Adjusted Net Income | $50.3 million | $89.9 million | $(39.6) million | (44.1)% |\n| Adjusted EBITDA | $196.3 million | $205.1 million | $(8.8) million | (4.3)% | Factors Affecting Our Business and Financial Reporting - The Company's strategy includes generating organic growth by expanding client relationships, winning new clients, pursuing channel expansion, enhancing digital solutions, and developing its international platform[96] - Acquisitions are a key growth driver, often including contingent consideration arrangements based on financial performance thresholds, which are reviewed and assessed quarterly for fair value adjustments[96][98] - Financial results are impacted by amortization of significant intangible assets from acquisitions, foreign exchange fluctuations (primarily CAD, GBP, EUR), and seasonality, with Q4 typically generating higher revenues[98] How We Assess the Performance of Our Business - Revenue is disaggregated into organic and acquired revenues. Organic revenues exclude impacts of acquisitions and divestitures, while acquired revenues are generally from businesses within 12 months of acquisition with contingent consideration[100][102][103] - Cost of revenues includes fixed and variable expenses for personnel and project-related costs, subject to inflationary pressures and changes in revenue mix. Selling, general, and administrative expenses include corporate salaries, IT, professional fees, and acquisition-related costs[106][107] - Other (income) expenses include non-cash fair value adjustments to warrant liability. Depreciation and amortization primarily relate to acquired intangible assets and property/equipment[110][112][113] Adjusted Net Income - Adjusted Net Income is a non-GAAP measure used to evaluate business performance by excluding non-operating, unusual, or infrequent items, such as amortization of intangibles, equity-based compensation, changes in warrant liability fair value, and acquisition-related expenses[117][118] Adjusted EBITDA and Adjusted EBITDA by Segment - Adjusted EBITDA is a non-GAAP measure used to assess financial performance, adjusting for interest, taxes, depreciation, amortization, equity-based compensation, and other non-recurring or non-cash items to provide a clearer view of ongoing operating performance[119][120] Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022 Comparison of the Three Months Ended June 30, 2023 and 2022 Comparison of the Three Months Ended June 30, 2023 and 2022 | (amounts in thousands) | Q2 2023 | Q2 2022 | Change ($) | Change (%) |\n|:-----------------------|:------------|:------------|:------------|:------------|\n| Total Revenues | $1,037,055 | $981,076 | $55,979 | 5.7% |\n| Sales Segment Revenues | $599,828 | $604,132 | $(4,304) | (0.7)% |\n| Marketing Segment Revenues | $437,227 | $376,944 | $60,283 | 16.0% | - Total revenues increased by 5.7% to $1,037.1 million. Excluding divestitures and foreign exchange, revenues increased 7.7%. Marketing segment revenues grew by 16.0% due to in-store sampling and demonstration services, while sales segment revenues decreased by 0.7% due to divestitures and an intentional client exit, partially offset by retail merchandising growth[124][125][126][128] - Cost of revenues as a percentage of revenues increased to 87.2% (from 85.8%) due to inflationary pressures and revenue mix. Operating income decreased by 21.2% to $22.3 million, with sales segment operating income down 53.1% and marketing segment up 15.7%[129][132][133] - Net loss increased to $7.8 million (from net income of $3.7 million) primarily due to decreased operating income and increased interest expense, net, which rose by 8.1% to $30.5 million due to higher interest rates[135][139] Comparison of the Three Months Ended June 30, 2023 and 2022 | (amounts in thousands) | Q2 2023 | Q2 2022 | Change ($) | Change (%) |\n|:-----------------------|:------------|:------------|:------------|:------------|\n| Total Adjusted EBITDA | $104,212 | $108,322 | $(4,110) | (3.8)% |\n| Sales Segment Adjusted EBITDA | $63,678 | $71,753 | $(8,075) | (11.3)% |\n| Marketing Segment Adjusted EBITDA | $40,534 | $36,569 | $3,965 | 10.8% | Comparison of the Six Months Ended June 30, 2023 and 2022 Comparison of the Six Months Ended June 30, 2023 and 2022 | (amounts in thousands) | H1 2023 | H1 2022 | Change ($) | Change (%) |\n|:-----------------------|:--------------|:--------------|:--------------|:------------|\n| Total Revenues | $2,049,038 | $1,895,884 | $153,154 | 8.1% |\n| Sales Segment Revenues | $1,213,172 | $1,196,101 | $17,071 | 1.4% |\n| Marketing Segment Revenues | $835,866 | $699,783 | $136,083 | 19.4% | - Total revenues increased by 8.1% to $2,049.0 million. Excluding divestitures and foreign exchange, revenues increased 9.3%. Marketing segment revenues grew by 19.4% due to in-store sampling and demonstration services, while sales segment revenues increased by 1.4% due to retail merchandising growth and European joint venture, partially offset by divestitures and an intentional client exit[142][143][145] - Cost of revenues as a percentage of revenues increased to 87.5% (from 85.9%) due to inflationary pressures and revenue mix. Operating income decreased by 72.7% to $14.0 million, primarily due to one-time charges in SG&A, partially offset by recovery from Take 5[146][147][149] - Net loss increased to $55.5 million (from net income of $21.2 million) driven by decreased operating income and a significant 93.8% increase in interest expense, net, to $77.7 million due to higher interest rates[151][154] Comparison of the Six Months Ended June 30, 2023 and 2022 | (amounts in thousands) | H1 2023 | H1 2022 | Change ($) | Change (%) |\n|:-----------------------|:------------|:------------|:------------|:------------|\n| Total Adjusted EBITDA | $196,282 | $205,061 | $(8,779) | (4.3)% |\n| Sales Segment Adjusted EBITDA | $129,517 | $139,986 | $(10,469) | (7.5)% |\n| Marketing Segment Adjusted EBITDA | $66,765 | $65,075 | $1,690 | 2.6% | Non-GAAP Financial Measures - Adjusted Net Income and Adjusted EBITDA are non-GAAP measures used by management to assess financial performance by excluding items not indicative of ongoing operations or that are unusual/infrequent. These measures are also used for debt covenants[158][160][161] Non-GAAP Financial Measures | (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 |\n|:---------------|:---------------------------------|:---------------------------------|:-------------------------------|:-------------------------------|\n| Net (loss) income | $(7,846) | $3,676 | $(55,524) | $21,210 |\n| Adjusted Net Income | $36,501 | $40,744 | $50,274 | $89,859 |\n| Adjusted EBITDA | $104,212 | $108,322 | $196,282 | $205,061 | Liquidity and Capital Resources - Principal liquidity sources are cash flows from operations, Revolving Credit Facility, and other debt. Primary uses of cash include operating expenses, working capital, acquisitions, interest, and debt repayment[169] Cash Flows Cash Flows | (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 |\n|:---------------|:-------------------------------|:-------------------------------|\n| Net cash provided by operating activities | $104,990 | $29,992 |\n| Net cash used in investing activities | $(5,789) | $(89,144) |\n| Net cash (used in) provided by financing activities | $(57,075) | $18,781 |\n| Net change in cash, cash equivalents and restricted cash | $43,620 | $(46,974) | - Net cash from operating activities significantly increased to $105.0 million in H1 2023 (from $30.0 million in H1 2022), primarily due to increased working capital requirements in the prior period. Net cash used in investing activities decreased to $5.8 million (from $89.1 million) due to fewer business acquisitions[172][173] - Net cash used in financing activities was $57.1 million in H1 2023 (compared to $18.8 million provided in H1 2022), mainly due to $49.4 million in Term Loan Facility debt repurchases and principal payments[174] Description of Credit Facilities - The Company has Senior Secured Credit Facilities, including a $500.0 million Revolving Credit Facility (maturing Dec 2027) and a $1.237 billion Term Loan Facility (maturing Oct 2027). As of June 30, 2023, $500.0 million of unused capacity was available under the Revolving Credit Facility[176][177] - The Term Loan Facility requires quarterly principal payments of $3.3 million and is subject to prepayment with excess cash flow and asset sales. Interest rates are floating (Term SOFR + 4.50% for Term Loan, variable for Revolving Credit)[178][184][185] - The Company also has $775.0 million in 6.50% Senior Secured Notes due 2028, with interest payable semi-annually. Both the Term Loan Facility and Notes are secured by company assets, with differing priority liens[189][190][192] Cash and Cash Equivalents Held Outside the United States - As of June 30, 2023, $57.2 million of cash and cash equivalents were held by foreign subsidiaries and $21.4 million by foreign branches. A deferred tax liability of $0.9 million was recorded for unremitted earnings in Canada, but the Company generally asserts indefinite reinvestment for other foreign earnings[200][201] Off-Balance Sheet Arrangements - The Company has no material off-balance sheet financing arrangements, guarantee contracts, retained or contingent interests in transferred assets, or obligations from material variable interests in unconsolidated entities[203] Critical Accounting Policies and Estimates - There were no material changes to the Company's critical accounting policies and estimates during the six months ended June 30, 2023, from those disclosed in the 2022 Annual Report[204] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the Company's exposure to market risks, specifically foreign currency risk and interest rate risk, and the strategies employed to manage these exposures, including the use of derivative financial instruments Foreign Currency Risk - The Company's foreign currency exposure primarily stems from operations in Europe and Canada, with functional currencies including Canadian dollars, British pounds, and euros. Financial derivative instruments are used to hedge Canadian dollar exchange rate risks[206] - A hypothetical 10% unfavorable change in exchange rates relative to the U.S. dollar would have decreased consolidated loss before taxes by approximately $1.8 million for the six months ended June 30, 2023[207] Interest Rate Risk - Interest rate risk is managed through derivative financial instruments, specifically interest rate cap and collar agreements, to mitigate exposure to SOFR fluctuations on variable rate credit facilities. These derivatives are not designated as hedges for accounting purposes[208] - As of June 30, 2023, the Company had interest rate caps with a notional value of $650.0 million and collars with a notional value of $300.0 million, with an aggregate net asset fair value of $44.0 million[209] - A one-eighth percentage point increase in the weighted average interest rate above the 0.75% floor on the Term Loan and Revolving Credit Facilities would have increased interest expense by $0.5 million for the six months ended June 30, 2023[209] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of the Company's disclosure controls and procedures as of June 30, 2023, concluding they were effective. No material changes in internal control over financial reporting occurred during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023, ensuring timely and accurate reporting of required information[211] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023[213] PART II – OTHER INFORMATION Presents supplementary information on legal proceedings, risk factors, equity sales, defaults, and other disclosures Item 1. Legal Proceedings This section outlines various legal matters the Company is involved in, including commercial disputes, employment-related class actions, and ongoing proceedings related to the Take 5 Media Group acquisition misconduct. The Company has accrued amounts for certain matters but cannot assure sufficiency or predict material adverse effects - The Company is involved in various legal matters, including commercial disputes with clients/vendors and employment-related class/representative actions under labor laws[215][216][217] - The Take 5 Matter, involving misconduct at an acquired business, led to termination of operations and client refunds. An arbitrator ruled in the Company's favor in October 2022, but potential future litigation or governmental investigations remain uncertain[218] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Company's 2022 Annual Report on Form 10-K - No material changes to the risk factors disclosed in the 2022 Annual Report on Form 10-K[219] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities or use of proceeds[221] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report during the period - No defaults upon senior securities[221] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Mine Safety Disclosures are not applicable[221] Item 5. Other Information This section reports on other information, specifically regarding Rule 10b5-1 trading plans - No directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2023[222] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report, including amendments to credit agreements and certifications - Exhibits filed include Amendment No. 2 to First Lien Credit Agreement and certifications from the Chief Executive Officer and Chief Financial Officer[224]