ADVANTAGE SOLUTIONS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

Accumulated

Advantage

Common Stock

Additional

Loans

Other

Solutions Inc.

Nonredeemable

Total

Paid-in

Accumulated

to

Comprehensive

Stockholders’

Noncontrolling

Stockholders’

Shares

Amount

Capital

Deficit

Topco

Income (Loss)

Equity

Interests

Equity

(in thousands, except share data)

Balance at April 1, 2021
318,449,966 $ 32 $ 3,354,383 $ (921,217 ) $ (6,322 ) $ (1,746 ) $ 2,425,130 $ 95,814 $ 2,520,944
Comprehensive income (loss)

Net (loss) income
—   —   —   6,121 —   —   6,121 (353 ) 5,768
Foreign currency translation adjustments
—   —   —   —   —   624 624 219 843

Total comprehensive income (loss)
6,745 (134 ) 6,611

Loans to Karman Topco L.P.
—   —   —   —   (6 ) —   (6 ) —   (6 )
Redemption of noncontrolling interest
—   —   (436 ) —   —   —   (436 ) 236 (200 )
Equity-based compensation
—   —   (3,061 ) —   —   —   (3,061 ) —   (3,061 )
Shares issued upon vesting of restricted stock units
41,424 —   —   —   —   —   —   —   —
Shares issued upon exercise of warrants
5,000 —   58 —   —   —   58 —   58
Stock-based compensation expense
—   —   10,318 —   —   —   10,318 —   10,318

Balance at June 30, 2021
318,496,390 $ 32 $ 3,361,262 $ (915,096 ) $ (6,328 ) $ (1,122 ) $ 2,438,748 $ 95,916 $ 2,534,664

Accumulated

Advantage

Common Stock

Additional

Loans

Other

Solutions Inc.

Nonredeemable

Total

Paid-in

Accumulated

to

Comprehensive

Stockholders’

Noncontrolling

Stockholders’

Shares

Amount

Capital

Deficit

Topco

Income (Loss)

Equity

Interests

Equity

(in thousands, except share data)

Balance at A
pril
1, 2020
203,750,000 $ 20 $ 2,337,471 $ (767,003 ) $ (6,244 ) $ (16,313 ) $ 1,547,931 $ 87,703 $ 1,635,634
Comprehensive loss

Net loss
—   —   —   (37,404 ) —   —   (37,404 ) (410 ) (37,814 )
Foreign currency translation adjustments
—   —   —   —   —   1,843 1,843 190 2,033
Total comprehensive loss
(35,561 ) (220 ) (35,781 )
Loans to Karman Topco L.P.
—   —   —   —   (38 ) —   (38 ) —   (38 )
Equity-based compensation
—   —   1,650 —   —   —   1,650 —   1,650

Balance at June 30, 2020
203,750,000
$
20 $ 2,339,121 $ (804,407 ) $ (6,282 ) $ (14,470 ) $ 1,513,982 $ 87,483 $ 1,601,465


														Accumulated			Advantage
	Common Stock				Additional						Loans			Other			Solutions Inc.			Nonredeemable			Total
					Paid-in			Accumulated			to			Comprehensive			Stockholders'			Noncontrolling			Stockholders'
	Shares		Amount		Capital			Deficit			Topco			Income (Loss)			Equity			Interests			Equity
(in thousands, except share data)
Balance at July 1, 2021		318,496,390	$	32	$	3,361,262		$	(915,096	)	$	(6,328	)	$	(1,122	)	$	2,438,748		$	95,916		$	2,534,664
Comprehensive income (loss)
Net income		—		—		—			23,311			—			—			23,311			973			24,284
Foreign currency translation adjustments		—		—		—			—			—			(2,443	)		(2,443	)		(2,305	)		(4,748	)
Total comprehensive income (loss)																		20,868			(1,332	)		19,536
Loans to Karman Topco L.P.		—		—		—			—			(6	)		—			(6	)		—			(6	)
Redemption of noncontrolling interest		—		—		(16	)		—			—			—			(16	)		—			(16	)
Equity-based compensation		—		—		(6,030	)		—			—			—			(6,030	)		—			(6,030	)
Shares issued upon exercise of warrants		1		—		—			—			—			—			—			—			—
Shares issued under Employee Stock Purchase Plan		77,172		—		736			—			—			—			736			—			736
Stock-based compensation expense		—		—		8,413			—			—			—			8,413			—			8,413
Balance at September 30, 2021		318,573,563	$	32	$	3,364,365		$	(891,785	)	$	(6,334	)	$	(3,565	)	$	2,462,713		$	94,584		$	2,557,297


													Accumulated			Advantage
	Common Stock				Additional					Loans			Other			Solutions Inc.			Nonredeemable		Total
					Paid-in		Accumulated			to			Comprehensive			Stockholders'			Noncontrolling		Stockholders'
	Shares		Amount		Capital		Deficit			Topco			Income (Loss)			Equity			Interests		Equity
(in thousands, except share data)
Balance at July 1, 2020		203,750,000	$	20	$	2,339,121	$	(804,407	)	$	(6,282	)	$	(14,470	)	$	1,513,982		$	87,483	$	1,601,465
Comprehensive income
Net income		—		—		—		35,949			—			—			35,949			756		36,705
Foreign currency translation adjustments		—		—		—		—			—			5,970			5,970			3,618		9,588
Total comprehensive income																	41,919			4,374		46,293
Loans to Karman Topco L.P.		—		—		—		—			(38	)		—			(38	)		—		(38	)
Balance at September 30, 2020		203,750,000	$	20	$	2,339,121	$	(768,458	)	$	(6,320	)	$	(8,500	)	$	1,555,863		$	91,857	$	1,647,720


														Accumulated			Advantage
	Common Stock				Additional						Loans			Other			Solutions Inc.			Nonredeemable			Total
					Paid-in			Accumulated			to			Comprehensive			Stockholders'			Noncontrolling			Stockholders'
	Shares		Amount		Capital			Deficit			Topco			Income (Loss)			Equity			Interests			Equity
(in thousands, except share data)
Balance at January 1, 2021		318,425,182	$	32	$	3,348,546		$	(921,101	)	$	(6,316	)	$	674		$	2,421,835		$	96,954		$	2,518,789
Comprehensive loss
Net income (loss)		—		—		—			29,316			—			—			29,316			190			29,506
Foreign currency translation adjustments		—		—		—			—			—			(4,239	)		(4,239	)		(2,796	)		(7,035	)
Total comprehensive loss																		25,077			(2,606	)		22,471
Loans to Karman Topco L.P.		—		—		—			—			(18	)		—			(18	)		—			(18	)
Redemption of noncontrolling interest		—		—		(452	)		—			—			—			(452	)		236			(216	)
Equity-based compensation		—		—		(13,140	)		—			—			—			(13,140	)		—			(13,140	)
Vesting of stock-based compensation awards		24,784		—		—			—			—			—			—			—			—
Shares issued upon vesting of restricted stock units		41,424		—		—			—			—			—			—			—			—
Shares issued under Employee Stock Purchase Plan		77,172		—		736			—			—			—			736			—			736
Shares issued upon exercise of warrants		5,001		—		58			—			—			—			58			—			58
Stock-based compensation expense		—		—		28,617			—			—			—			28,617			—			28,617
Balance at September 30, 2021		318,573,563	$	32	$	3,364,365		$	(891,785	)	$	(6,334	)	$	(3,565	)	$	2,462,713		$	94,584		$	2,557,297


													Accumulated			Advantage
	Common Stock				Additional					Loans			Other			Solutions Inc.			Nonredeemable			Total
					Paid-in		Accumulated			to			Comprehensive			Stockholders'			Noncontrolling			Stockholders'
	Shares		Amount		Capital		Deficit			Topco			Income (Loss)			Equity			Interests			Equity
(in thousands, except share data)
Balance at January 1, 2020		203,750,000	$	20	$	2,337,471	$	(745,295	)	$	(6,244	)	$	(8,153	)	$	1,577,799		$	92,007		$	1,669,806
Comprehensive loss
Net income (loss)		—		—		—		(23,163	)		—			—			(23,163	)		331			(22,832	)
Foreign currency translation adjustments		—		—		—		—			—			(347	)		(347	)		(481	)		(828	)
Total comprehensive loss																	(23,510	)		(150	)		(23,660	)
Loans to Karman Topco L.P.		—		—		—		—			(76	)		—			(76	)		—			(76	)
Equity-based compensation		—		—		1,650		—			—			—			1,650			—			1,650
Balance at September 30, 2020		203,750,000	$	20	$	2,339,121	$	(768,458	)	$	(6,320	)	$	(8,500	)	$	1,555,863		$	91,857		$	1,647,720

See Notes to the Condensed Consolidated Financial Statements.

~~Table of Contents~~

Supplemental Pro Forma Information

Supplemental information on a pro forma basis, presented as if the acquisitions executed during the period from January 1, 2021 to ~~August~~November 9, 2021 and for the year ended December 31, 2020, had been consummated as of the beginning of the comparative prior period, is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
(in thousands, except per share data)
Revenues	$	951,049	$	831,259	$	2,684,380	$	2,440,002
Net income (loss) attributable to stockholders of Advantage Solutions Inc.	$	23,226	$	37,817	$	29,911	$	(17,956	)
Basic net income (loss) per common share	$	0.07	$	0.19	$	0.09	$	(0.09	)
Diluted net income (loss) per common share	$	0.07	$	0.19	$	0.09	$	(0.09	)

Three Months Ended June 30,


Six Months Ended June 30,


2021


2020


2021


2020

(in thousands, except per share data)

Total revenues
   $ 852,157    $ 648,602    $ 1,646,090
   $ 1,536,060

Net income (loss) attributable to stockholders of Advantage Solutions Inc.
   $ 6,032    $ (34,598 )    $ 6,231    $ (54,066 )
Basic net income (loss) per common share
   $ 0.02    $ (0.17 )    $ 0.02    $ (0.27 )
Diluted net income (loss) per common share
   $ 0.00    $ (0.17 )    $ 0.01    $ (0.27 )

The unaudited

pro forma supplemental information is based on estimates and assumptions that the Company believes

are

reasonable and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets, the pro forma impact of acquisition costs which consisted of legal, advisory and due diligence fees and expenses, and the pro forma tax effect of the pro forma adjustments for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been consummated during the periods for which pro forma information is presented.

4. Goodwill and Intangible Assets

Changes in goodwill for the ~~six~~nine months ended ~~June~~September 30, 2021 are as follows:


	Sales			Marketing			Total
(in thousands)
Gross carrying amount as of December 31, 2020	$	2,114,378		$	700,961		$	2,815,339
Accumulated impairment charge(1)		(652,000	)		0			(652,000	)
Balance at December 31, 2020	$	1,462,378		$	700,961		$	2,163,339
Acquisitions		29,332			13,313			42,645
Measurement period adjustments		179			(1,043	)		(864	)
Foreign exchange translation effects		(1,999	)		0			(1,999	)
Balance at September 30, 2021	$	1,489,890		$	713,231		$	2,203,121

(1)

Sales

Marketing

Total

(in thousands)

Gross carrying amount as of December 31, 2020
   $ 2,114,378    $ 700,961    $ 2,815,339
Accumulated impairment charge
(1)
   (652,000 )    —      (652,000 )






Balance at December 31, 2020
   $ 1,462,378    $ 700,961    $ 2,163,339






Acquisitions
   18,459    —      18,459
Measurement period adjustments
   179    (1,045 )    (866 )
Foreign exchange translation effects
   259    —      259






Balance at June 30, 2021
   $ 1,481,275    $ 699,916    $ 2,181,191

~~(1)~~

~~During the fiscal year ended December 31, 2018, the Company recognized a~~

~~non-cash~~

~~goodwill impairment charge of $652.0 million related to the Company’s sales reporting unit as a result of the Company’s annual evaluation of goodwill impairment test.~~

13During the fiscal year ended December 31, 2018, the Company recognized a non-cash goodwill impairment charge of $652.0 million related to the Company’s sales reporting unit as a result of the Company’s annual evaluation of goodwill impairment test.

~~Table of Contents~~

The following tables set forth information for intangible assets:


		September 30, 2021
(in thousands)	Weighted Average Useful Life	Gross Carrying Value		Accumulated Amortization		Accumulated Impairment Charges(1)		Net Carrying Value
Finite-lived intangible assets:
Client relationships	14 years	$	2,480,530	$	1,112,531	$	—	$	1,367,999
Trade names	8 years		138,481		75,112		—		63,369
Developed technology	5 years		13,260		7,587		—		5,673
Covenant not to compete	5 years		6,100		4,621		—		1,479
Total finite-lived intangible assets			2,638,371		1,199,851		—		1,438,520
Indefinite-lived intangible assets:
Trade names			1,480,000		—		580,000		900,000
Total other intangible assets		$	4,118,371	$	1,199,851	$	580,000	$	2,338,520

(1)

During the fiscal year ended December 31, 2018, the Company recognized a non-cash intangible asset impairment charge of $580.0 million related to the Company’s sales trade name as a result of the Company’s annual impairment test for indefinite-lived intangible assets.


		December 31, 2020
(in thousands)	Weighted Average Useful Life	Gross Carrying Value		Accumulated Amortization		Accumulated Impairment Charges		Net Carrying Value
Finite-lived intangible assets:
Client relationships	14 years	$	2,455,360	$	977,140	$	—	$	1,478,220
Trade names	8 years		134,220		66,209		—		68,011
Developed technology	5 years		10,160		5,989		—		4,171
Covenant not to compete	5 years		6,100		3,706		—		2,394
Total finite-lived intangible assets			2,605,840		1,053,044		—		1,552,796
Indefinite-lived intangible assets:
Trade names			1,480,000		—		580,000		900,000
Total other intangible assets		$	4,085,840	$	1,053,044	$	580,000	$	2,452,796

June 30, 2021

(in thousands)

Weighted
Average Useful
Life

Gross Carrying

Value

Accumulated

Amortization

Accumulated
Impairment
Charges
(1)

Net Carrying

Value

Finite-lived intangible assets:

Client relationships
   14 years    $ 2,465,579    $ 1,067,784    $ —      $ 1,397,795
Trade names
   8 years    134,885    72,339    —      62,546
Developed technology
   5 years    10,160    7,005    —      3,155
Covenant not to compete
   5 years    6,100    4,316    —      1,784








Total finite-lived intangible assets
      2,616,724    1,151,444    —      1,465,280








Indefinite-lived intangible assets:

Trade names
      1,480,000    —      580,000    900,000








Total other intangible assets
      $ 4,096,724    $ 1,151,444    $ 580,000    $ 2,365,280

~~(1)~~

~~During the fiscal year ended December 31, 2018, the Company recognized a~~

~~non-cash~~

~~intangible asset impairment charge of $580.0~~

~~million related to the Company’s sales trade name as a result of the Company’s annual impairment test for indefinite-lived intangible assets.~~

December 31, 2020

(in thousands)


Weighted
Average Useful
Life

Gross Carrying
Value

Accumulated
Amortization

Accumulated
Impairment
Charges

Net Carrying
Value

Finite-lived intangible assets:

Client relationships
   14 years    $ 2,455,360    $ 977,140    $ —        $ 1,478,220
Trade names
   8 years    134,220    66,209    —      68,011
Developed technology
   5 years    10,160    5,989    —      4,171
Covenant not to compete
   5 years    6,100    3,706    —      2,394








Total finite-lived intangible assets
      2,605,840    1,053,044    —      1,552,796








Indefinite-lived intangible assets:

Trade names
      1,480,000    —      580,000    900,000








Total other intangible assets
      $ 4,085,840    $ 1,053,044    $ 580,000    $ 2,452,796

Amortization expenses ~~included in the Consolidated Statements of Operatio~~

~~s and Comprehensive Income (Loss) for~~during the three and ~~six~~nine months ended ~~June~~September 30, 2021 were $49.8 million, and $148.4 million, respectively. Amortization expenses during the three and nine months ended September 30, 2020 were ~~$49.2 million, $98.6 million, $47.7~~$47.8 million, and ~~$95.5~~$143.3 million, respectively.

As of ~~June~~September 30, 2021, estimated future amortization expenses of the Company’s existing intangible assets are as follows:


(in thousands)

Remainder of 2021	$	50,422
2022		198,780
2023		195,199
2024		193,810
2025		187,732
Thereafter		612,577
Total amortization expense	$	1,438,520

(in thousands)

Remainder of 2021
   $ 98,662
2022
   194,917
2023
   191,363
2024
   189,968
2025
   184,611
Thereafter
   605,759


Total amortization expense
   $ 1,465,280

~~Table of Contents~~

5. Debt


	September 30,		December 31,
	2021		2020
(in thousands)
Term Loan Facility	$	1,315,063	$	1,325,000
Notes		775,000		775,000
Revolving Credit Facility		0		50,000
Notes payable and deferred obligations		2,981		3,618
		2,093,044		2,153,618
Less: current portion		13,369		63,745
Less: debt issuance costs		53,648		60,545
Long-term debt, net of current portion	$	2,026,027	$	2,029,328

June 30,
2021

December 31,
2020

(in thousands)

New Term Loan Facility
   $ 1,318,375    $ 1,325,000
Notes
   775,000    775,000
New Revolving Credit Facility
   —      50,000
Notes payable and deferred obligations
   2,953    3,618




   2,096,328    2,153,618
Less: current portion
   13,303    63,745
Less: debt issuance costs
   55,928    60,545




Long-term debt, net of current portion
   $ 2,027,097    $ 2,029,328

As of ~~June~~September 30, 2021, the Company had ~~$1.3~~$1.3 billion of debt outstanding under the ~~New~~ Term Loan Facility and ~~$775.0~~$775.0 million of debt outstanding under the Notes with maturity dates of October 28, 2027 and November 15, 2028, respectively. The Company was in compliance with all of its affirmative and negative covenants under the ~~New~~ Term Loan Facility and Notes as of ~~June~~September 30, 2021. In addition, the Company was required to repay the principal under the ~~New~~ Term Loan Facility (as such term was defined in the ~~New~~ Term Loan Facility Agreement) in the greater amount of its excess cash flow, as defined in the ~~New~~ Term Loan Facility Agreement, or ~~$13.3~~$13.3 million, per annum, in quarterly payments. The Company made the minimum quarterly principal payments of ~~$3.3~~$3.3 million during the three months ended ~~June~~September 30, 2021 and no payments under the excess cash flow calculation were required. During the three months ended ~~June~~September 30, 2020, the Company made the minimum quarterly principal payments of ~~$6.5~~$6.5 million pursuant to its then outstanding first lien term loans that existed prior to consummation of the Transactions.

6. Fair Value of Financial Instruments

The Company

measures fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The following table sets forth the Company’s financial assets and liabilities measured on a recurring basis at fair value, categorized by input level within the fair value hierarchy.


	September 30, 2021
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Assets measured at fair value
Cash and cash equivalents	$	168,028	$	168,028	$	0	$	0
Derivative financial instruments		5,949		0		5,949		0
Total assets measured at fair value	$	173,977	$	168,028	$	5,949	$	0
Liabilities measured at fair value
Derivative financial instruments	$	766	$	0	$	766	$	0
Warrant liability		16,210		0		0		16,210
Contingent consideration liabilities		65,112		0		0		65,112
Total liabilities measured at fair value	$	82,088	$	0	$	766	$	81,322


	December 31, 2020
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Assets measured at fair value
Cash and cash equivalents	$	204,301	$	204,301	$	0	$	0
Derivative financial instruments		1,824		0		1,824		0
Total assets measured at fair value	$	206,125	$	204,301	$	1,824	$	0
Liabilities measured at fair value
Derivative financial instruments	$	1,882	$	0	$	1,882	$	0
Warrant liability		21,234		0		0		21,234
Contingent consideration liabilities		45,901		0		0		45,901
Total liabilities measured at fair value	$	69,017	$	0	$	1,882	$	67,135

June 30, 2021

(in thousands)

Fair Value

Level 1

Level 2

Level 3

Assets measured at fair value

Cash and cash equivalents
   $ 159,782    $ 159,782    $ —      $ —
Derivative financial instruments
   6,142    —      6,142    —








Total assets measured at fair value
   $ 165,924    $ 159,782    $ 6,142    $ —








Liabilities measured at fair value

Derivative financial instruments
   $ 1,143    $ —      $ 1,143    $ —
Warrant liability
   19,701    —      —      19,701
Contingent consideration liabilities
   46,843    —      —      46,843








Total liabilities measured at fair value
   $ 67,687    $ —      $ 1,143    $ 66,544

~~Table of Contents~~

December 31, 2020

(in thousands)

Fair Value

Level 1

Level 2

Level 3

Assets measured at fair value

Cash and cash equivalents
   $ 204,301    $ 204,301    $ —      $ —
Derivative financial instruments
   1,824    —      1,824    —








Total assets measured at fair value
   $ 206,125    $ 204,301    $ 1,824    $ —








Liabilities measured at fair value

Derivative financial instruments
   $ 1,882    $ —      $ 1,882    $ —
Warrant liability
   21,234    —      —      21,234
Contingent consideration liabilities
   45,901    —      —      45,901








Total liabilities measured at fair value
   $ 69,017    $ —      $ 1,882    $ 67,135

Interest Rate Cap Agreements

The Company had interest rate cap contracts with an aggregate notional value of principal of ~~$2.2~~$2.2 billion as of each of ~~June~~September 30, 2021 and December 31, 2020, from various financial institutions to manage the Company’s exposure to interest rate movements on variable rate credit facilities. As of ~~June~~September 30, 2021, the aggregate fair value of the Company’s outstanding interest rate caps represented an outstanding net asset of ~~$6.1~~$5.9 million and an outstanding net liability of ~~$1.1~~$0.8 million. As of December 31, 2020, the aggregate fair value of the Company’s outstanding interest rate caps represented an outstanding net asset of ~~$1.8~~$1.8 million and an outstanding net liability of ~~$1.9~~$1.9 million.

As of ~~June~~September 30, 2021, ~~$6.1~~$5.9 million and ~~$1.1~~

$0.8 million of fair value of the Company’s outstanding interest rate caps were included in “Prepaid expenses and other current assets” and “Other accrued expenses” in the Condensed Consolidated Balance Sheets, respectively, with changes in fair value recognized as a component of “Interest expense, net” in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). As of December 31, 2020, ~~$1.8~~$1.8 million, ~~$1.0~~$1.0 million, and ~~$0.9~~$0.9 million of fair value of the Company’s outstanding interest rate caps were included in “Prepaid expenses and other current assets”, “Other accrued expenses”, and “Other long-term liabilities” in the Condensed Consolidated Balance Sheets, respectively, with changes in fair value recognized as a component of “Interest expense, net” in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

During the three months ended ~~June~~September 30, 2021 and 2020, the Company recorded a loss of ~~$1.2~~$0.2 million and aan immaterial gain of less than ~~$0.1~~

$0.1 million, respectively, within Interest expense, net, related to changes in the fair value of its derivative instruments. During the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company recorded a gain within Interest expense, net in the amount of $

~~4.3~~4.1 million, and ~~$0.1~~$0.1 million, respectively, related to changes in the fair value of its derivative instruments.

Forward Contracts

As of ~~June~~September 30, 2021, the Company had

~~eight~~

three open

euro

forward contracts to hedge foreign currency exposure on a total of ~~€3.6~~

€1.4 million, with maturities in fiscal year ~~2021.~~2021. As of December 31, 2020, the Company had 0 open euro forward contracts. During the three months and ~~six~~nine months ended ~~June~~September 30, 2021, ~~and 2020,~~ the Company recognized ~~immaterial changes~~$0.1 million and $0.1 million, respectively, in fair value of the forward ~~contracts as a component~~contracts. During the three months and nine months ended September 30, 2020, the Company recognized $0.4 million and $0.5 million, respectively, in fair value of ~~“Selling, general and administrative expenses” in~~ the ~~Condensed Consolidated Statements of Operations and Comprehensive~~

~~Income (Loss).~~

~~Table of Contents~~

forward contracts.

Warrant Liability

The estimated fair value of the liability is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument.

The fair value of the warrants on the date of issuance and on each re

~~measurement~~re-measurement date of certain warrants issued by the Company in a private placement in connection with the Closing (the “private placement warrants”) and classified as liabilities is estimated using the Black-Scholes option pricing model using the following assumptions:


	September 30, 2021			December 31, 2020
Fair value warrants per share	$	2.21		$	2.90
Share Price	$	8.65		$	13.17
Exercise price per share	$	11.50		$	11.50
Expected term (years)		4.1			4.8
Expected volatility		43.0	%		17.0	%
Risk-free interest rate		0.8	%		0.4	%
Dividend yield		0.0	%		0.0	%

June 30, 2021

December 31, 2020

Fair value warrants per share
   $ 2.69 $ 2.90
Share Price
   $ 10.79 $ 13.17
Exercise price per share
   $ 11.50 $ 11.50
Expected term (years)
   4.3 4.8
Expected volatility
   32.0 % 17.0 %
Risk-free interest rate
   0.7 % 0.4 %
Dividend yield    0.0 % 0.0 %

As of ~~June~~September 30, 2021, 7,333,333 private placement warrants remained outstanding at a fair value of ~~$19.7~~$16.2 million resulting in $~~7.0~~3.5 million and ~~$1.5~~$5.0 million gain related to the change in fair value of warrant liability for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively. The warrant liability is stated at fair value at each reporting period with the change in fair value recorded on the

Condensed

Consolidated ~~Statement~~

Statements of Operations and Comprehensive

Income (Loss)

until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument.

Contingent Consideration Liabilities

Each reporting period, the Company measures the fair value of its contingent liabilities by evaluating the significant unobservable inputs and probability weightings using Monte Carlo simulations. Any resulting decreases or increases in the fair value result in a corresponding gain or loss reported in “Selling, general, and administrative expenses” in the Condensed Consolidated Statements of

Operations and

Comprehensive

Income (Loss).

As of ~~June~~September 30, 2021, the maximum potential payment outcomes were ~~$233.0~~$291.2 million. The following table summarizes the changes in the carrying value of estimated contingent consideration liabilities:


	September 30,
(in thousands)	2021			2020
Beginning of the period	$	45,901		$	47,649
Fair value of acquisitions		19,883			17,210
Changes in fair value		6,977			4,162
Payments		(6,399	)		(14,074	)
Note issuance for settlements		0			(6,194	)
Measurement period adjustments		(1,181	)		0
Foreign exchange translation effects		(69	)		(600	)
End of the period	$	65,112		$	48,153

June 30,

(in thousands)

2021

2020

Beginning of the period
   $ 45,901    $ 47,649
Fair value of acquisitions
   5,116    17,210
Payments
   (6,399 )    (8,859 )
Note issuance for settlements
   0      (5,982 )
Measurement period adjustments

(1,181
)

0

Changes in fair value
   3,361    9,532
Foreign exchange translation effects
   45    (802 )




End of the period
   $ 46,843    $ 58,748

~~Table of Contents~~

Long-term Debt

The following table sets forth the carrying values and fair values of the Company’s financial liabilities measured on a recurring basis, categorized by input level within the fair value hierarchy:


(in thousands)	Carrying Value		Fair Value (Level 2)
Balance at September 30, 2021
Term Loan Credit Facility	$	1,315,063	$	1,432,132
Notes		775,000		892,991
Notes payable and deferred obligations		2,981		2,981
Total long-term debt	$	2,093,044	$	2,328,104


(in thousands)	Carrying Value		Fair Value (Level 2)
Balance at December 31, 2020
Term Loan Credit Facility	$	1,325,000	$	1,447,993
Notes		775,000		884,826
Revolving Credit Facility		50,000		50,000
Notes payable and deferred obligations		3,618		3,618
Total long-term debt	$	2,153,618	$	2,386,437

(in thousands)

Carrying Value

Fair Value

(Level 2)

Balance at June 30, 2021

New Term Loan Credit Facility
   $ 1,318,375    $ 1,461,643
Notes
   775,000    899,251
Notes payable and deferred obligations
   2,953    2,953




Total long-term debt
   $ 2,096,328    $ 2,363,847

(in thousands)

Carrying Value

Fair Value

(Level 2)

Balance at December 31, 2020

New Term Loan Credit Facility
   $ 1,325,000    $ 1,447,993
Notes
   775,000    884,826
New Revolving Credit Facility
   50,000    50,000
Notes payable and deferred obligations
   3,618    3,618




Total long-term debt
   $ 2,153,618    $ 2,386,437

7. Related Party Transactions

Conyers Park and the Transactions

In May 2019, Conyers Park II Sponsor LLC, an affiliate of Centerview Capital Management, LLC, which was ~~Conyer~~

Conyers Park’s sponsor prior to the Merger (“CP Sponsor”)

purchased 11,500,000 of Conyers Park’s Class B ordinary shares for an aggregate purchase price of ~~$25,000~~$25,000 in cash, or approximately ~~$0.002~~$0.002 per share. In June 2019, CP Sponsor transferred 25,000 shares to each of four individuals, including a current member of the board of directors of the Company. At the time of the Closing, the 11,250,000 shares of Conyers Park Class B common stock, par value ~~$0.0001~~$0.0001 per share, then held by CP Sponsor and its directors automatically converted into shares of

the Company’s

Class A common stock. CP Sponsor also purchased 7,333,333 private placement warrants for a purchase price of ~~$1.50~~$1.50 per whole warrant, or ~~$11,000,000~~$11,000,000 in the aggregate, in private placement transactions that occurred simultaneously with the closing of the Conyers Park’s initial public offering and related over-allotment option. As a result of the Closing, each private placement warrant entitles CP Sponsor to purchase one share

the Company’s

Class A Common Stock at ~~$11.50~~$11.50 per share.

Concurrent with the execution of the Merger Agreement, Conyers Park entered into the subscription agreements with certain investors, ~~(collectively, the “Subscription Agreements”),~~ pursuant to which, among other things, Conyers Park agreed to issue and sell in a private placement shares of Conyers Park Class A common stock for a purchase price of ~~$10.00~~$10.00 per share. Certain of the Advantage Sponsors or their affiliates agreed to purchase an aggregate of 34,410,000 shares of Conyers Park Class A common stock. Conyers Park also entered into a stockholders agreement (the “Stockholders Agreement”) with CP Sponsor, Topco, and certain of the Advantage Sponsors and their affiliates (collectively, the “Stockholder Parties”). The Stockholders Agreement provides, among other things, that the Stockholder Parties agree to cast their votes such that the Company’s board of directors is constituted as set forth in the Stockholders Agreement and the Merger Agreement and will have certain rights to designate directors to the Company’s board of directors, in each case, on the terms and subject to the conditions therein. Additionally, Conyers Park entered into a Registration Rights Agreement with CP Sponsor, Topco, the Advantage Sponsors and their affiliates and the other parties thereto, pursuant to which the Company

has

agreed to register for resale certain shares of Class A common stock and other equity securities that are held by the parties thereto from time to time.

~~Table of Contents~~

Overlapping Directors

Seven members of the board of directors of the Company served as the members of the board of

directors of five clients of the Company.

Until February 2, 2020, a member of the board of directors of the Company served as a member of the board of directors for a holding company of a client.

The information below details the Company’s financial relationships with those clients as of and for the periods indicated:


		Revenues
		Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)		2021		2020		2021		2020
Client 1		$	1,409	$	0	$	5,904	$	0
Client 2			0		0		0		3,866
Client 3			0		26		214		26
Client 4			124		280		457		888
Client 5			0		0		407		209
Client 6			43		35		169		207
	Total	$	1,576	$	341	$	7,151	$	5,196

Revenues

Accounts Receivable


Three Months Ended

Six Months Ended

as of

(In thousands)

June 30,
2021

June 30,
2020

June 30,
2021

June 30,
2020

June 30,
2021

December 31,
2020

Client 1
   $ 2,071    $ 0      $ 4,495    $ 0      $ 0      $ 0
Client 2
   0      0      0      3,866    0      0
Client 3
   107    0      214    0      736    572
Client 4
   116    514    333    608    5,152    4,819
Client 5
   264    33    407    209    1,276    1,285
Client 6
   37    66    126    171    1,041    915












Total
   $ 2,595    $ 613    $ 5,575    $ 4,854    $ 8,205    $ 7,591

From June 25, 2019 until October 28, 2020, a member of the board of directors of Topco served as a member of the board of directors of another client of the Company. During the three and ~~six~~nine months ended ~~June~~September 30, 2020, the Company recognized revenues of $

~~4.3~~

5.8 million and $

~~9.1~~

14.9 million, respectively, from this client.

Investment in Unconsolidated Affiliates

During the three months ended ~~June~~September 30, 2021 and 2020, the Company recognized revenues of ~~$4.7~~$4.4 million and ~~$2.6~~$3.1 million, respectively, from a parent company of an unconsolidated affiliate. During the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company recognized revenues of ~~$9.3~~$13.7 million and ~~$7.3~~$10.5 million, respectively, from

the

parent company of

such

unconsolidated affiliate. Accounts receivable from this client were ~~$1.7~~$1.8 million and ~~$2.2~~$2.2 million as of ~~June~~September 30, 2021 and December 31, 2020, ~~respectivel~~

respectively.

8. Income Taxes

The Company’s effective income tax rates were ~~53.3%~~25.4% and ~~26.6%~~9.0% for the three months ended ~~June~~September 30, 2021 and 2020, respectively. The fluctuation in the effective rates during the three months ended ~~June~~September 30, 2021 and 2020 is caused by variations in the Company’s estimated annual effective tax rate from the respective previous quarters and changes in the income (loss) before income taxes in those ~~periods and the impact of discrete items related to changes in statutory tax rates in certain foreign and state jurisdictions for the three months ended June 30, 2021 which resulted in a higher tax~~

~~provision overall.~~

periods.

The Company’s effective

tax rate was

~~61.5~~

36.0% and

~~17.2~~

27.6% during the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. The effective tax rate is based upon the estimated income or loss before taxes for the year, by jurisdiction, and adjusted for estimated permanent tax adjustments. The fluctuation in the Company’s effective tax rate was primarily due to a difference in ~~projected~~forecasted income (loss) before income taxes used in the annual effective tax ~~rate and unfavorable permanent differences related to officers’ compensation including stock-based awards for the six months ended June 30, 2021.~~rate. Also, the Company recorded discrete items during the ~~six~~nine months ended ~~June~~September 30, 2021, including a valuation allowance of ~~$1.3~~$1.3 million for its Mexico operations and income tax expenses of ~~$2.3~~$2.3 million and ~~$0.8~~$0.8 million to adjust the deferred tax liability resulting from changes in statutory tax rates in certain foreign and state jurisdictions, respectively. These discrete items resulted in a higher tax provision overall for the ~~six~~nine months ended ~~June~~September 30, 2021.

~~Table of Contents~~

9. Segments

The Company’s

operations are organized into ~~two~~2 reportable segments: sales and marketing. The operating segments reported below are the segments of the Company for which separate financial information is available and for which segment results are evaluated regularly by the chief operating decision maker (i.e., the Company’s Chief Executive Officer) in deciding how to allocate resources and in assessing performance. Through the Company’s sales segment, the Company serves as a strategic intermediary between consumer goods manufacturers and retailer partners and performs critical merchandizing services on behalf of both consumer goods manufacturers and retail partners. Through the Company’s marketing segment, the Company develops and executes marketing programs for manufacturers and retailers. These reportable segments are organized by the types of services provided, similar economic characteristics, and how the Company manages its business. The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; therefore, no additional information is produced or included herein. The Company and its chief operating decision maker evaluate performance based on revenues and operating income.


(in thousands)	Sales		Marketing		Total
Three Months Ended September 30, 2021
Revenues	$	597,139	$	331,621	$	928,760
Depreciation and amortization	$	41,515	$	17,648	$	59,163
Operating income	$	51,906	$	13,696	$	65,602
Three Months Ended September 30, 2020
Revenues	$	542,062	$	242,283	$	784,345
Depreciation and amortization	$	41,978	$	16,578	$	58,556
Operating income	$	60,205	$	28,366	$	88,571


(in thousands)	Sales		Marketing		Total
Nine Months Ended September 30, 2021
Revenues	$	1,693,107	$	876,628	$	2,569,735
Depreciation and amortization	$	128,789	$	52,661	$	181,450
Operating income	$	131,727	$	13,910	$	145,637
Nine Months Ended September 30, 2020
Revenues	$	1,510,099	$	795,185	$	2,305,284
Depreciation and amortization	$	127,319	$	50,194	$	177,513
Operating income	$	95,420	$	24,592	$	120,012

(in thousands)

Sales

Marketing

Total

Three Months Ended June 30, 2021

Revenues
   $ 561,644    $ 288,310    $ 849,954
Depreciation and amortization
   $ 44,710    $ 17,964    $ 62,674
Operating income (loss)
   $ 44,673    $ (2,226 )    $ 42,447
Three Months Ended June 30, 2020

Revenues
   $ 460,239    $ 181,304    $ 641,543
Depreciation and amortization
   $ 42,234    $ 16,514    $ 58,748
Operating income (loss)
   $ 11,021    $ (11,018 )    $ 3

(in thousands)

Sales

Marketing

Total

Six Months Ended June 30, 2021

Revenues
   $ 1,095,968    $ 545,007    $ 1,640,975
Depreciation and amortization
   $ 87,274    $ 35,013    $ 122,287
Operating income
   $ 79,822    $ 213    $ 80,035
Six Months Ended June 30, 2020

Revenues
   $ 968,037    $ 552,902    $ 1,520,939
Depreciation and amortization
   $ 85,341    $ 33,616    $ 118,957
Operating income (loss)
   $ 35,215    $ (3,774 )    $ 31,441

10. Commitments and Contingencies

Litigation

The Company is involved in various legal matters that arise in the ordinary course of its business. Some of these legal matters purport or may be determined to be class and/or representative actions, or seek substantial damages, or penalties. The Company has accrued amounts in connection with certain legal matters, including with respect to certain of the matters described below. There can be no assurance, however, that these accruals will be sufficient to cover such matters or other legal matters or that such matters or other legal matters will not materially or adversely affect the Company’s business, financial position, or results of operations.

Employment Matters

The Company has also been involved in various litigation, including purported class or representative actions with respect to matters arising under the California Labor Code and Private Attorneys General Act. The Company has retained outside counsel to represent it in these matters and is vigorously defending its interests.

~~Table of Contents~~

Legal Matters Related to Take 5

On April 1, 2018, the Company acquired certain assets and assumed liabilities of Take 5 Media Group (“Take 5”). In June 2019, as a result of a review of internal allegations related to inconsistency of data provided by Take 5 to its clients, the Company commenced an investigation into Take 5’s operations. In July 2019, as a result of the Company’s investigation, the Company determined that revenue during the fiscal year ended December 31, 2018 attributable to the Take 5 business had been recognized for services that were not performed on behalf of clients of Take 5 and that inaccurate reports were made to Take 5 clients about those services (referred to as the “Take 5 Matter”). As a result of these findings, in July 2019, the Company terminated all operations of Take 5, including the use of its associated trade names and the offering of its services to its clients and offered refunds to Take 5 clients of collected revenues attributable to Take 5 since the Company’s acquisition of Take 5.

USAO and FBI Voluntary Disclosure and Investigation Related to Take 5

The Company voluntarily disclosed to the United States Attorney’s Office and the Federal Bureau of Investigation certain misconduct occurring at Take 5, a line of business that the Company closed in July 2019. The Company intends to cooperate in this and any other governmental investigations that may arise in connection with the Take 5 Matter. At this time, the Company cannot predict the ultimate outcome of any investigation related to the Take 5 Matter and is unable to estimate the potential impact such an investigation may have o

on the Company.

Arbitration Proceedings Related to Take 5

In August 2019, as a result of the Take 5 Matter, the Company provided a written indemnification claim notice to the sellers of Take 5 (the “Take 5 Sellers”) seeking monetary damages (including interest, fees and costs) based on allegations of breach of the asset purchase agreement (the “Take 5 APA”), as well as fraud. In September 2019, the Take 5 Sellers initiated arbitration proceedings against the Company, alleging breach of the Take 5 APA as a result of the Company’s decision to terminate the operations of the Take 5 business, and seeking monetary damages equal to all unpaid

earn-out

payments under the Take 5 APA (plus interest, fees and costs). In 2020, the Take 5 sellers amended their statement of claim to allege defamation, relating to statements the Company made to customers in connection with terminating the operations of the Take 5 business, and seeking monetary damages for the alleged injury to their reputation. The Company filed its response to the Take 5 Sellers’ claims, and asserted indemnification, fraud and other claims against the Take 5 Sellers as counterclaims and cross-claims in the arbitration proceedings. The Company is currently unable to estimate the potential impact related to these arbitration ~~proceeding~~

,proceedings, but the Company has retained outside counsel to represent the Company in these matters and intends to vigorously pursue the Company’s interests.

Other Legal Matters Related to Take 5

The Take 5 Matter may result in additional litigation against the Company, including lawsuits from clients, or governmental investigations, which may expose the Company to potential liability in excess of the amounts being offered by the Company as refunds to Take 5 clients. The Company is currently unable to determine the amount of any potential liability, costs or expenses (above the amounts already being offered as refunds) that may result from any lawsuits or investigations associated with the Take 5 Matter or determine whether any such issues will have any future material adverse effect on the Company’s financial position, liquidity, or results of operations. Although the Company has insurance covering certain liabilities, the insurance may not be sufficient to cover any potential liability or expenses associated with the Take 5 Matter.

11. Redeemable Noncontrolling Interest

The Company is party

to a put and call option agreement with respect to the common securities that represent the remaining noncontrolling interest from a majority-owned subsidiary, which was established through a majority-owned international joint venture during the ~~six~~nine months ended ~~June~~September 30, 2021. The put and call option agreement representing 20

% of the total outstanding noncontrolling equity interest of that subsidiary, may be

exercised at the

~~Table of Contents~~

discretion of the noncontrolling interest holder by providing written notice to the Company beginning in 2026 and expiring in ~~2028.~~2028. The redemption value of the put and call option agreement is based on a multiple of the majority-owned subsidiary earnings before interest, taxes, depreciation and amortization subject to

certain adjustments. The noncontrolling interest is subject to a put option that is outside of the Company’s control, and is presented as redeemable non-controlling interest in the temporary equity section of the Condensed Consolidated Balance Sheets. The Company recorded its redeemable noncontrolling interest at fair value on the date of the related business combination transaction and recognizes changes in the redemption value at the end of each reporting period.

The carrying value of the redeemable noncontrolling interest was ~~$1.8~~$1.8 million as of ~~June~~September 30, 2021.


(in thousands)	September 30, 2021
Beginning Balance	$	0
Fair value at acquisition		1,804
Net loss attributable to redeemable noncontrolling interests		29
Foreign currency translation adjustment		(14	)
Ending Balance	$	1,819

(in thousands)

2021

Beginning Balance
   $ 0
Fair value at acquisition
   1,804
Net

loss
attributable to redeemable noncontrolling interests
   (14 )
Foreign currency translation adjustment
   33


Ending Balance
   $ 1,823

12.

Stock-Based Compensation

The Company has issued nonqualified stock options, restricted stock units, and performance restricted stock units under the Advantage Solutions Inc. 2020 Incentive Award Plan (the ~~“Plan”~~“Plan”). As of ~~June~~September 30, 2021, the number of nonqualified stock options outstanding was immaterial. The Company’s restricted stock units and performance restricted stock units, as described below, are expensed and reported as non-vested shares. The Company

recognized stock-based compensation expense of $

~~10.3~~

8.3 million and $

~~20.2~~

28.5 million in the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively. The related deferred tax benefit for stock-based compensation recognized was ~~$1.5~~$1.3 million and ~~$3.1~~$4.4 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021, respectively.

Performance Restricted Stock Units

Performance restricted stock units (“PSUs”) are subject to the achievement of certain performance conditions based on the Company’s ~~Revenue~~revenues and Adjusted EBITDA targets in the respective measurement period and the recipient’s continued service to the Company. The PSUs are scheduled to vest over a three-year period from the date of grant and may vest from 0%0% to ~~150%~~150% of the number of shares set forth in the table below. The number of PSUs earned shall be adjusted to be proportional to the partial performance between the Threshold Goals, Target Goals and Maximum Goals. Details for each aforementioned defined term for each grant have been provided in the table below.


(in thousands, except share and per share data) Performance Period	Number of Shares Threshold		Number of Shares Target		Number of Shares Maximum		Weighted Average Fair Value per Share		Maximum Potential Expense to be Recognized		Maximum Remaining Expense to be Recognized
January 1, 2021— December 31, 2021		1,299,140		2,598,280		3,897,405	$	13.09	$	53,897	$	39,963

Performance Period

Number of
Shares

Threshold

Number of
Shares

Target

Number of
Shares

Maximum

Weighted
Average Fair
Value per
Share

Maximum
Potential
Expense to be
Recognized *

Maximum
Remaining
Expense to be
Recognized *

January 1, 2021—December 31,

2021
1,273,231    2,546,461    3,816,120    $ 13.22    $ 50,446    $ 40,721

*	~~dollars in thousands~~

The fair value of PSU grants was equal to the closing price of ADV stock on the date of the applicable

~~grant~~

. grant. The maximum potential expense if the Maximum Goals were met for these awards has been provided in the table above.

Recognition of expense associated with performance-based stock is not permitted until achievement of the performance targets are probable of occurring.

~~Table of Contents~~

Restricted Stock Units

Restricted stock units (“RSUs”) are subject to the recipient’s continued service to the Company. The RSUs are generally scheduled to vest over three years and are subject to the provisions of the agreement under the Plan.

During the ~~six~~nine months ended ~~June~~September 30, 2021, the following activities involving RSUs occurred under the Plan:


	Number of RSUs		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2021		0	$	0
Granted		3,858,699		10.84
Vested		41,424		13.22
Forfeited		187,075		12.98
Outstanding at September 30, 2021	$	3,630,200	$	13.17

Number of RSUs

Weighted Average Grant
Date Fair Value

Outstanding at January 1, 2021
   0      $ 0
Granted
   1,825,166    $ 13.18
Vested
   41,424    $ 13.22
Forfeited
   78,816    $ 13.33




Outstanding at June 30, 2021
   1,704,926    $ 13.17

As of ~~June~~September 30, 2021, the total remaining unrecognized compensation cost related to RSUs amounted to ~~$15.9~~$28.2 million, which will be amortized over the weighted-average remaining requisite service periods of ~~2.5~~2.4 years.

13. Earnings Per Share

The Company calculates earnings per share using a dual presentation of basic and diluted earnings per share. Basic earnings per share is calculated by dividing net income (loss) attributable to stockholders of the Company by the weighted-average shares of common stock outstanding without the consideration for potential dilutive shares of common stock. Diluted earnings per share represents basic earnings per share adjusted to include the potentially dilutive effect of outstanding share option awards,

non-vested

share awards, common stock warrants, and Performance Shares (as defined below). Diluted earnings per share is computed by dividing the net income by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method and

if-converted

method, as applicable. During periods of net loss, diluted loss per share is equal to basic loss per share because the antidilutive effect of potential common shares is disregarded. As a result of the Transactions, the Company has retrospectively adjusted the weighted-average number of common shares outstanding prior to October 28, 2020 by multiplying them by the exchange ratio used to determine the number of common shares into which they converted.

~~Table of Contents~~

The following is a reconciliation of basic and diluted net earnings (loss) per common share:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except share and earnings per share data)	2021		2020		2021		2020
Basic earnings per share computation:
Numerator:
Net income (loss) attributable to stockholders of Advantage Solutions Inc.	$	23,311	$	35,949	$	29,316	$	(23,163	)
Denominator:
Weighted average common shares - basic		318,563,497		203,750,000		318,213,337		203,750,000
Basic earnings (loss) per common share	$	0.07	$	0.18	$	0.09	$	(0.11	)
Diluted earnings per share computation:
Numerator:
Net income (loss) attributable to stockholders of Advantage Solutions Inc.	$	23,311	$	35,949	$	29,316	$	(23,163	)
Denominator:
Weighted average common shares outstanding		318,563,497		203,750,000		318,213,337		203,750,000
Restricted Stock Units		1,450,668		0		1,335,011		0
Employee stock purchase plan and stock options		106,469		0		106,469		0
Weighted average common shares - diluted		320,120,634		203,750,000		319,654,817		203,750,000
Diluted earnings (loss) per common share	$	0.07	$	0.18	$	0.09	$	(0.11	)

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except share and earnings per share data)

2021

2020

2021

2020

Basic earnings per share computation:

Numerator:

Net income (loss) attributable to stockholders of Advantage Solutions Inc.
   $ 6,121    $ (37,404 )    $ 6,005    $ (59,112 )
Denominator:

Weighted average common shares—basic
   318,464,596    203,750,000    318,035,355    203,750,000








Basic earnings (loss) per common share
   $ 0.02    $ (0.18 )    $ 0.02    $ (0.29 )








Diluted earnings per share computation:

Numerator:

Net income (loss) attributable to stockholders of Advantage Solutions Inc.
   $ 6,121    $ (37,404 )    $ 6,005    $ (59,112 )
Change in fair value of warrant liability
   (7,059 )    0      (1,533 )    0

Numerator for diluted earnings per share
   (938 )    (37,404 )    4,472    (59,112 )
Denominator:

Weighted average common shares outstanding
   318,464,596    203,750,000    318,035,355    203,750,000
RSUs and PSUs
   3,457,299    0      3,207,047    0
Public and private placement warrants
   1,276,669    0      29,527    0
Employee stock purchase plan and stock options
   95,709    0      78,216    0

Weighted average common shares—diluted
   323,294,273    203,750,000    321,350,145    203,750,000








Diluted earnings (loss) per common share
   $ 0.00    $ (0.18 )    $ 0.01    $ (0.29 )

During periods of net loss, diluted loss per share is equal to basic loss per share because the antidilutive effect of potential common shares is disregarded.

As part of the Transactions, 5,000,000 shares of Class A common stock were issued to Topco at Closing (the “Performance Shares”), which were subject to vesting upon satisfaction of a market performance condition for any period of 20 trading days out of 30 consecutive trading days during the five-year period after the Closing. Topco was not able to vote or sell such shares until vesting. The Performance Shares vested on January 15, 2021, when the closing price for the Class A common stock exceeded ~~$12.00~~$12.00 per share for 20 trading days out of 30 consecutive trading days and were included in the ~~June~~September 30, 2021 earnings per share calculation.

The Company had

~~18,578,325~~

18,578,324 warrants, including

7,333,333

private placement warrants held by CP Sponsor, to purchase Class A common stock at $

11.50

per share outstanding at the Closing, and

~~5,000~~

5,001 warrants were exercised during the nine months ended September 30, 2021. The computation of diluted net income per share does 0t include the assumed exercise of warrants since that would have an antidilutive effect on earnings per share for the three and nine months ended September 30, 2021.

14. Subsequent Events

Repricing of Long-Term Debt

~~Joint Venture – Preferred Dividends~~

following the First Lien Amendment Effective Date in which a 1.00% prepayment premium shall apply to any prepayment of the term loan in connection with certain repricing events, and (ii) updating the provisions by which U.S. Dollar LIBOR will eventually be replaced with SOFR or another interest rate benchmark to reflect the most recent standards and practices used in the industry and by Bank of America.

On October 28, 2021, the Borrower and Holdings also entered into the First Amendment to ABL Revolving Credit Agreement (the “ABL Amendment”), which amended the ABL Revolving Credit Agreement, dated October 28, 2020, by and among the Borrower, Holdings, the lenders from time to time party thereto and Bank of America, as administrative agent. The ABL Amendment was entered into by the Borrower to amend certain terms and provisions, including (i) reducing the interest rate floor for Eurocurrency rate loans from 0.50% to 0.00% and base rate loans from 1.50% to 1.00%, and (ii) updating the provisions by which U.S. Dollar LIBOR will eventually be replaced with SOFR or another interest rate benchmark to reflect the most recent standards and practices used in the industry and by Bank of America.

Share Repurchase Program

On November 9, 2021, the Company ~~also has cumulative preferred dividends, undeclared~~announced that the Board of Directors authorized a new share repurchase program (the “2021 Share Repurchase Program”) pursuant to which the Company may repurchase up to $100 million of the Company’s Class A common stock. The 2021 Share Repurchase Program does not have an expiration date, but provides for suspension or discontinuation at any time. The 2021 Share Repurchase Program permits the repurchase of our Class A common stock on the open market from time to time. The timing and unpaid associated with its joint venture. These preferred shares do not represent a participating security, but preference dividends would be considered in determining income available to common stockholders. The amount of any share repurchase is subject to prevailing market conditions, relevant securities laws and other considerations, and the ~~preference dividends was immaterial~~Company is under no obligation to ~~all periods presented.~~

~~Table~~repurchase any specific number of ~~Contents~~shares.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including the section titled “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, our beliefs and our management’s assumptions. Such words as “expect,” “anticipate,” “outlook,” “could,” “target,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “should,” “may,” “assume” and “continue” as well as variations of such words and similar expressions are intended to identify such forward-looking statements, although not all forward-looking statements contain such terms. These statements are not guarantees of future performance and they involve certain risks, uncertainties and assumptions that are difficult to predict. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecasted by our forward-looking statements. More information regarding these risks and uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K/A for the year ended December 31, 2020, and Part II, Item 1A “Risk Factors” of this report. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise.

Executive Overview

We are a leading business solutions provider to consumer goods manufacturers and retailers. We have a strong platform of competitively advantaged sales and marketing services built over multiple decades – essential, business critical services like headquarter sales, retail merchandising,

in-store

sampling, digital commerce and shopper marketing. For brands and retailers of all sizes, we help get the right products on the shelf (whether physical or digital) and into the hands of consumers (however they shop). We use a scaled platform to innovate as a trusted partner with our clients, solving problems to increase their efficiency and effectiveness across a broad range of channels.

We have two reportable segments: sales and marketing.

Through our sales segment, which generated approximately ~~66.8%~~65.9% and ~~63.6%~~65.5% of our total revenues in the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively, we offer headquarter sales representation services to consumer goods manufacturers, for whom we prepare and present to retailers a business case to increase distribution of manufacturers’ products and optimize how they are displayed, priced and promoted. We also make

in-store

merchandising visits for both manufacturer and retailer clients to ensure the products we represent are adequately stocked and properly displayed.

Through our marketing segment, which generated approximately ~~33.2%~~34.1% and ~~36.4%~~34.5% of our total revenues in the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively, we help brands and retailers reach consumers through two main categories within the marketing segment. The first and largest category is our retail experiential business, also known as

in-store

sampling or demonstrations, where we manage highly customized large-scale sampling programs (both

in-store

and online) for leading retailers. The second category is our collection of specialized agency services, in which we provide private label services to retailers and develop granular marketing programs for brands and retailers through our shopper, consumer and digital marketing agencies.

Business Combination with Conyers Park

On September 7, 2020, Advantage Solutions Inc., now known as ASI Intermediate Corp. (“ASI”), entered into an agreement and plan of merger (as amended, modified, supplemented or waived, the “Merger Agreement”), with Conyers Park II Acquisition Corp., a Delaware corporation now known as Advantage Solutions Inc. (“Conyers Park”), CP II Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Conyers Park (“Merger Sub”), and Karman Topco L.P., then the parent company of ASI (“Topco”).

In September 2020 and in connection with its entry into the Merger Agreement, Conyers Park entered into subscription agreements ~~(collectively, the “Subscription Agreements”)~~ pursuant to which certain investors, including participating equity holders of Topco (the “Advantage Sponsors”), agreed to purchase Class A Common Stock of Conyers Park (“Common Stock”) at a purchase price of $10.00 per share (the “PIPE Investment”).

On October 27, 2020, Conyers Park held a special meeting of stockholders (the “Special Meeting”), at which the Conyers Park stockholders considered and adopted, among other matters, a proposal to approve the business combination, including (a) adopting the Merger Agreement and (b) approving the other transactions contemplated by the Merger Agreement and related agreements. Pursuant to the terms of the Merger Agreement, following the Special Meeting, on October 28, 2020 (the “Closing Date”), Merger Sub was merged with and into ASI with ASI being the surviving company in the merger (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Transactions”). On the Closing Date, the PIPE Investment was consummated, and 85,540,000 shares of Common Stock were sold for aggregate gross proceeds of $855.4 million. Of the 85,540,000 shares of Common Stock, the Advantage Sponsors acquired 34,410,000 shares of Common Stock, and other purchasers acquired 51,130,000 shares of Common Stock.

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Holders of 32,114,818 shares of Common Stock sold in Conyers Park’s initial public offering properly exercised their right to have such shares redeemed for a full pro rata portion of the trust account holding the proceeds therefrom, calculated as of two business days prior to the Closing Date, equal to $10.06 per share, or $323.1 million in the aggregate (collectively, the “Redemptions”).

As a result of the Merger, among other things, pursuant to the Merger Agreement, Conyers Park issued to Topco, as sole stockholder of ASI prior to the Merger, aggregate consideration equal to (a) 203,750,000 shares of Common Stock, and (b) 5,000,000 shares of Common Stock that vested upon achievement of a market performance condition on January 15, 2021 (the “Performance Shares”). After giving effect to the Transactions, the Redemptions, and the consummation of the PIPE Investment, there were 313,425,182 shares of Common Stock issued and outstanding as of the Closing Date, excluding the Performance Shares. The Common Stock and outstanding warrants of Conyers Park (renamed “Advantage Solutions Inc.” following the Transactions) commenced trading on the Nasdaq Global Select Market under the symbols “ADV” and “ADVWW”, respectively, on October 29, 2020.

As noted above, an aggregate of $323.1 million was paid from the Conyers Park’s trust account to holders in connection with the Redemptions, and the remaining balance immediately prior to the closing of the Transactions of approximately $131.2 million remained in the trust account. The remaining amount in the trust account was used to fund the Transactions, including the entry into the ~~New~~ Senior Secured Credit Facilities (as defined below).

In connection with the Merger, ASI repaid and terminated $3.3 billion of debt arrangements under its ~~First Lien Credit Agreement, Second Lien Credit Agreement,~~then first lien credit agreement, second lien credit agreement, and accounts receivable securitization facility ~~(the “AR Facility”)~~ that existed inas of September 30, 2020 (collectively, the “Prior Credit Facilities”) with incremental costs of $86.8 million. This amount was repaid by ASI through a combination of (i) cash on hand, (ii) proceeds from certain private investments in Common Stock, (iii) the entry by Advantage Sales & Marketing Inc., a wholly owned subsidiary of ASI, into (a) a ~~new~~ senior secured asset-based revolving credit facility, which permits borrowing in an aggregate principal amount of up to $400.0 million, subject to borrowing base capacity ~~(the “New Revolving~~(as may be amended from time to time, the “Revolving Credit Facility”), of which $100.0 million of principal amount was borrowed as of October 28, 2020, and (b) a ~~new~~ secured first lien term loan credit facility in an aggregate principal amount of $1.325 billion ~~(the “New Term~~(as may be amended from time to time, the “Term Loan Facility” and, together with the ~~New~~ Revolving Credit Facility, the ~~“New Senior~~“Senior Secured Credit Facilities”), and (iv) the issuance by Advantage Solutions FinCo LLC, a direct subsidiary of Advantage Sales & Marketing Inc. (“Finco”), of $775.0 million aggregate principal amount of 6.50% Senior Secured Notes due 2028 (the “Notes”).

The Merger was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, Conyers Park was treated as the “acquired” company for financial reporting purposes. This determination was primarily based on Topco having a relative majority of the voting power of the combined entity, the operations of ASI prior to the Merger comprising the only ongoing operations of the combined entity, and senior management of ASI comprising the senior management of the combined entity. Accordingly, for accounting purposes, the financial statements of the combined entity represent a continuation of the financial statements of ASI with the acquisition being treated as the equivalent of ASI issuing stock for the net assets of Conyers Park, accompanied by a recapitalization. The net assets of Conyers Park was stated at historical cost, with no goodwill or other intangible assets recorded.

Impacts of

the COVID-19 Pandemic

The

COVID-19

pandemic has had, and is likely to continue to have, a severe and unprecedented impact on the world. Measures to prevent its spread, including government-imposed restrictions on large gatherings, closures of

face-to-face

events, “shelter in place” health orders and travel restrictions have had a significant effect on certain of our business operations. In response to these business disruptions, we have taken several actions including reducing certain of our discretionary expenditures, eliminating

non-essential

travel, terminating or amending certain office leases, furloughing, instituting pay reductions and deferrals and terminating some of our employees, particularly with respect to

COVID-19

impacted operations.

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These measures to prevent the spread of

COVID-19

have adversely impacted certain areas of our business operations, including our

in-store

sampling, foodservice and international businesses. Most notably, we temporarily suspended all

in-store

sampling in all U.S. locations starting in March and April of 2020 as well as in certain international locations. While the restrictions relating to

in-store

sampling services materially and adversely affected our results of operations during the year ended December 31, 2020 and the ~~six~~nine months ended ~~June~~September 30, 2021, we have started to

re-open

in-store

sampling activities in certain retailers in certain geographies on a prudent, phased basis, and we have been successful in growing other adjacent services in our experiential marketing business such as online grocery

pick-up

sampling and virtual product demonstrations, both of which have seen increased adoption and demand. While not back to

pre-pandemic

levels, more recently, we have seen ~~growth~~recovery in our foodservice business, which was impacted by lower away-from-home demand on various channels, including restaurants, education and travel and lodging. Additionally, our international business has started to show ~~growth~~recovery after restrictions were lifted on activity in the various international geographies in which we operate.

During the year ended December 31, 2020 and the ~~six~~nine months ended ~~June~~September 30, 2021, we experienced a positive impact in our headquarter sales and private label services ~~where,~~which, due to the large increase in consumer purchases at retail to support incremental

at-home

consumption, our operations have experienced a favorable increase in volume and demand. Additionally, our

e-commerce

services have benefited due to the increase in consumer purchasing with online retailers.

These differing impacts are reflected in our financial results for the ~~six~~nine months ended ~~June~~September 30, 2021, which show that compared to the ~~six~~nine months ended ~~June~~September 30, 2020:



our sales segment revenues and operating income increased 12.1%, 38.0%, and Adjusted EBITDA ~~increased 13.2%, 126.7%, and 3.0%~~decreased 0.6%, respectively, and;



our market segment revenues and Adjusted EBITDA increased 10.2% and 16.9%, respectively, and operating income decreased ~~1.4% and 105.6%, respectively, and Adjusted EBITDA increased 20.0%~~43.4%.

We expect the ultimate significance of the impact of the pandemic on our financial condition, results of operations and cash flows will be dictated by the length of time that such circumstances continue and any future restrictions imposed on our business and operations, which will depend on the currently unknowable extent and duration of the

COVID-19

pandemic and the nature and effectiveness of governmental, commercial and personal actions taken in response. We believe the impact of the pandemic will continue to decrease induring the ~~second half~~remainder of 2021 as businesses and individuals choose to have more

in-person

activities.

Summary

Our financial performance for the three months ended ~~June~~September 30, 2021 as compared to the three months ended ~~June~~September 30, 2020 includes:



~~revenues increasing~~Revenues increased by ~~$208.4~~$144.4 million, or ~~32.5%~~18.4%, to ~~$849.9~~$928.8 million;



~~operating~~Operating income ~~increasing from zero to $42.4 million;~~

~~net income increasing~~decreased by ~~$43.6~~$23.0 million, or ~~115.2%~~25.9%, to ~~$5.8~~$65.6 million;



Net income decreased by $12.4 million, or 33.7%, to $24.3 million;



Adjusted Net Income ~~increasing~~decreased by ~~$2.6~~$6.5 million, or ~~6.7%~~9.9%, to ~~$41.4~~$59.1 million; and



Adjusted EBITDA ~~increasing~~decreased by ~~$9.9~~$2.5 million, or ~~8.9%~~1.8%, to ~~$121.9~~$133.8 million.

Our financial performance for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the ~~six~~nine months ended ~~June~~September 30, 2020 includes:



~~revenues increasing~~Revenues increased by ~~$120.0~~$264.5 million, or ~~7.9%~~11.5%, to ~~$1,640.9~~$2,569.7 million;



~~operating~~Operating income ~~increasing~~increased by ~~$48.6~~$25.6 million, or ~~154.6%~~21.4%, to ~~$42.4~~$145.6 million;



~~net~~Net income ~~increasing~~decreased by ~~$63.2~~$52.4 million, or ~~106.2%~~229.4%, to ~~$5.2~~$29.5 million;

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

Adjusted Net Income ~~increasing~~increased by ~~$22.0~~$15.5 million, or ~~33.5%~~11.8%, to ~~$87.7~~$146.8 million; and



Adjusted EBITDA ~~increasing~~increased by ~~$15.0~~$12.5 million, or ~~6.9%~~3.5%, to ~~$233.4~~$367.2 million.

During the ~~six~~nine months ended ~~June~~September 30, 2021, we acquired ~~three sales~~six businesses. The aggregate purchase price ~~for these three acquisitions~~ was ~~$27.0~~$73.5 million, of which ~~$20.4~~$40.0 million was paid in cash, ~~$5.1~~$19.9 million in contingent consideration and ~~$1.4~~$13.6 million in holdback.

Recent Developments

Repricing of Long-Term Debt

On October 28, 2021 (the “First Lien Amendment Effective Date”), Advantage Sales & Marketing Inc. (the “Borrower”), an indirect wholly-owned subsidiary of the Company, together with Karman Intermediate Corp., a Delaware corporation (“Holdings”) and certain of the Borrower’s subsidiaries, entered into Amendment No. 1 to the First Lien Credit Agreement (the “First Lien Amendment”), which amended the First Lien Credit Agreement, dated October 28, 2020, by and among the Borrower, Holdings, Bank of America, N.A., as administrative agent and collateral agent (“Bank of America”), each lender party from time to time thereto, and the other parties thereto. The First Lien Amendment was entered into by the Borrower to reduce the applicable interest rate on the term loan to 5.25% per annum, resulting in estimated interest savings of approximately $9.9 million or $7.3 million, net of tax, per annum. Additional terms and provisions amended include (i) resetting the period for six months following the First Lien Amendment Effective Date in which a 1.00% prepayment premium shall apply to any prepayment of the term loan in connection with certain repricing events, and (ii) updating the provisions by which U.S. Dollar LIBOR will eventually be replaced with SOFR or another interest rate benchmark to reflect the most recent standards and practices used in the industry and by Bank of America.

replaced with SOFR or another interest rate benchmark to reflect the most recent standards and practices used in the industry and by Bank of America.

Share Repurchase Program

On November 9, 2021, the Company announced that the Board of Directors authorized a new share repurchase program (the “2021 Share Repurchase Program”) pursuant to which the Company may repurchase up to $100 million of the Company’s Class A common stock. The 2021 Share Repurchase Program does not have an expiration date, but provides for suspension or discontinuation at any time. The 2021 Share Repurchase Program permits the repurchase of our Class A common stock on the open market from time to time. The timing and amount of any share repurchase is subject to prevailing market conditions, relevant securities laws and other considerations, and the Company is under no obligation to repurchase any specific number of shares.

Factors Affecting Our Business and Financial Reporting

There are a number of factors, in addition to the impact of the

ongoing COVID-19 pandemic,

that affect the performance of our business and the comparability of our results from period to period including:



Organic Growth.

Part of our strategy is to generate organic growth by expanding our existing client relationships, continuing to win new clients, pursuing channel expansion and new industry opportunities, enhancing our digital technology solutions, developing our international platform, delivering operational efficiencies and expanding into logical adjacencies. We believe that by pursuing these organic growth opportunities we will be able to continue to enhance our value proposition to our clients and thereby grow our business.



Acquisitions.

We have grown and expect to continue to grow our business in part by acquiring quality businesses, both domestic and international. In December 2017, we completed the acquisition of Daymon Worldwide Inc., a leading provider of private label development and management, merchandising and experiential marketing services. In addition to the Daymon acquisition, we have completed 6669 acquisitions from January 2014 to ~~June~~September 30, 2021, ranging in purchase prices from approximately $0.3 million to $98.5 million. Many of our acquisition agreements include contingent consideration arrangements, which are described below. We have completed acquisitions at what we believe are attractive purchase prices and have regularly structured our agreements to result in the generation of long-lived tax assets, which have in turn reduced our effective purchase prices when incorporating the value of those tax assets. We continue to look for strategic and

tuck-in

acquisitions that can be completed at attractive purchase prices.



Contingent Consideration.

Many of our acquisition agreements include contingent consideration arrangements, which are generally based on the achievement of financial performance thresholds by the operations attributable to the acquired businesses. The contingent consideration arrangements are based upon our valuations of the acquired businesses and are intended to share the investment risk with the sellers of such businesses if projected financial results are not achieved. The fair values of these contingent consideration arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. For each transaction, we estimate the fair value of contingent consideration payments as part of the initial purchase price. We review and assess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from our initial estimates. Changes in the estimated fair value of contingent consideration liabilities related to the time component of the present value calculation are reported in “Interest expense, net.” Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in “Selling, general and administrative expenses” in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).



Depreciation and Amortization.

As a result of the acquisition of our business by Topco on July 25, 2014 (the “2014 Topco Acquisition”), we acquired significant intangible assets, the value of which is amortized, on a straight-line basis, over 15 years from the date of the 2014 Topco Acquisition, unless

determined to be indefinite-lived. The amortization of such intangible assets recorded in our consolidated financial statements has a significant impact on our operating income (loss) and net income (loss). Our historical acquisitions have increased, and future acquisitions likely will increase, our intangible assets. We do not believe the amortization expense associated with the intangibles created from our purchase accounting adjustments reflect a material economic cost to our business. Unlike depreciation expense which has an economic cost reflected by the fact that we must re-invest in property and equipment to maintain the asset base delivering our results of operations, we do not have any capital re-investment requirements associated with the acquired intangibles, such as client relationships and trade names, that comprise the majority of the finite-lived intangibles that create our amortization expense.



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~~accounting adjustments reflect a material economic cost to our business. Unlike depreciation expense which has an economic cost reflected by the fact that we must~~

~~re-invest~~

~~in property and equipment to maintain the asset base delivering our results of operations, we do not have any capital~~

~~re-investment~~

~~requirements associated with the acquired intangibles, such as client relationships and trade names, that comprise the majority of the finite-lived intangibles that create our amortization expense.~~

Foreign Exchange Fluctuations.

Our financial results are affected by fluctuations in the exchange rate between the U.S. dollar and other currencies, primarily Canadian dollars, British pounds and euros, due to our operations in such foreign jurisdictions. See also “

—Quantitative and Qualitative Disclosure of Market Risk—Foreign Currency Risk.

”



Seasonality.

Our quarterly results are seasonal in nature, with the fourth fiscal quarter typically generating a higher proportion of our revenues than other fiscal quarters, as a result of higher consumer spending. We generally record slightly lower revenues in the first fiscal quarter of each year, as our clients begin to roll out new programs for the year, and consumer spending generally is less in the first fiscal quarter than other quarters. Timing of our clients’ marketing expenses, associated with marketing campaigns and new product launches, can also result in fluctuations from one quarter to another.

How We Assess the Performance of Our Business

Revenues

Revenues related to our sales segment are primarily comprised of commissions,

fee-for-service

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

Marketing segment revenues are primarily recognized in the form of a

fee-for-service

~~(including~~ (including retainer fees, fees charged to clients based on hours incurred, project-based fees or fees for executing

in-person

consumer engagements or experiences, which engagements or experiences we refer to as events), commissions or on a cost-plus basis, in each case, related to services including experiential marketing, shopper and consumer marketing services, private label development or our digital, social and media services.

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

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

In general, when we acquire a business, the acquisition includes a contingent consideration arrangement (e.g., an

earn-out

provision) and, accordingly, we separately track the financial performance of the acquired business. In such cases, we consider revenues generated by such a business during the 12 months following its acquisition to be acquired revenues. For example, if we completed an acquisition on July 1, ~~2019~~2020 for a business that included a contingent consideration arrangement, we would consider revenues from the acquired business from July 1, ~~2019~~2020 to June 30, ~~2020~~2021 to be acquired revenues. We generally consider growth attributable to the financial performance of an acquired business after the

12-month

anniversary of the date of acquisition to be organic.

In limited cases, when the acquisition of an acquired business does not include a contingent consideration arrangement, or we otherwise do not separately track the financial performance of the acquired business due to operational integration, we consider the revenues that the business generated in the 12 months prior to its acquisition to be our acquired revenues for the 12 months following its acquisition, and any differences in revenues

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actually generated during the 12 months after its acquisition to be organic. For example, if we completed an acquisition on July 1, ~~2020~~2021 for a business that did not include a contingent consideration arrangement, we would consider the amount of revenues from the acquired business from July 1, ~~2019~~2020 to June 30, ~~2020~~2021 to be acquired revenues during the period from July 1, ~~2020~~2021 to June 30, ~~2021,~~2022, with any differences from that amount actually generated during the latter period to be organic revenues.

All revenues generated by our acquired businesses are considered to be organic revenues

after the 12-month anniversary of

the date of acquisition.

When we divest a business, we consider the revenues that the divested business generated in the 12 months prior to its divestiture to be subtracted from acquired revenues for the 12 months following its divestiture. For example, if we completed a divestiture on July 1, ~~2020~~2021 for a business, we would consider the amount of revenues from the divested business from July 1, ~~2019~~2020 to June 30, ~~2020~~2021 to be subtracted from acquired revenues during the period from July 1, ~~2020~~2021 to June 30, ~~2021.~~

2022.

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

Cost of Revenues

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

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries, payroll taxes and benefits for corporate personnel. Other overhead costs include information technology, occupancy costs for corporate personnel, professional services fees, including accounting and legal services, and other general corporate expenses. Additionally, included in selling, general and administrative expenses are costs associated with the changes in fair value of the contingent consideration of acquisitions and other acquisition-related costs. Acquisition-related costs are comprised of fees related to change of equity ownership, transaction costs, professional fees, due diligence and integration activities.

We also expect to incur additional expenses as a result of operating as a public company, including expenses necessary to comply with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance and reporting obligations pursuant to the rules and regulations of the ~~SEC,~~Securities and Exchange Commission, as well as higher expenses for general and director and officer insurance, investor relations, and professional services.

Other (Income) Expenses

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability represents a

non-cash

(income) expense resulting from a fair value adjustment to warrant liability with respect to the private placement warrants and based on the input assumptions used in the Black-Scholes option pricing model, including our stock price at the end of the reporting period, the implied volatility or other inputs to the model and the number of private placement warrants outstanding, which may vary from period to period. We believe these amounts are not correlated to future business operations.

~~Table of Contents~~

Interest Expense

Interest expense relates primarily to borrowings under our first lien credit agreement and second lien credit agreement, which were paid off in connection with the Merger, and ~~New~~ Senior Secured Credit Facilities as described below. See “ —

Liquidity and Capital Resources

.”

Depreciation and Amortization

Amortization Expense

Included in our depreciation and amortization expense is amortization of acquired intangible assets. We have ascribed value to identifiable intangible assets other than goodwill in our purchase price allocations for companies we have acquired. These assets include, but are not limited to, client relationships and trade names. To the extent we ascribe value to identifiable intangible assets that have finite lives, we amortize those values over the estimated useful lives of the assets. Such amortization expense, although

non-cash

in the period expensed, directly impacts our results of operations. It is difficult to predict with any precision the amount of expense we may record relating to future acquired intangible assets.

As a result of the 2014 Topco Acquisition, we acquired significant intangible assets, the value of which is amortized, on a straight-line basis, over 15 years from the date of the 2014 Topco Acquisition, unless determined to be indefinite-lived. We recognized a

non-cash

intangible asset impairment charge of $580.0 million during the year ended December 31, 2018, related to our sales trade name resulting from the 2014 Topco Acquisition considered to be indefinite lived. The impairment charge has been reflected in “Impairment of goodwill and indefinite-lived assets” in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), in addition to a $652.0 million

non-cash

goodwill impairment charge in the sales reporting unit.

Depreciation Expense

Depreciation expense relates to the property and equipment that we own, which represented less than 1% of our total assets at ~~June~~September 30, 2021.

Income Taxes

Income tax (benefit) expense and our effective tax rates can be affected by many factors, including state apportionment factors, our acquisition strategy, tax incentives and credits available to us, changes in judgment regarding our ability to realize our deferred tax assets, changes in our worldwide mix of

pre-tax

losses or earnings, changes in existing tax laws and our assessment of uncertain tax positions.

Cash Flows

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

—Liquidity and Capital Resources.

”

Prior to the consummation of the Transactions (including our entry into the ~~New~~ Senior Secured Credit Facilities), our principal sources of liquidity have been cash flows from operations, borrowings under ~~the Revolving Credit Facility (as herein defined)~~various revolving credit facilities and other debt. Following the Transactions, our principal sources of liquidity are cash flows from operations, borrowings under the ~~New~~ Revolving Credit Facility, and other debt. Our principal uses of cash are operating expenses, working capital requirements, acquisitions and repayment of debt.

Adjusted Net Income

Adjusted Net Income is a

non-GAAP

financial measure. Adjusted Net Income means net income (loss) before (i) impairment of goodwill and indefinite-lived assets, (ii) amortization of intangible assets, (iii) equity based compensation of Topco and Advantage Sponsors’ management fee, (iv) changes in fair value of warrant liability, (v) fair value adjustments of contingent consideration related to acquisitions, (vi) acquisition-related expenses, (vii) costs associated with

COVID-19,

net of benefits received, (viii) EBITDA for economic interests in investments, (ix) restructuring expenses, (x) litigation expenses, (xi) (Recovery from) loss on Take 5, (xii) deferred financing fees, (xiii) costs associated with the Take 5 Matter, (xiv) other adjustments that management believes are helpful in evaluating our operating performance and (xv) related tax adjustments.

~~Table of Contents~~

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

Adjusted EBITDA and Adjusted EBITDA by Segment

Adjusted EBITDA and Adjusted EBITDA by segment are supplemental

non-GAAP

financial measures of our operating performance. Adjusted EBITDA means net income (loss) before (i) interest expense, net, (ii) (benefit from) provision for income taxes, (iii) depreciation, (iv) impairment of goodwill and indefinite-lived assets, (v) amortization of intangible assets, (vi) equity based compensation of Topco and Advantage Sponsors’ management fee, (vii) changes in fair value of warrant liability, (viii) stock-based compensation expense, (ix) fair value adjustments of contingent consideration related to acquisitions, (x) acquisition-related expenses, (xi) costs associated with

COVID-19,

net of benefits received, (xii) EBITDA for economic interests in investments, (xiii) restructuring expenses, (xiv) litigation expenses, (xv) (Recovery from) loss on Take 5, (xvi) costs associated with the Take 5 Matter and (xvii) other adjustments that management believes are helpful in evaluating our operating performance.

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

~~Table of Contents~~

Results of Operations for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020

The following table sets forth items derived from the Company’s consolidated statements of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 in dollars and as a percentage of total revenues.


	Three Months Ended September 30,									Nine Months Ended September 30,
(amounts in thousands)	2021					2020				2021					2020
Revenues	$	928,760		100.0	%	$	784,345	100.0	%	$	2,569,735		100.0	%	$	2,305,284		100.0	%
Cost of revenues		766,253		82.5	%		625,363	79.7	%		2,117,818		82.4	%		1,881,979		81.6	%
Selling, general, and administrative expenses		37,742		4.1	%		11,855	1.5	%		124,830		4.9	%		133,480		5.8	%
Recovery from Take 5		—		0.0	%		—	0.0	%		—		0.0	%		(7,700	)	(0.3	)%
Depreciation and amortization		59,163		6.4	%		58,556	7.5	%		181,450		7.1	%		177,513		7.7	%
Total expenses		863,158		92.9	%		695,774	88.7	%		2,424,098		94.3	%		2,185,272		94.8	%
Operating income		65,602		7.1	%		88,571	11.3	%		145,637		5.7	%		120,012		5.2	%
Other (income) expenses:
Change in fair value of warrant liability		(3,491	)	(0.4	)%		—	0.0	%		(5,024	)	(0.2	)%		—		0.0	%
Interest expense, net		36,490		3.9	%		48,243	6.2	%		104,544		4.1	%		151,558		6.6	%
Total other expenses		32,999		3.6	%		48,243	6.2	%		99,520		3.9	%		151,558		6.6	%
Income (loss) before income taxes		32,603		3.5	%		40,328	5.1	%		46,117		1.8	%		(31,546	)	(1.4	)%
Provision for (benefit from) income taxes		8,276		0.9	%		3,623	0.5	%		16,582		0.6	%		(8,714	)	(0.4	)%
Net income (loss)	$	24,327		2.6	%	$	36,705	4.7	%	$	29,535		1.1	%	$	(22,832	)	(1.0	)%
Other Financial Data
Adjusted Net Income(1)	$	59,101		6.4	%	$	65,607	8.4	%	$	146,762		5.7	%	$	131,258		5.7	%
Adjusted EBITDA(1)	$	133,756		14.4	%	$	136,253	17.4	%	$	367,155		14.3	%	$	354,648		15.4	%

(1)

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

Three Months Ended June 30,

Six Months Ended June 30,

(amounts in thousands)

2021

2020

2021

2020

Revenues
   $ 849,954 100.0 % $ 641,543 100.0 % $ 1,640,975 100.0 % $ 1,520,939 100.0 %
Cost of revenues
   698,226 82.1 % 509,923 79.5 % 1,351,565 82.4 % 1,256,616 82.6 %
Selling, general, and administrative expenses
   46,607 5.5 % 80,569 12.6 % 87,088 5.3 % 121,625 8.0 %
Recovery from Take 5
   —   0.0 % (7,700 ) (1.2 )% —   0.0 % (7,700 ) (0.5 )%
Depreciation and amortization
   62,674 7.4 % 58,748 9.2 % 122,287 7.5 % 118,957 7.8 %


Total expenses
   807,507 95.0 % 641,540 100.0 % 1,560,940 95.1 % 1,489,498 97.9 %


Operating income
   42,447 5.0 % 3 0.0 % 80,035 4.9 % 31,441 2.1 %
Other (income) expenses:

Change in fair value of warrant liability
   (7,059 ) (0.8 )% —   0.0 % (1,533 ) (0.1 )% —   0.0 %
Interest expense, net
   37,189 4.4 % 51,521 8.0 % 68,054 4.1 % 103,315 6.8 %


Total other (income) expenses
   30,130 3.5 % 51,521 8.0 % 66,521 4.1 % 103,315 6.8 %
Income (loss) before income taxes
   12,317 1.4 % (51,518 ) (8.0 )% 13,514 0.8 % (71,874 ) (4.7 )%
Provision for (benefit from) income taxes
   6,563 0.8 % (13,704 ) (2.1 )% 8,306 0.5 % (12,337 ) (0.8 )%


Net income (loss)
   $ 5,754 0.7 % $ (37,814 ) (5.9 )% $ 5,208 0.3 % $ (59,537 ) (3.9 )%


Other Financial Data

Adjusted Net Income
(1)
   $ 41,397 4.9 % $ 38,802 6.0 % $ 87,661 5.3 % $ 65,651 4.3 %
Adjusted EBITDA
(1)
   $ 121,971 14.4 % $ 112,044 17.5 % $ 233,399 14.2 % $ 218,395 14.4 %

~~(1)~~

Adjusted Net Income and Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP. For a discussion of our presentation of Adjusted Net Income and Adjusted EBITDA and reconciliations of net income (loss) to Adjusted Net Income and Adjusted EBITDA, see “

~~—Non-GAAP~~

~~Financial Measures~~

.”

Comparison of the Three Months Ended ~~June~~September 30, 2021 and 2020

Revenues

Three Months Ended June 30,

Change

(amounts in thousands)

2021

2020

$

%

Sales
   $ 561,644    $ 460,239    $ 101,405    22.0 %
Marketing
   288,310    181,304    107,006    59.0 %








Total revenues
   $ 849,954    $ 641,543    $ 208,411    32.5 %


	Three Months Ended September 30,				Change
(amounts in thousands)	2021		2020		$		%
Sales	$	597,139	$	542,062	$	55,077		10.2	%
Marketing		331,621		242,283		89,338		36.9	%
Total revenues	$	928,760	$	784,345	$	144,415		18.4	%

Total revenues increased by ~~$208.4~~$144.4 million, or ~~32.5%~~18.4%, during the three months ended ~~June~~September 30, 2021, as compared to the three months ended ~~June~~September 30, 2020.

The sales segment revenues increased ~~$101.4~~$55.1 million, of which ~~$3.7~~$22.3 million were revenues from acquired businesses during the three months ended ~~June~~September 30, 2021 as compared to the three months ended ~~June~~September 30, 2020. Excluding revenues from acquired businesses, ~~and favorable foreign exchange rates of $10.4 million,~~ the segment experienced an increase of ~~$87.3~~$32.8 million in organic revenues primarily due to growth in our retail merchandising services ~~where we~~that benefitted from ~~expansions with existing and~~several new clients and our ~~international and foodservice~~European businesses ~~which~~that experienced recoveries from temporary ~~reductions~~reduction in services as a result of the

COVID-19

pandemic. ~~The growth was offset by reduction in our headquarter sales where, due to the large increase in consumer purchases at retail to support incremental~~

~~at-home~~

~~consumption, our operations had experienced a favorable increase in volume and demand in the prior year.~~

~~Table of Contents~~

The marketing segment revenues increased ~~$107.0~~$89.3 million, of which $4.1 million were revenues from acquired businesses during the three months ended ~~June~~September 30, 2021 as compared to the three months ended ~~June~~September 30, ~~2020, which includes revenues of $3.1 million from acquired businesses.~~2020. Excluding revenues from acquired businesses, ~~and favorable foreign exchange rates of $2.1 million,~~ the segment experienced an increase of ~~$101.8~~$85.2 million in organic revenues. The increase in revenues was primarily due to an increase in our

in-store

product demonstration

and sampling services which continue to recover from ~~gradually lifting~~the temporary suspensions put in place last year as a result of ~~recovery from~~ the

COVID-19

pandemic and ~~continued~~sustained growth in our digital marketing services.

Cost of Revenues

Cost of revenues as a percentage of revenues for the three months ended ~~June~~September 30, 2021 was ~~82.1%~~82.5%, as compared to ~~79.5%~~79.7% for the three months ended ~~June~~September 30, 2020. The increase as a percentage of revenues was largely attributable to the change in the revenue mix of our services as a result of recoveries from the

COVID-19

pandemic and continued investment in our merchandising work force and to stand up associates on behalf of clients to restart services which were dormant during

COVID-19.

Selling, General and Administrative Expenses

Selling, general and administrative expenses as a percentage of revenues for the three months ended ~~June~~September 30, 2021 was ~~5.5%~~4.1%, as compared to ~~12.6%~~1.5% for the three months ended ~~June~~September 30, 2020. The ~~decrease~~increase as a percentage of revenues for the three months ended ~~June~~September 30, 2021 was primarily attributable to ~~$39.6 million decrease~~the change in restructuring ~~charges primarily associated with terminating~~expenses as a result of favorable settlement of lease liability obligations for certain ~~office~~exited leases, ~~$2.1 million decrease in acquisition-related expenses, partially offset by $9.0 million increase in stock-based compensation expense related to issuance~~net of performance restricted stock units (“PSUs”) and restricted stock units (“RSUs”) with respect to our Class A common stock under the Advantage Solutions Inc. 2020 Incentive Award Plan (the “2020 Plan”).

~~Depreciation and Amortization Expense~~

Depreciation and amortization expense increased $3.9 million, or 6.7%, to $62.7 million for the three months ended June 30, 2021, from $58.7 million for the three months June 30, 2020. The increase is primarily due to increase in depreciation expenses from our internally developed software and additional amortization of intangibles assets from acquisitions.

~~Operating Income~~

Three Months Ended June 30,

Change

(amounts in thousands)

2021

2020

$

%

Sales
   $ 44,673    $ 11,021    $ 33,652    305.3 %
Marketing
   (2,226 )    (11,018 )    8,792    (79.8 )%








Total operating income
   $ 42,447    $ 3    $ 42,444    *

*	~~Not meaningful~~

~~In the sales segment, the increase in operating income~~termination fees paid during the three months ended June 30, 2021 was primarily attributable to growth in revenues as described above together with the decrease in restructuring charges primarily associated with terminating certain office leasesprior year and the change in fair value adjustments related to contingent consideration.

Depreciation and Amortization Expense

Depreciation and amortization expense stayed relatively consistent at $59.2 million for the three months ended September 30, 2021 compared to $58.6 million for the three months September 30, 2020.

Operating Income


	Three Months Ended September 30,				Change
(amounts in thousands)	2021		2020		$			%

Sales	$	51,906	$	60,205	$	(8,299	)		(13.8	%)
Marketing		13,696		28,366		(14,670	)		(51.7	%)
Total operating income	$	65,602	$	88,571	$	(22,969	)		(25.9	%)

In the sales and marketing ~~segment,~~segments, the ~~increase~~decrease in operating income during the three months ended ~~June~~September 30, 2021 was primarily attributable to ~~the decrease in restructuring charges primarily~~lapping favorable settlements of lease liability obligations associated with ~~terminating certain office leases, partially offset by the~~real estate realignment initiatives in 2020, a non-cash change in fair value adjustments related to contingent ~~consideration and recovery from Take 5 as described above.~~

~~Table of Contents~~

consideration.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability represents ~~$7.1~~$3.5 million of

non-cash

gain resulting from a fair value adjustment to warrant liability with respect to the private placement warrants for the three months ended ~~June~~September 30, 2021. Fair value adjustments are based on the input assumptions used in the Black-Scholes option pricing model, including our Class A common stock price at the end of the reporting period, the implied volatility or other inputs to the model and the number of private placement warrants outstanding, which may vary from period to period.

Interest Expense, net

Interest expense decreased ~~$14.3~~$11.8 million, or ~~27.8%~~24.4%, to ~~$37.2~~$36.5 million for the three months ended ~~June~~September 30, 2021, from ~~$51.5~~$48.2 million for the three months ended ~~June~~September 30, 2020. The decrease in interest expense, net was primarily due to the decrease in total debt as a result of the Transactions.

Provision for ~~(benefit from)~~ Income Taxes

Provision for income taxes was ~~$6.6~~$8.3 million for the three months ended ~~June~~September 30, 2021 as compared to ~~a benefit from income taxes of $13.7~~$3.6 million for the three months ended ~~June~~September 30, 2020. The ~~fluctuation~~increase was primarily attributable to the ~~greater~~

~~pre-tax~~

income, unfavorable permanent book/tax differences related to officers’ compensation including stock based awards and discrete items recorded for the three months ended June 30, 2021 related to the remeasurement of deferred tax liabilitiesvariations in the ~~UK and US state jurisdictions due to~~ income ~~tax rate changes.~~

(loss) before income taxes from the respective previous quarters.

Net Income

Net income was ~~$5.8~~$24.3 million for the three months ended ~~June~~September 30, 2021, compared to net ~~loss~~income of ~~$37.8~~$36.7 million for the three months ended ~~June~~September 30, 2020. The ~~increase~~decrease in net income was primarily driven by the ~~increase~~decrease in operating income and ~~decrease in interest expense as a result of the consummation of the Transactions and the fair value adjustment of warrant liability partially offset by~~ unfavorable variance associated with the provision for income taxes, ~~as described above.~~

~~Adjusted Net Income~~

~~The increase in Adjusted Net Income for the three months ended June 30, 2021 was attributable to~~partially offset by the decrease in interest expense as a result of the consummation of the Transactions ~~and~~as described above.

Adjusted Net Income

The decrease in Adjusted Net Income for the three months ended September 30, 2021 was attributable to the increase in provision for income ~~taxes.~~taxes as described above. For a reconciliation of Adjusted Net Income to Net income (loss), see “ —

Non-GAAP

Financial Measures.”

Adjusted EBITDA and Adjusted EBITDA by Segment

Three Months Ended June 30,

Change

(amounts in thousands)

2021

2020

$

%

Sales
   $ 89,523    $ 90,020    $ (497 )    (0.6 )%
Marketing
   32,448    22,024    10,424    47.3 %








Total Adjusted EBITDA
   $ 121,971    $ 112,044    $ 9,927    8.9 %


	Three Months Ended September 30,				Change
(amounts in thousands)	2021		2020		$			%

Sales	$	95,199	$	101,926	$	(6,727	)		(6.6	)%
Marketing		38,557		34,327		4,230			12.3	%
Total Adjusted EBITDA	$	133,756	$	136,253	$	(2,497	)		(1.8	)%

Adjusted EBITDA ~~increased $9.9~~decreased $2.5 million, or ~~8.9 %,~~1.8%, to ~~$122.0~~$133.8 million for the three months ended ~~June~~September 30, 2021, from ~~$112.0~~$136.3 million for the three months ended ~~June~~September 30, 2020.

The ~~increase~~decrease in Adjusted EBITDA was primarily attributable to the ~~growth~~investment to stand up our associates on behalf of clients in ~~revenues as described above.~~ our retail merchandising segment and the sampling and demonstration business that is recovering from shut downs caused by the COVID-19 pandemic and by expected volume normalization in our headquarter sales services against last year’s pantry loading at-home.For a reconciliation of Adjusted EBITDA to net income, see “—

Non-GAAP

Financial Measures

.”

~~Table of Contents~~

Comparison of the ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020

Revenues

Six Months Ended June 30,

Change

(amounts in thousands)

2021

2020

$

%

Sales
   $ 1,095,968    $ 968,037    $ 127,931    13.2 %
Marketing
   545,007    552,902    (7,895 )    (1.4 )%








Total revenues
   $ 1,640,975    $ 1,520,939    $ 120,036    7.9 %


	Nine Months Ended September 30,				Change
(amounts in thousands)	2021		2020		$		%
Sales	$	1,693,107	$	1,510,099	$	183,008		12.1	%
Marketing		876,628		795,185		81,443		10.2	%
Total revenues	$	2,569,735	$	2,305,284	$	264,451		11.5	%

Total revenues increased by ~~$120.0~~$264.5 million, or ~~7.9%~~11.5%, during the ~~six~~nine months ended ~~June~~September 30, 2021, as compared to the ~~six~~nine months ended ~~June~~September 30, 2020.

The sales segment revenues increased ~~$127.9~~$183.0 million, of which ~~$6.1~~$28.4 million were revenues from acquired businesses during the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the ~~six~~nine months ended ~~June~~September 30, 2020. Excluding revenues from acquired businesses, ~~and favorable foreign exchange rates of $17.1 million,~~ the segment experienced an increase of ~~$104.7~~$154.6 million in organic revenues primarily due to growth in our ~~headquarter and~~ retail ~~merchandising~~ services ~~where we~~that benefitted from ~~expansions with existing and~~several new clients, ~~and an increase in~~

~~eat-at-home~~

~~consumption due to the~~

~~COVID-19~~

~~pandemic,~~ expansion in our

e-commerce

services, and our European businesses which experienced recoveries from temporary ~~reductions~~reduction in services as a result of the

COVID-19

pandemic.

The marketing segment revenues ~~declined $7.9~~increased $81.4 million, of which $11.1 million were revenues from acquired businesses during the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to the ~~six~~nine months ended ~~June~~September 30, ~~2020, which includes revenues of $7.0 million from acquired businesses.~~2020. Excluding revenues from acquired businesses, ~~and favorable foreign exchange rates of $4.2 million,~~ the segment experienced ~~a decline~~an increase of ~~$19.1~~$70.3 million in organic revenues. The ~~slight decrease~~increase in revenues was primarily due to ~~the gradual lifting of temporary suspensions or reductions of certain~~

~~in-store~~

~~sampling services as a result of the~~

~~COVID-19~~

~~pandemic partially offset by~~ continued growth in our digital marketing services.

Our product demonstration and sampling revenues were consistent with prior year for the nine months ended September 30, 2021, which included a decline in first quarter this year as compared to the first quarter of 2020, which was largely at full scale pre-pandemic, and growth in the subsequent two quarters this year.

Cost of Revenues

Cost of revenues as a percentage of revenues for the ~~six~~nine months ended ~~June~~September 30, 2021 was 82.4%, as compared to ~~82.6%~~81.6% for the ~~six~~nine months ended ~~June~~September 30, 2020, which is relatively consistent year over year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses as a percentage of revenues for ~~the six~~nine months ended ~~June~~September 30, 2021 was ~~5.3%~~4.9%, as compared to ~~8.0%~~5.8% for the ~~six~~nine months ended ~~June~~September 30, 2020. The decrease as a percentage of revenues for the ~~six~~nine months ended ~~June~~September 30, 2021 was primarily attributable to ~~$36.6 million~~a decrease in restructuring charges primarily associated with terminating certain office leases ~~$12.5 million~~and a decrease in equity-based compensation expense associated with our Common Series D Units ~~and $5.7 million of the change in fair value adjustments related to contingent consideration,~~ partially offset by ~~$17.6 million of~~ stock-based compensation ~~expense related to issuance of PSUs and RSUs~~expense. In connection with ~~respect to our Class A common stock under~~ the Transactions, we adopted the Advantage Solutions Inc. 2020 ~~Plan.~~

Incentive Award Plan (the “2020 Plan”) with awards granted during the nine months ended September 30, 2021.

Depreciation and Amortization Expense

Depreciation and amortization expense increased ~~$3.3~~$3.9 million, or ~~2.8%~~2.2%, to ~~$122.3~~$181.5 million for the ~~six~~nine months ended ~~June~~September 30, 2021, from ~~$119.0~~$177.5 million for the ~~six~~nine months ~~June~~ended September 30, 2020. The increase is primarily due to additional amortization expenses of intangibles from acquisitions.

~~Table of Contents~~

Operating Income

Six Months Ended June 30,

Change

(amounts in thousands)

2021

2020

$

%

Sales
   $ 79,822    $ 35,215    $ 44,607    126.7 %
Marketing
   213    (3,774 )    3,987    (105.6 )%








Total operating income
   $ 80,035    $ 31,441    $ 48,594    154.6 %


	Nine Months Ended September 30,				Change
(amounts in thousands)	2021		2020		$			%
Sales	$	131,727	$	95,420	$	36,307			38.0	%
Marketing		13,910		24,592		(10,682	)		(43.4	)%
Total operating income	$	145,637	$	120,012	$	25,625			21.4	%

In the sales segment, the increase in operating income during the ~~six~~nine months ended ~~June~~September 30, 2021 was primarily attributable to growth in revenues together with the change in fair value adjustments related to contingent consideration and the decrease in selling, general and administrative expenses as described ~~above together with our cost saving initiatives in response to~~

~~COVID-19~~

~~pandemic.~~

above.

In the marketing segment, the ~~increase~~decrease in operating income during the ~~six~~nine months ended ~~June~~September 30, 2021 was primarily attributable to the change in fair value adjustments related to contingent consideration and the decrease in recovery from the Take 5 Matter partially offset by growth in revenues and the ~~cost saving initiatives~~decrease in ~~response to~~

~~COVID-19~~

~~pandemic, partially offset by recovery from Take 5~~ selling, general and administrative expenses as described above.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability represents ~~$1.5~~$5.0 million of

non-cash

gain resulting from a fair value adjustment to warrant liability with respect to the private placement warrants for the ~~six~~nine months ended ~~June~~September 30, 2021. Fair value adjustment are based on the input assumptions used in the Black-Scholes option pricing model, including our Class A common stock price at the end of the reporting period, the implied volatility or other inputs to the model and the number of private placement warrants outstanding, which may vary from period to period.

Interest Expense, net

Interest expense decreased ~~$35.3~~$47.0 million, or ~~34.1%~~31.0%, to ~~$68.1~~$105.5 million for the ~~six~~nine months ended ~~June~~September 30, 2021, from ~~$103.3~~$151.6 million for the ~~six~~nine months ended ~~June~~September 30, 2020. The decrease in interest expense, net was primarily due to the decrease in total debt as a result of the Transactions.

Provision for (benefit from) Income Taxes

Provision for income taxes was ~~$8.3~~$16.6 million for the ~~six~~nine months ended ~~June~~September 30, 2021 as compared to a benefit from income taxes of ~~$12.3~~$8.7 million for the ~~six~~nine months ended ~~June~~September 30, 2020. The fluctuation was primarily attributable to income before taxes during the ~~greater~~

~~pre-tax~~

~~income, unfavorable permanent differences related~~nine months ended September 30, 2021 compared to ~~officers’ compensation including stock based awards and~~a loss before taxes during the nine months ended September 30, 2020. In addition, discrete items ~~recorded for~~during the ~~six~~nine months ended ~~June~~September 30, 2021 related to a valuation allowance for the Company’s Mexico operations and the remeasurement of deferred tax liabilities in the UK and US state jurisdictions due to income tax rate changes.

Net Income

Net income was ~~$5.2~~$29.5 million for the ~~six~~nine months ended ~~June~~September 30, 2021, compared to net loss of ~~$59.5~~$22.8 million for the ~~six~~nine months ended ~~June~~September 30, 2020. The increase in net income was primarily driven by the increase in operating income and decrease in interest expense as a result of the consummation of the Transactions partially offset by unfavorable variances associated with the provision for income taxes as described above.

Adjusted Net Income

The increase in Adjusted Net Income for the ~~six~~nine months ended ~~June~~September 30, 2021 was attributable to the decrease in interest expense as a result of the consummation of the Transactions and change in fair value of warrant liability partially offset by recovery from the Take 5 Matter and the increase in provision for income ~~taxes.~~taxes as described above. For a reconciliation of Adjusted Net Income to Net income (loss), see “—

Non-GAAP

Financial Measures.”

~~Table of Contents~~

Adjusted EBITDA and Adjusted EBITDA by Segment

Six Months Ended June 30,

Change

(amounts in thousands)

2021

2020

$

%

Sales
   $ 173,600    $ 168,583    $ 5,017    3.0 %
Marketing
   59,799    49,812    9,987    20.0 %








Total Adjusted EBITDA
   $ 233,399    $ 218,395    $ 15,004    6.9 %


	Nine Months Ended September 30,				Change
(amounts in thousands)	2021		2020		$			%
Sales	$	268,798	$	270,509	$	(1,711	)		(0.6	)%
Marketing		98,357		84,139		14,218			16.9	%
Total Adjusted EBITDA	$	367,155	$	354,648	$	12,507			3.5	%

Adjusted EBITDA increased ~~$15.0~~$12.5 million, or ~~6.9 %,~~3.5%, to ~~$233.4~~$367.2 million for the ~~six~~nine months ended ~~June~~September 30, 2021, from ~~$218.4.0~~$354.6 million for the ~~six~~nine months ended ~~June~~September 30, 2020.

The increase in Adjusted EBITDA was primarily attributable to the growth in revenues as described ~~above.~~above partially offset by investment in recruiting to build-back our workforce impacted by the COVID-19 pandemic. For a reconciliation of Adjusted EBITDA to net income, see “—

Non-GAAP

Financial Measures

.”

~~Table of Contents~~

Non-GAAP Financial

Measures

Adjusted Net Income is a

non-GAAP

financial measure. Adjusted Net Income means net income (loss) before (i) impairment of goodwill and indefinite-lived assets, (ii) amortization of intangible assets, (iii) equity based compensation of Topco and Advantage Sponsors’ management fee, (iv) change in fair value of warrant liability, (v) fair value adjustments of contingent consideration related to acquisitions, (vi) acquisition-related expenses, (vii) costs associated with

COVID-19,

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

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

Three Months Ended June 30,

Six Months Ended June 30,


2021

2020

2021

2020

(in thousands)

Net income (loss)
   $ 5,754    $ (37,814 )    $ 5,208    $ (59,537 )
Less: Net loss attributable to noncontrolling interest
   (367 )    (410 )    (797 )    (425 )
Add:

Equity based compensation of Topco and Advantage Sponsors’ management fee
(a)
   (1,642 )    4,184    (4,456 )    8,021
Change in fair value of warrant liability
   (7,059 )    —      (1,533 )    —
Fair value adjustments related to contingent consideration related to acquisitions
(c)
   3,598    4,128    2,555    8,223
Acquisition-related expenses
(d)
   2,797    4,861    7,943    10,390
Restructuring expenses
(e)
   6,934    46,565    11,030    47,663
Litigation expenses
(f)
   —      2,500    (818 )    2,604
Amortization of intangible assets
(g)
   49,172    47,652    98,610    95,498
Costs associated with
COVID-19,
net of benefits received
(h)
   (3,328 )    (1,019 )    (2,035 )    (19 )
Recovery from Take 5
   —      (7,700 )    —      (7,700 )
Costs associated with the Take 5 Matter
(i)
   1,310    661    2,211    1,600
Tax adjustments related to
non-GAAP
adjustments
(j)
   (16,506 )    (25,626 )    (31,851 )    (41,517 )








Adjusted Net Income
   $ 41,397    $ 38,802    $ 87,661    $ 65,651


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
(in thousands)
Net income (loss)	$	24,327		$	36,705		$	29,535		$	(22,832	)
Less: Net income attributable to noncontrolling interest		1,016			756			219			331
Add:
Equity based compensation of Topco and Advantage Sponsors’ management fee(a)		(5,575	)		1,468			(10,031	)		9,489
Change in fair value of warrant liability		(3,491	)		—			(5,024	)		—
Fair value adjustments related to contingent consideration related to acquisitions(c)		3,221			(6,184	)		5,776			2,039
Acquisition-related expenses(d)		5,110			3,683			13,053			14,073
Restructuring expenses(e)		(394	)		(7,635	)		10,636			40,028
Litigation expenses(f)		(92	)		(31	)		(910	)		2,573
Amortization of intangible assets(g)		49,786			47,781			148,396			143,279
Costs associated with COVID-19, net of benefits received(h)		1,087			(1,389	)		(948	)		(1,408	)
Recovery from Take 5		—			—			—			(7,700	)
Costs associated with the Take 5 Matter(i)		1,400			1,219			3,611			2,819
Tax adjustments related to non-GAAP adjustments(j)		(15,262	)		(9,254	)		(47,113	)		(50,771	)
Adjusted Net Income	$	59,101		$	65,607		$	146,762		$	131,258

Adjusted EBITDA and Adjusted EBITDA by segment are supplemental

non-GAAP

financial measures of our operating performance. Adjusted EBITDA means net income (loss) before (i) interest expense, net, (ii) (benefit from) provision for income taxes, (iii) depreciation, (iv) impairment of goodwill and indefinite-lived assets, (v) amortization of intangible assets, (vi) equity based compensation of Topco and Advantage Sponsors’ management fee, (vii) change in fair value of warrant liability, (viii) stock-based compensation expense, (ix) fair value adjustments of contingent consideration related to acquisitions, (x) acquisition-related expenses, (xi) costs associated with

COVID-19,

~~Table of Contents~~

measures in conjunction with our results according to GAAP because we believe they provide a more complete understanding of factors and trends affecting our business than GAAP measures alone. Furthermore, the agreements governing our indebtedness contain covenants and other tests based on measures substantially similar to Adjusted EBITDA. Neither Adjusted EBITDA nor Adjusted EBITDA by segment should be considered as an alternative for our Net income (loss), our most directly comparable measure presented on a GAAP basis.

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

~~Consolidated~~

Three Months Ended June 30,

Six Months Ended June 30,


2021

2020

2021

2020

(in thousands)

Net income (loss)
   $ 5,754    $ (37,814 )    $ 5,208    $ (59,537 )
Add:

Interest expense, net
   37,189    51,521    68,054    103,315
Provision for income taxes
   6,563    (13,704 )    8,306    (12,337 )
Depreciation and amortization
   62,674    58,748    122,287    118,957
Equity based compensation of Topco and Advantage Sponsors’ management fee
(a)
   (1,642 )    4,184    (4,456 )    8,021
Change in fair value of warrant liability
   (7,059 )    —      (1,533 )    —
Stock based compensation expense
(b)
   8,988    —      17,643    —
Fair value adjustments related to contingent consideration related to acquisitions
(c)
   3,598    4,128    2,555    8,223
Acquisition-related expenses
(d)
   2,797    4,861    7,943    10,390
EBITDA for economic interests in investments
(k)
   (1,807 )    (887 )    (2,996 )    (2,785 )
Restructuring expenses
(e)
   6,934    46,565    11,030    47,663
Litigation expenses
(f)
   —      2,500    (818 )    2,604
Costs associated with
COVID-19,
net of benefits received
(h)
   (3,328 )    (1,019 )    (2,035 )    (19 )
Recovery from Take 5
   —      (7,700 )    —      (7,700 )
Costs associated with the Take 5 Matter
(i)
   1,310    661    2,211    1,600








Adjusted EBITDA
   $ 121,971    $ 112,044    $ 233,399    $ 218,395

~~Table of Contents~~


Consolidated	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
(in thousands)
Net income (loss)	$	24,327		$	36,705		$	29,535		$	(22,832	)
Add:
Interest expense, net		36,490			48,243			104,544			151,558
Provision for (benefit from) income taxes		8,276			3,623			16,582			(8,714	)
Depreciation and amortization		59,163			58,556			181,450			177,513
Equity based compensation of Topco and Advantage Sponsors’ management fee(a)		(5,575	)		1,468			(10,031	)		9,489
Change in fair value of warrant liability		(3,491	)		—			(5,024	)		—
Stock based compensation expense(b)		7,854			—			25,497			—
Fair value adjustments related to contingent consideration related to acquisitions(c)		3,221			(6,184	)		5,776			2,039
Acquisition-related expenses(d)		5,110			3,683			13,053			14,073
EBITDA for economic interests in investments(k)		(3,620	)		(2,005	)		(6,616	)		(4,790	)
Restructuring expenses(e)		(394	)		(7,635	)		10,636			40,028
Litigation expenses(f)		(92	)		(31	)		(910	)		2,573
Costs associated with COVID-19, net of benefits received(h)		1,087			(1,389	)		(948	)		(1,408	)
Recovery from Take 5		—			—			—			(7,700	)
Costs associated with the Take 5 Matter(i)		1,400			1,219			3,611			2,819
Adjusted EBITDA	$	133,756		$	136,253		$	367,155		$	354,648

Financial information by segment, including a reconciliation of Adjusted EBITDA by segment to operating income, the closest GAAP financial measure, is provided in the following table:

~~Sales Segment~~

Three Months Ended June 30,

Six Months Ended June 30,


2021

2020

2021

2020

(in thousands)

Operating income
   $ 44,673    $ 11,021    $ 79,822    $ 35,215
Add:

Depreciation and amortization
   44,710    42,234    87,274    85,341
Equity based compensation of Topco and Advantage Sponsors’ management fee
(a)
   (678 )    3,538    (2,516 )    6,737
Stock based compensation expense
(b)
   4,730    —      9,424    —
Fair value adjustments related to contingent consideration related to acquisitions
(c)
   (5,027 )    4,128    (4,249 )    8,440
Acquisition-related expenses
(d)
   2,280    4,081    5,600    8,237
EBITDA for economic interests in investments
(k)
   (2,110 )    (1,338 )    (3,597 )    (3,409 )
Restructuring expenses
(e)
   1,176    23,326    1,956    24,078
Litigation expenses
(f)
   —      2,500    (516 )    2,604
Costs associated with
COVID-19,
net of benefits received
(h)
   (231 )    530    402    1,340








Sales Segment Adjusted EBITDA
   $ 89,523    $ 90,020    $ 173,600    $ 168,583

~~Marketing Segment~~

Three Months Ended June 30,

Six Months Ended June 30,


2021

2020

2021

2020

(in thousands)

Operating (loss) income
   $ (2,226 )    $ (11,018 )    $ 213    $ (3,774 )
Add:

Depreciation and amortization
   17,964    16,514    35,013    33,616
Equity based compensation of Topco and Advantage Sponsors’ management fee
(a)
   (964 )    646    (1,940 )    1,284
Stock based compensation expense
(b)
   4,258    —      8,219    —
Fair value adjustments related to contingent consideration related to acquisitions
(c)
   8,625    —      6,804    (217 )
Acquisition-related expenses
(d)
   517    780    2,343    2,153
EBITDA for economic interests in investments
(k)
   303    451    601    624
Restructuring expenses
(e)
   5,758    23,239    9,074    23,585
Litigation expenses
(f)
   —      —      (302 )    —
Costs associated with
COVID-19,
net of benefits received
(h)
   (3,097 )    (1,549 )    (2,437 )    (1,359 )
Recovery from Take 5
   —      (7,700 )    —      (7,700 )
Costs associated with the Take 5 Matter
(i)
   1,310    661    2,211    1,600








Marketing Segment Adjusted EBITDA
   $ 32,448    $ 22,024    $ 59,799    $ 49,812


Sales Segment	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
(in thousands)
Operating income	$	51,906		$	60,205		$	131,727		$	95,420
Add:
Depreciation and amortization		41,515			41,978			128,789			127,319
Equity based compensation of Topco and Advantage Sponsors’ management fee(a)		(4,844	)		1,398			(7,360	)		8,135
Stock based compensation expense(b)		4,371			—			13,795			—
Fair value adjustments related to contingent consideration related to acquisitions(c)		192			(669	)		(4,057	)		7,771
Acquisition-related expenses(d)		3,899			3,581			9,499			11,818
EBITDA for economic interests in investments(k)		(3,832	)		(2,142	)		(7,429	)		(5,551	)
Restructuring expenses(e)		1,273			(1,227	)		3,229			22,851
Litigation expenses(f)		(68	)		—			(584	)		2,604
Costs associated with COVID-19, net of benefits received(h)		787			(1,198	)		1,189			142
Sales Segment Adjusted EBITDA	$	95,199		$	101,926		$	268,798		$	270,509


Marketing Segment	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
(in thousands)
Operating income	$	13,696		$	28,366		$	13,910		$	24,592
Add:
Depreciation and amortization		17,648			16,578			52,661			50,194
Equity based compensation of Topco and Advantage Sponsors’ management fee(a)		(731	)		70			(2,671	)		1,354
Stock based compensation expense(b)		3,483			—			11,702			—
Fair value adjustments related to contingent consideration related to acquisitions(c)		3,029			(5,515	)		9,833			(5,732	)
Acquisition-related expenses(d)		1,211			102			3,554			2,255
EBITDA for economic interests in investments(k)		212			137			813			761
Restructuring expenses(e)		(1,667	)		(6,408	)		7,407			17,177
Litigation expenses(f)		(24	)		(31	)		(326	)		(31	)
Costs associated with COVID-19, net of benefits received(h)		300			(191	)		(2,137	)		(1,550	)
Recovery from Take 5		—			—			—			(7,700	)
Costs associated with the Take 5 Matter(i)		1,400			1,219			3,611			2,819
Marketing Segment Adjusted EBITDA	$	38,557		$	34,327		$	98,357		$	84,139

~~(a)~~

(a)

Represents the management fees and reimbursements for expenses paid to certain of the Advantage Sponsors (or certain of the management companies associated with it or its advisors) pursuant to a management services agreement in the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020. Also represents expenses related to (i) equity-based compensation expense associated with grants of Common Series D Units of Topco made to one of the Advantage Sponsors, (ii) equity-based compensation expense associated with the Common Series C Units of Topco as a result of the Transactions, (iii) compensation amounts associated with the Company’s Management Incentive Plan originally scheduled for potential payment March 2022 that were accelerated and terminated as part of the Transactions, and (iv) compensation amounts associated with the anniversary payments to Tanya Domier. Certain of Ms. Domier’s anniversary payments were accelerated as part of the Transactions.

~~Table of Contents~~

~~(b) Represents~~

~~non-cash~~

~~compensation expense related to issuance of PSUs, RSUs, stock options and ESPP under the 2020 plan.~~

~~(c)~~
(b)	Represents non-cash compensation expense related to PSUs and RSUs under the 2020 Planand the Advantage Solutions 2020 Employee Stock Purchase Plan.
(c)	Represents adjustments to the estimated fair value of our contingent consideration liabilities related to our acquisitions, excluding the present value accretion recorded in interest expense, net, for the applicable periods. See Note 6—Fair Value of Financial Instruments to our unaudited condensed financial statements for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020.

~~(d)~~
(d)	Represents fees and costs associated with activities related to our acquisitions and restructuring activities related to our equity ownership, including transaction bonuses paid in connection with the Transactions, professional fees, due diligence, public company readiness and integration activities.

~~(e)~~
(e)	Represents fees and costs associated with various internal reorganization activities among our consolidated entities.

~~(f)~~
(f)	Represents legal settlements that are unusual or infrequent costs associated with our operating activities.

~~(g)~~
(g)	Represents the amortization of intangible assets recorded in connection with the 2014 Topco Acquisition and our other acquisitions.

~~(h)~~

(h)

Represents (i) costs related to implementation of strategies for workplace safety in response to

COVID-19,

including employee-relief fund, additional sick pay for front-line associates, medical benefit payments for furloughed associates, and personal protective equipment; and (ii) benefits received from government grants for

COVID-19

relief.

~~(i)~~
(i)	Represents ~~$1.3 million, $2.2 million, $0.7 million, and $1.6 million of~~ costs associated with investigation and remediation activities related to the Take 5 Matter, primarily, professional fees and other related costs, ~~respectively~~ for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively.

~~(j)~~
(j)	Represents the tax provision or benefit associated with the adjustments above, taking into account the Company’s applicable tax rates, after excluding adjustments related to items that do not have a related tax impact.

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

~~Table of Contents~~

Liquidity and Capital Resources

Our principal sources of liquidity were cash flows from operations, borrowings under the ~~New~~ Revolving Credit Facility, and other debt. Our principal uses of cash are operating expenses, working capital requirements, acquisitions, interest on debt and repayment of debt. Our principal sources of liquidity prior to the Transactions included $3.3 billion of outstanding debt under our then-existing first and second lien credit agreements, which we repaid on October 28, 2020 in connection with the ~~Transactions and were scheduled to mature in July 2021 and July 2022, respectively.~~

Transactions.

Cash Flows

A summary of our cash operating, investing and financing activities are shown in the following table:

Six Months Ended June 30,

(in thousands)

2021

2020

Net cash provided by operating activities
   $ 55,924    $ 234,427
Net cash used in investing activities
   (33,384 )    (66,814 )
Net cash (used in) provided by financing activities
   (64,489 )    100,883
Net effect of foreign currency fluctuations on cash
   (855 )    (5,860 )




Net change in cash, cash equivalents and restricted cash
   $ (42,804 )    $ 262,636


	Nine Months Ended September 30,
(in thousands)	2021			2020
Net cash provided by operating activities	$	101,068		$	290,105
Net cash used in investing activities		(66,152	)		(74,572	)
Net cash (used in) provided by financing activities		(68,999	)		90,454
Net effect of foreign currency fluctuations on cash		(1,476	)		(1,187	)
Net change in cash, cash equivalents and restricted cash	$	(35,559	)	$	304,800

Net Cash Provided by Operating Activities

Net cash provided by operating activities during the ~~six~~nine months ended ~~June~~September 30, 2021 consisted of net income of ~~$5.2~~$36.4 million adjusted for

certain non-cash items,

including depreciation and amortization of ~~$122.3~~$181.5 million and effects of changes in working capital. Net cash provided by operating activities during the ~~six~~nine months ended ~~June~~September 30, 2020, consisted of net loss of ~~$59.5~~$22.8 million adjusted for

certain non-cash items,

including depreciation and amortization of ~~$119.0~~$177.5 million and effects of changes in working capital. The decrease in cash provided by operating activities during the ~~six~~nine months ended ~~June~~September 30, 2021 relative to the same period in 2020 was primarily due to the decreased need for working capital in the prior year as a result of

COVID-19

related temporary suspensions of

in-store

sampling services combined with the deferral of payment of our portion of Social Security taxes during the ~~six~~nine months ended ~~June~~September 30, 2020.

Net Cash Used in Investing Activities

Net cash used in investing activities during the ~~six~~nine months ended ~~June~~September 30, 2021 primarily consisted of the purchase of businesses, net of cash acquired of ~~$20.4~~$40.0 million and purchase of property and equipment of ~~$13.0~~$24.5 million. Net cash used in investing activities during the ~~six~~nine months ended ~~June~~September 30, 2020, primarily consisted of the purchase of businesses, net of cash acquired of $51.4 million and purchase of property and equipment of ~~$15.4~~$23.2 million.

Net Cash (Used in) Provided by Financing Activities

We primarily finance our growth through cash flows from operations, however, we also incur long-term debt or borrow under lines of credit when necessary to execute acquisitions. Cash flows from financing activities consisted of borrowings related to these lines of credit and subsequent payments of principal and financing fees. Additionally, many of our acquisition agreements include contingent consideration arrangements, which are generally based on the achievement of future financial performance by the operations attributable to the acquired companies. The portion of the cash payment up to the acquisition date fair value of the contingent consideration liability are classified as financing outflows, and amounts paid in excess of the acquisition date fair value of that liability are classified as operating outflows.

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Cash flows related to financing activities during the ~~six~~nine months ended ~~June~~September 30, 2021 were primarily related to borrowings of ~~$41.7~~$51.7 million and repayment of ~~$92.8~~$102.7 million on the Revolving Credit Facility and our lines of credit and ~~$6.4~~$8.6 million related to payments of contingent consideration and holdback payments

Cash flows related to financing activities during the ~~six~~nine months ended ~~June~~September 30, 2020, were primarily related to the borrowing and subsequent repayment of ~~$80.0~~$104.9 million onunder the ~~Revolving Credit Facility and borrowings and repayments on our lines~~accounts receivable securitization facility that existed as of ~~credit, proceeds of $120.0 million from the AR Facility,~~September 30, 2020, proceeds of $2.8 million from one of our ~~majority-owned~~majority owned subsidiaries operating in Japan entering into a local government loan program, principal payments of ~~$13.3~~$19.8 million on our long-term debt and ~~$7.6~~$11.4 million related to payments of contingent consideration and holdback payments.

Description of Credit Facilities

~~New~~

Senior Secured Credit Facilities

In connection with the consummation of the Transactions, Advantage Sales & Marketing Inc. (the “Borrower”), an indirect wholly-owned subsidiary of the Company, ~~(the “Borrower”)~~ entered into ~~the New Senior Secured Credit Facilities consisting of~~ (i) ~~the New Revolving Credit Facility, which is~~ a senior secured asset-based revolving credit facility in an aggregate principal amount of up to $400.0 million, subject to borrowing base capacity (as may be amended from time to time, the “Revolving Credit Facility”) and (ii) ~~the New Term Loan Facility, which is~~ a secured first lien term loan credit facility in an aggregate principal amount of $1.325 ~~billion.~~

~~New~~billion (as may be amended from time to time, the “Term Loan Facility” and together with the Revolving Credit Facility,

the “Senior Secured Credit Facilities”).

On October 28, 2021, the Borrower entered into Amendment No. 1 to the First Lien Credit Agreement (the “First Lien Amendment”), which amended the Term Loan Facility to, among other amendments, reduce the applicable interest margins on the term loans, reset the six-month period for which a 1.00% prepayment premium shall apply to any prepayment of the term loans in connection with a repricing transaction and update the benchmark replacement provisions in connection with the upcoming cessation of U.S. Dollar LIBOR to align with more recent standards adopted by the industry and by Bank of America.

On October 28, 2021, the Borrower also entered into the First Amendment to ABL Revolving Credit Agreement (the “ABL Amendment”), which amended the Revolving Credit Facility to reduce the interest rate floors and update the benchmark replacement provisions in the same manner as in the First Lien Amendment.

Revolving Credit Facility

Our ~~New~~ Revolving Credit Facility provides for revolving loans and letters of credit in an aggregate amount of up to $400.0 million, subject to borrowing base capacity. Letters of credit are limited to the lesser of (a) $150.0 million and (b) the aggregate unused amount of commitments under our ~~New~~ Revolving Credit Facility then in effect. Loans under the ~~New~~ Revolving Credit Facility may be denominated in either U.S. dollars or Canadian dollars. Bank of America, N.A., is administrative agent and ABL Collateral Agent. The ~~New~~ Revolving Credit Facility is scheduled to mature in October 2025. We may use borrowings under the ~~New~~ Revolving Credit Facility to fund working capital and for other general corporate purposes, including permitted acquisitions and other investments.

As of September 30, 2021, we had unused capacity under our Revolving Credit Facility available to us of $400.0 million, subject to borrowing base limitations (without giving effect to approximately $60.3 million of outstanding letters of credit and the borrowing base limitations for additional borrowings).

Borrowings under the ~~New~~ Revolving Credit Facility are limited by borrowing base calculations based on the sum of specified percentages of eligible accounts receivable plus specified percentages of qualified cash, minus the amount of any applicable reserves. Borrowings will bear interest at a floating rate, which can be either an adjusted Eurodollar rate plus an applicable margin or, at the Borrower’s option, a base rate plus an applicable margin. The applicable margins for the ~~New~~ Revolving Credit Facility are 2.00%, 2.25% or 2.50%, with respect to Eurodollar rate borrowings and 1.00%, 1.25% or 1.50%, with respect to base rate borrowings, in each case depending on average excess availability under the ~~New~~ Revolving Credit Facility. The Borrower’s ability to draw under the ~~New~~ Revolving Credit Facility or issue letters of credit thereunder will be conditioned upon, among other things, the Borrower’s delivery of prior written notice of a borrowing or issuance, as applicable, the Borrower’s ability to reaffirm the

representations and warranties contained in the credit agreement governing the ~~New~~ Revolving Credit Facility and the absence of any default or event of default thereunder.

The Borrower’s obligations under the ~~New~~ Revolving Credit Facility are guaranteed by Karman Intermediate Corp. (“Holdings”) and all of the Borrower’s direct and indirect wholly owned material U.S. subsidiaries (subject to certain permitted exceptions) and Canadian subsidiaries (subject to certain permitted exceptions, including exceptions based on immateriality thresholders of aggregate assets and revenues of Canadian subsidiaries) (the “Guarantors”). The ~~New~~ Revolving Credit Facility is secured by a lien on substantially all of Holdings’, the Borrower’s and the Guarantors’ assets (subject to certain permitted exceptions). The Borrower’s ~~New~~ Revolving Credit Facility has a first-priority lien on the current asset collateral and a second-priority lien on security interests in the fixed asset collateral (second in priority to the liens securing the Notes and the ~~New~~ Term Loan Facility discussed below), in each case, subject to other permitted liens.

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The ~~New~~ Revolving Credit Facility has the following fees: (i) an unused line fee of 0.375% or 0.250% per annum of the unused portion of the ~~New~~ Revolving Credit Facility, depending on average excess availability under the ~~New~~ Revolving Credit Facility; (ii) a letter of credit participation fee on the aggregate stated amount of each letter of credit equal to the applicable margin for adjusted Eurodollar rate loans, as applicable; and (iii) certain other customary fees and expenses of the lenders and agents thereunder.

The ~~New~~ Revolving Credit Facility contains customary covenants, including, but not limited to, restrictions on the Borrower’s ability and that of our subsidiaries to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, make acquisitions, loans, advances or investments, pay dividends, sell or otherwise transfer assets, optionally prepay or modify terms of any junior indebtedness, enter into transactions with affiliates or change our line of business. The ~~New~~ Revolving Credit Facility will require the maintenance of a fixed charge coverage ratio (as set forth in the credit agreement governing the ~~New~~ Revolving Credit Facility) of 1.00 to 1.00 at the end of each fiscal quarter when excess availability is less than the greater of $25 million and 10% of the lesser of the borrowing base and maximum borrowing capacity. Such fixed charge coverage ratio will be tested at the end of each quarter until such time as excess availability exceeds the level set forth above.

The ~~New~~ Revolving Credit Facility provides that, upon the occurrence of certain events of default, the Borrower’s obligations thereunder may be accelerated and the lending commitments terminated. Such events of default include payment defaults to the lenders thereunder, material inaccuracies of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, voluntary and involuntary bankruptcy, insolvency, corporate arrangement,

winding-up,

liquidation or similar proceedings, material money judgments, material pension-plan events, certain change of control events and other customary events of default.

~~New~~

Term Loan Facility

The ~~New~~ Term Loan Facility is a term loan facility denominated in US dollars in an aggregate principal amount of $1.325 billion. Borrowings under the ~~New~~ Term Loan Facility amortize in equal quarterly installments in an amount equal to 1.00% per annum of the principal amount. Borrowings will bear interest at a floating rate, which can be either an adjusted Eurodollar rate plus an applicable margin or, at the Borrower’s option, a base rate plus an applicable margin. The applicable margins for the ~~New~~ Term Loan Facility are ~~5.25%~~4.50% with respect to Eurodollar rate borrowings and ~~4.25%~~3.50% with respect to base rate borrowings.

The Borrower may voluntarily prepay loans or reduce commitments under the ~~New~~ Term Loan Facility, in whole or in part, subject to minimum amounts, with prior notice but without premium or penalty (other than a 1.00% premium on any prepayment in connection with a repricing transaction prior to the date that is ~~twelve~~six months after the effective date ~~we entered into~~of the ~~New Term Loan Facility)~~First Lien Amendment).

The Borrower will be required to prepay the ~~New~~ Term Loan Facility with 100% of the net cash proceeds of certain asset sales (such percentage subject to reduction based on the achievement of specific first lien net leverage ratios) and subject to certain reinvestment rights, 100% of the net cash proceeds of certain debt issuances and 50% of excess cash flow (such percentage subject to reduction based on the achievement of specific first lien net leverage ratios).

The Borrower’s obligations under the ~~New~~ Term Loan Facility are guaranteed by Holdings and the Guarantors. Our ~~New~~ Term Loan Facility is secured by a lien on substantially all of Holdings’, the Borrower’s and the Guarantors’ assets (subject to certain permitted exceptions). The ~~New~~ Term Loan Facility has a first-priority lien on the fixed asset collateral (equal in priority with the liens securing the Notes) and a second-priority lien on security interests in the current asset collateral (second in priority to the liens securing the ~~New~~ Revolving Credit Facility), in each case, subject to other permitted liens.

The ~~New~~ Term Loan Facility contains certain customary negative covenants, including, but not limited to, restrictions on the Borrower’s ability and that of our restricted subsidiaries to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, pay dividends or make other restricted payments, sell or otherwise transfer assets or enter into transactions with affiliates.

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The ~~New~~ Term Loan Facility provides that, upon the occurrence of certain events of default, the Borrower’s obligations thereunder may be accelerated. Such events of default will include payment defaults to the lenders thereunder, material inaccuracies of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, voluntary and involuntary bankruptcy, insolvency, corporate arrangement,

winding-up,

liquidation or similar proceedings, material money judgments, change of control and other customary events of default.

Senior Secured Notes

In connection with the Transactions, Finco issued $775.0 million aggregate principal amount of 6.50% Senior Secured Notes due 2028 (the “Notes”). Substantially concurrently with the Transactions, Finco merged with and into Advantage Sales & Marketing Inc. (in its capacity as the issuer of the Notes, the “Issuer”), with the Issuer continuing as the surviving entity and assuming the obligations of Finco. The Notes were sold to BofA Securities, Inc., Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC and Apollo Global Securities, LLC. The Notes were resold to certain

non-U.S.

persons pursuant to Regulation S under the Securities Act of 1933, as amended (the “Securities Act”), and to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act at a purchase price equal to 100% of their principal amount. The terms of the Notes are governed by an Indenture, dated as of October 28, 2020 (the “Indenture”), among Finco, the Issuer, the guarantors named therein (the “Notes Guarantors”) and Wilmington Trust, National Association, as trustee and collateral agent.

Interest and maturity

Interest on the Notes is payable semi-annually in arrears on May 15 and November 15 at a rate of 6.50% per annum, commencing on May 15, 2021. The Notes will mature on November 15, 2028.

Guarantees

The Notes are guaranteed by Holdings and each of the Issuer’s direct and indirect wholly owned material U.S. subsidiaries (subject to certain permitted exceptions) and Canadian subsidiaries (subject to certain permitted exceptions, including exceptions based on immateriality thresholders of aggregate assets and revenues of Canadian subsidiaries) that is a borrower or guarantor under the ~~New~~ Term Loan Facility.

Security and Ranking

The Notes and the related guarantees are the general, senior secured obligations of the Issuer and the Notes Guarantors, are secured on a first-priority pari passu basis by security interests on the fixed asset collateral (equal in priority with liens securing the ~~New~~ Term Loan Facility), and are secured on a second-priority basis by security interests on the current asset collateral (second in priority to the liens securing the ~~New~~ Revolving Credit Facility and equal in priority with liens securing the ~~New~~ Term Loan Facility), in each case, subject to certain limitations and exceptions and permitted liens.

The Notes and related guarantees rank (i) equally in right of payment with all of the Issuer’s and the Guarantors’ senior indebtedness, without giving effect to collateral arrangements (including the ~~New~~ Senior Secured Credit Facilities) and effectively equal to all of the Issuer’s and the Guarantors’ senior indebtedness secured on the same priority basis as the Notes, including the ~~New~~ Term Loan Facility, (ii) effectively subordinated to any of the Issuer’s and the Guarantors’ indebtedness that is secured by assets that do not constitute collateral for the Notes to the extent of the value of the assets securing such indebtedness and to indebtedness that is secured by a senior-priority lien, including the ~~New~~ Revolving Credit Facility to the extent of the value of the current asset collateral and (iii) structurally subordinated to the liabilities of the Issuer’s

non-Guarantor

subsidiaries.

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Optional redemption for the Notes

The Notes are redeemable on or after November 15, 2023 at the applicable redemption prices specified in the Indenture plus accrued and unpaid interest. The Notes may also be redeemed at any time prior to November 15, 2023 at a redemption price equal to 100% of the aggregate principal amount of such Notes to be redeemed plus a “make-whole” premium, plus accrued and unpaid interest. In addition, the Issuer may redeem up to 40% of the original aggregate principal amount of Notes before November 15, 2023 with the net cash proceeds of certain equity offerings at a redemption price equal to 106.5% of the aggregate principal amount of such Notes to be redeemed, plus accrued and unpaid interest. Furthermore, prior to November 15, 2023 the Issuer may redeem during each calendar year up to 10% of the original aggregate principal amount of the Notes at a redemption price equal to 103% of the aggregate principal amount of such Notes to be redeemed, plus accrued and unpaid interest. If the Issuer or its restricted subsidiaries sell certain of their respective assets or experience specific kinds of changes of control, subject to certain exceptions, the Issuer must offer to purchase the Notes at par. In connection with any offer to purchase all Notes, if holders of no less than 90% of the aggregate principal amount of Notes validly tender their Notes, the Issuer is entitled to redeem any remaining Notes at the price offered to each holder.

Restrictive covenants

The Notes are subject to covenants that, among other things limit the Issuer’s ability and its restricted subsidiaries’ ability to: incur additional indebtedness or guarantee indebtedness; pay dividends or make other distributions in respect of, or repurchase or redeem, the Issuer’s or a parent entity’s capital stock; prepay, redeem or repurchase certain indebtedness; issue certain preferred stock or similar equity securities; make loans and investments; sell or otherwise dispose of assets; incur liens; enter into transactions with affiliates; enter into agreements restricting the Issuer’s subsidiaries’ ability to pay dividends; and consolidate, merge or sell all or substantially all of the Issuer’s assets. Most of these covenants will be suspended on the Notes so long as they have investment grade ratings from both Moody’s Investors Service, Inc. and S&P Global Ratings and so long as no default or event of default under the Indenture has occurred and is continuing.

Events of default

The following constitute events of default under the Notes, among others: default in the payment of interest; default in the payment of principal; failure to comply with covenants; failure to pay other indebtedness after final maturity or acceleration of other indebtedness exceeding a specified amount; certain events of bankruptcy; failure to pay a judgment for payment of money exceeding a specified aggregate amount; voidance of subsidiary guarantees; failure of any material provision of any security document or intercreditor agreement to be in full force and effect; and lack of perfection of liens on a material portion of the collateral, in each case subject to applicable grace periods.

Prior Credit Facilities

In connection with the Transactions, our debt arrangements under the ~~First Lien Credit Agreement~~then first lien credit agreement and ~~Second Lien Credit Agreement~~second lien credit agreement as well as the ~~AR Facility~~accounts receivable securitization facility that existed as of September 30, 2020 were repaid and terminated with incremental costs of $86.8 million. For a description of the ~~First Lien Credit Agreement and Second Lien Credit Agreement~~Prior Facilities that were refinanced in connection with the consummation of the Transactions on October 28, 2020,

please see the additional information set forth in Note 7—

Debt

, to our audited consolidated financial statements for the year ended December 31, 2020.

Cash and Cash Equivalents Held Outside the United States

As of ~~June~~September 30, 2021 and December 31, 2020, ~~$84.1~~$80.9 million and $87.7 million, respectively, of our cash and cash equivalents and marketable securities were held by foreign subsidiaries. As of ~~June~~September 30, 2021, and December 31, 2020, ~~$31.6~~$33.3 million and $28.9 million, respectively, of our cash and cash equivalents and marketable securities were held by foreign branches.

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We assessed our determination as to our indefinite reinvestment intent for certain of our foreign subsidiaries and recorded a deferred tax liability of approximately $2.1 million of withholding tax as of December 31, 2020 for unremitted earnings in Canada with respect to which the Company does not have an indefinite reinvestment assertion. We will continue to evaluate our cash needs, however we currently do not intend, nor do we foresee a need, to repatriate funds from the foreign subsidiaries except for Canada. We have continued to assert indefinite reinvestment on all other earnings as it is necessary for continuing operations and to grow the business. If at a point in the future our assertion changes, we will evaluate

tax-efficient

means to repatriate the income. In addition, we expect existing domestic cash and cash flows from operations to continue to be sufficient to fund our domestic operating activities and cash commitments for investing and financing activities, such as debt repayment and capital expenditures, for at least the next 12 months and thereafter for the foreseeable future.

If we should require more capital in the United States than is generated by our domestic operations, for example, to fund significant discretionary activities such as business acquisitions, we could elect to repatriate future earnings from foreign jurisdictions. These alternatives could result in higher tax expense or increased interest expense. We consider the majority of the undistributed earnings of our foreign subsidiaries, as of December 31, 2020, to be indefinitely reinvested and, accordingly, no provision has been made for taxes in excess of the $2.1 million noted above.

Off-Balance Sheet

Arrangements

We do not have any

off-balance

sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets or any obligation arising out of a material variable interest in an unconsolidated entity. We do not have any majority-owned subsidiaries that are not included in our consolidated financial statements. Additionally, we do not have an interest in, or relationships with, any special-purpose entities.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are included in our Annual Report on Form

10-K/A

filed May 17, 2021 for the year ended December 31, 2020 and did not materially change during the three and ~~six~~nine months ended ~~June~~September 30, 2021.

Recently Issued Accounting Pronouncements

See the information set forth in Note 1,

Organization and Significant Accounting Policies – Recent Accounting Pronouncements

, to our unaudited condensed consolidated financial statements for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and 2020. included in “Part I, Financial Information—Item 1. Financial Statements” in this Quarterly Report.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

Our exposure to foreign currency exchange rate fluctuations is primarily the result of foreign subsidiaries and foreign branches primarily domiciled in Europe and Canada. We use financial derivative instruments to hedge foreign currency exchange rate risks associated with our Canadian subsidiary.

The assets and liabilities of our foreign subsidiaries and foreign branches, whose functional currencies are primarily Canadian dollars, British pounds and euros, respectively, are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at the average exchange rates prevailing during the period. The cumulative translation effects for subsidiaries using a functional currency other than the U.S. dollar are included in accumulated other comprehensive loss as a separate component of stockholders’ equity. We estimate that had the exchange rate in each country unfavorably changed by ten percent relative to the U.S. dollar, our consolidated income before taxes would have decreased by approximately ~~$1.3~~$3.2 million for the ~~six~~nine months ended ~~June~~September 30, 2021.

Equity Price Risk

As of ~~June~~September 30, 2021, 7,333,333 private placement warrants remained outstanding at a fair value of $19.7 million as of ~~June~~September 30, 2021. The warrant liability is stated at fair value at each reporting period with the change in fair value recorded on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument. Based on the fair value of the private placement warrants outstanding as of ~~June~~September 30, 2021, a hypothetical decrease of 10% in the share price of the Company’s common stock would reduce the fair value of the warrant liability and result in an unrealized gain recognized in Change in fair value of warrant liability on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) of ~~$4.6~~$3.4 million. Similarly, based on the fair value of the private placement warrants outstanding as of ~~June~~September 30, 2021, a hypothetical increase of 10% in the share price of the Company’s common stock would increase the fair value of the warrant liability and result in an unrealized loss recognized in Change in fair value of warrant liability on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) of ~~$5.1~~$3.7 million.

Interest Rate Risk

Interest rate exposure relates primarily to the effect of interest rate changes on borrowings outstanding under the ~~New~~ Term Loan Facility, ~~New~~ Revolving Credit Facility and Notes. As of the closing of the Transactions, we drew $100.0 million on the ~~New~~ Revolving Credit Facility, which was subject to an assumed interest rate of 2.75%. Additionally, we borrowed an aggregate principal amount of $1.325 billion on the ~~New~~ Term Loan Facility, which are subject to an assumed interest rate of 6.0% and $775.0 million in Notes, which is subject to a fixed interest rate of 6.5%.

Prior to the Transactions, interest rate exposure related primarily to the effect of interest rate changes on borrowings outstanding under our Prior Credit ~~Facilities, including our AR Facility, the revolving credit facility then in place, First Lien Credit Agreement and Second Lien Credit Agreement.~~

Facilities.

We manage our interest rate risk through the use of derivative financial instruments. Specifically, we have entered into interest rate cap agreements to manage our exposure to potential interest rate increases that may result from fluctuations in LIBOR. We do not designate these derivatives as hedges for accounting purposes, and as a result, all changes in the fair value of derivatives, used to hedge interest rates, are recorded in “Interest expense, net” in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

As of ~~June~~September 30, 2021, we had interest rate cap contracts on $1.5 billion of notional value of principal from various financial institutions, with a maturity dates of January 24, 2022 to manage our exposure to interest rate movements on variable rate credit facilities when three-months LIBOR on term loans exceeds caps ranging

from 3.25% to 3.50%. The aggregate fair value of our interest rate caps represented an outstanding net liability of ~~$1.1~~$0.8 million as of ~~June~~September 30, 2021.

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In addition, we had interest rate cap contracts on an additional $650.0 million of notional value of principal from other financial institutions, with a maturity date of December 16, 2024 to manage our exposure to interest rate movements on variable rate credit facilities when

one-month

LIBOR on term loans exceeding a cap of 0.75%. The aggregate fair value of our interest rate caps represented an outstanding net asset of ~~$6.1~~$5.9 million as of ~~June~~September 30, 2021.

Holding other variables constant, a change of

one-eighth

percentage point in the weighted average interest rate above the floor of 0.75% on the ~~New~~ Term Loan Facility and ~~New~~ Revolving Credit Facility would have resulted in an increase of ~~$0.4~~$0.6 million in interest expense, net of gains from interest rate caps, for the ~~six~~nine months ended ~~June~~September 30, 2021.

In the future, in order to manage our interest rate risk, we may refinance our existing debt, enter into additional interest rate cap agreements or modify our existing interest rate cap agreement. However, we do not intend or expect to enter into derivative or interest rate cap transactions for speculative purposes.

ITEM 4. CONTROLS AND PROCEDURES

Material Weaknesses in Internal Control over Financial Reporting

On August 15, 2019, we concluded that our previously-issued audited consolidated financial statements and related notes as of and for the year ended December 31, 2018, should be restated to reflect the corrections of misstatements as a result of the Take 5 Matter. In connection with our investigation into the Take 5 Matter and the other error corrections, we identified material weaknesses in our internal control over financial reporting that continue to exist as of ~~June~~September 30, 2021. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Specifically, we identified material weaknesses in the design and operating effectiveness of our risk assessment and information and communication processes which contributed to the following material weaknesses:



We determined that we did not design and maintain effective controls related to our due diligence procedures for potential acquisitions with respect to databases and information technology systems used to recognize revenue and determine the satisfaction of performance obligations. Specifically, internal controls were not designed and maintained to assess the risks associated with potential acquisitions and the need to perform due diligence as part of purchase accounting with respect to databases and information technology systems utilized to determine the satisfaction of performance obligations, and to communicate and evaluate the results of due diligence.



We determined that we did not design and maintain effective controls to establish an appropriate basis for reliance on data and information in our information technology systems used for revenue recognition in certain of our newly acquired businesses. Specifically, internal controls were not designed and maintained to ensure the completeness and accuracy of system generated reports used to verify the satisfaction of performance obligations.



We determined that we did not design and maintain effective controls related to information and communication specifically with respect to our whistleblower complaint process to properly investigate, communicate and resolve whistleblower complaints and allegations related to accounting or other misconduct in a timely manner, and with respect to communication with appropriate parties. Specifically, internal controls were not designed and maintained to ensure that individuals conducting investigations into allegations of accounting or other misconduct had the appropriate expertise and

supervision, and that the results of the investigations have been communicated to the appropriate parties or that other transactions are communicated to the appropriate parties.

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These material weaknesses resulted in restatement of our previously issued annual financial statements as of and for the year ended December 31, 2018 and interim consolidated financial information for the three months ended September 30, 2018, December 31, 2018, and March 31, 2019.

In April 2021, the Company

re-evaluated

its historical accounting for its warrants and concluded it must amend the accounting treatment of the private placement warrants (collectively, the “Warrants”) issued in connection with the initial public offering of Conyers Park ~~II Acquisition Corp., (“Conyers Park”)~~ and recorded to the Company’s consolidated financial statements as a result of the ~~Company’s merger with Conyers Park (the “Merger”)~~Merger and the reverse recapitalization that occurred on October 28, 2020. At that time, the Warrants were presented within equity and did not impact any reporting periods prior to the Merger. As such, we concluded that the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2020 included in our Annual Report on Form

10-K

originally filed on March 16, 2021 should be and were revised. In connection with our

re-evaluation

of this matter, we identified an additional material weakness in our internal control over financial reporting that continues to exist as of ~~June~~September 30, 2021, as we did not design and maintain effective controls related to the evaluation of settlement features used to determine the classification of certain warrant instruments.

Additionally, all of the material weaknesses described above could result in a misstatement of our annual or interim consolidated financial statements or disclosures that would result in a material misstatement to our annual or interim financial statements that would not be prevented or detected.

Remediation Plan

We are in the process of designing, implementing and ~~implementing measures to improve~~testing the operating effectiveness of our internal control over financial reporting ~~and~~to remediate the material weaknesses. Our efforts include the following actions:



In order to validate more fully an acquisition target with databases and information technology systems used to recognize revenue and determine the satisfaction of performance obligations, we ~~are designing~~have designed and ~~implementing~~implemented policies and procedures to perform more robust risk assessment and due diligence procedures in connection with such potential acquisitions, including engaging third-party experts to evaluate such target companies’ databases or information technology, and enhancing the communication and evaluation of due diligence results, as appropriate. During the quarter ended ~~June~~September 30, 2021, we ~~implemented~~tested the implementation of the revised policies and procedures related to the risk assessment and due diligence procedures in connection with potential acquisitions. WeIn connection with acquisitions occurring subsequent to the third quarter 2021, we expect to ~~test the implementation~~perform operating effectiveness testing of the revised policies and procedures ~~as part~~to establish that they have been operating for a sufficient period of ~~our internal control over financial reporting in connection with acquisitions occurring subsequent to June 30, 2021.~~

time.



We are enhancing our procedures related to the risk assessment, and evaluation of the completeness and accuracy of our internal reporting processes with respect to newly acquired businesses, including with respect to the completeness and accuracy of reports used to verify the satisfaction of performance obligations under client contracts and the accuracy of recognized revenues. During the quarter ended ~~June~~September 30, 2021, we have ~~finalized~~designed and implemented the ~~design of~~ revised risk assessment procedures over newly acquired businesses, including establishing certain additional procedures to be performed over reports used in the recognition of ~~revenue. We~~revenue and are in the process of ~~implementing~~testing the implementation of the related internal controls ~~and expect to test the implementation of the revised risk assessment procedures~~ in connection with acquisitions occurring subsequent to ~~June~~September 30, 2021.

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

We ~~are designing, enhancing~~have designed and ~~implementing~~implemented procedures and policies to promote timely and proper risk assessment, investigation, resolution, communication and disclosure of any whistleblower complaints or reported allegations of accounting or other misconduct. During the quarter ended ~~June~~September 30, 2021, we ~~implemented the associated changes in the design of our internal controls and expect to test~~tested the implementation of the ~~related changes~~revised policies and procedures. Subsequent to ~~these controls during~~ the third quarter ~~ended September 30, 2021.~~

~~During the quarter ended June 30,~~ 2021, we expect to perform operating effectiveness testing of the revised whistleblower complaint process to establish it has been operating for a sufficient period of time.



We have designed and implemented procedures for the accounting evaluation of ~~settlement features used to determine~~transactions, including instruments with warrants, options or conversion features. We are in the ~~classification~~process of ~~certain warrant instruments. We expect to test~~testing the implementation of these control procedures ~~during~~for relevant transactions that have occurred. Subsequent to the third quarter, ~~ended September 30, 2021.~~we expect to perform operating effectiveness testing of the revised controls to establish they have been operating for a sufficient period of time.

While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles, we are committed to the continuous improvement of our internal control over financial reporting and will continue to diligently review our internal control over financial reporting. The material weaknesses will not be considered remediated until management completes the design and implementation of the measures described above and the controls operate for a sufficient period of time and management has concluded, through testing, that these controls are effective.

Limitations on Effectiveness of Disclosure Controls and Procedures

In designing and evaluating our disclosure controls and procedures (as defined in Rules

13a-15(e)

and

15d-15(e)

under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules

13a-15(e)

and

15d-15(e)

under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form

10-Q.

Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of ~~June~~September 30, 2021, our disclosure controls and procedures were not effective because of the material weaknesses in our internal control over financial reporting described above.

However, after giving full consideration to these material weaknesses, and the additional analyses and other procedures that we performed to ensure that our consolidated financial statements included in this Quarterly Report were prepared in accordance with U.S. generally accepted accounting principles, our management has concluded that our consolidated financial statements included in this Quarterly Report fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

~~Table of Contents~~

PART ~~II—~~II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

Employment-Related Matters

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

A former employee filed a complaint in California Superior Court, Santa Clara County in July 2017, which seeks civil damages and penalties on behalf of the plaintiff and similarly situated persons for various alleged wage and hour violations under the California Labor Code, including failure to pay wages and/or overtime, failure to provide meal and rest breaks, failure to pay reporting time pay, waiting time penalties and penalties pursuant to California’s Private Attorneys General Act. We filed a motion for summary judgment. The court granted our motion for summary judgment in March 2020, and plaintiff filed an appeal of the court’s ruling in May 2020. We have retained outside counsel to represent us and intend to vigorously defend our interests in this matter.

A former employee filed a complaint in California Superior Court, Orange County in September 2019, which seeks damages, penalties and injunctive relief on behalf of the plaintiff and similarly situated persons for various alleged wage and hour violations under the California Labor Code, including failure to pay wages and/or overtime, failure to provide meal and rest breaks, failure to reimburse employee expenses, failure to pay reporting time pay, failure to comply with wage statement requirements, waiting time penalties, violations of California law regarding post-employment nonsolicitation agreements and violations of California’s unfair competition law. In November 2019, the former employee filed a first amended complaint adding a claim for civil penalties on behalf of the plaintiff and similarly situated persons pursuant to California’s Private Attorneys General Act (“PAGA”) based on the preceding allegations. Plaintiff’s counsel requested dismissal of the class and individual claims so that only the PAGA claim will remain, and the court granted such action. The parties have previously pursued mediation, and in the future the parties may pursue further mediation, other dispute resolutions approaches, or continue with the discovery or motion process on this litigation. We have retained outside counsel to represent us and intend to vigorously defend our interests in this matter.

Proceedings Relating to Take 5

The following proceedings relate to the Take 5 Matter, which is discussed in greater detail in “

PART I, Financial Information —Item 1. Financial Statements—Note 10. Commitments and Contingencies

” in this Quarterly Report and “

Risk Factors — Risks Related to the Company’s Business and Industry

” in our Annual Report on Form 10-K/A for the year ended December 31, 2020.

USAO and FBI Voluntary Disclosure and Investigation Related to Take 5

In connection with the Take 5 Matter, we voluntarily disclosed to the United States Attorney’s Office and the Federal Bureau of Investigation certain misconduct occurring at Take 5. We intend to cooperate in this and any other governmental investigation that may arise in connection with the Take 5 Matter. At this time, we cannot

predict the ultimate outcome of any investigation related to the Take 5 Matter and are unable to estimate the potential impact such an investigation may have on us.

~~Table of Contents~~

Arbitration Proceedings Related to Take 5

In August 2019, as a result of the Take 5 Matter, we provided a written indemnification claim notice to the sellers of Take 5, or the Take 5 Sellers, seeking monetary damages (including interest, fees and costs) based on allegations of breach of the asset purchase agreement, or Take 5 APA, as well as fraud. In September 2019, the Take 5 Sellers initiated arbitration proceedings in the state of Delaware against us, alleging breach of the Take 5 APA as a result of our decision to terminate the operations of the Take 5 business and seeking monetary damages equal to all unpaid

earn-out

payments under the Take 5 APA (plus interest fees and costs). In 2020, the Take 5 Sellers amended their statement of claim to allege defamation, relating to statements we made to customers in connection with terminating the operations of the Take 5 business, and seeking monetary damages for the alleged injury to their reputation. We have filed our response to the Take 5 Sellers’ claims and asserted indemnification, fraud and other claims against the Take 5 Sellers as counterclaims and cross-claims in the arbitration proceedings. We are currently unable to estimate the potential impact related to these arbitration proceedings, but we have retained outside counsel to represent us in these matters and are vigorously pursuing our interests. The arbitration hearing for this matter is currently scheduled for the ~~fourth~~first quarter of ~~2021.~~

2022.

Other Legal Matters Related to Take 5

The Take 5 Matter may result in additional litigation against us, including lawsuits from clients, or governmental investigations, which may expose us to potential liability in excess of the amounts being offered by us as refunds to Take 5 clients. We are currently unable to determine the amount of any potential liability, costs or expenses (above the amounts already being offered as refunds) that may result from any lawsuits or investigations associated with the Take 5 Matter or determine whether any such issues will have any future material adverse effect on our financial position, liquidity or results of operations. Although we have insurance covering certain liabilities, we cannot assure that the insurance will be sufficient to cover any potential liability or expenses associated with the Take 5 Matter.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed under Part I, Item 1A “Risk Factors” in our Annual Report on Form

10-K/A

for the year ended December 31, 2020, the current effects of which are discussed in more detail in Part I, Item 2 ~~“Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations” of this Quarterly Report on Form

10-Q.

In addition, the known and unknown impacts caused by the

COVID-19

pandemic and actions taken in response to it by governments, businesses, and individuals, may give rise to or amplify the risk factors disclosed in our Annual Report on Form

10-K/A

for the year ended December 31, 2020. These risks are not the only risks that may affect us. Additional risks that we are not aware of or do not believe are material at the time of this filing may also become important factors that adversely affect our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

None

~~Table of Contents~~

ITEM 6. Exhibits

The following exhibits are filed with this Report:


Exhibit Number		Description

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934

32.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350

32.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350

101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

***

~~Table of Contents~~

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


ADVANTAGE SOLUTIONS INC.

By:		/s/ Tanya Domier
		Tanya Domier
		Chief Executive Officer and Director
Date:		~~August~~ November 9, 2021

By:		/s/ Brian Stevens
		Brian Stevens
		Chief Financial Officer and Chief Operating
		Officer (Principal Financial Officer)
Date:		~~August~~ November 9, 2021


Delaware		83-4629508
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.0001 par value per share	ADV	Nasdaq Global Select Market
Warrants exercisable for one share of Class A common stock at an exercise price of $11.50 per share	ADVWW	Nasdaq Global Select Market


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

			Emerging growth company	☐


	June 30,			December 31,
(in thousands, except share and per share data)	2021			2020

ASSETS
Current assets
Cash and cash equivalents	$	159,782		$	204,301
Restricted cash		17,380			15,665
Accounts receivable, net of allowance for expected credit losses of $18,155 and $16,377, respectively		641,136			574,142
Prepaid expenses and other current assets		110,369			105,643

Total current assets		928,667			899,751
Property and equipment, net		63,130			80,016
Goodwill		2,181,191			2,163,339
Other intangible assets, net		2,365,280			2,452,796
Investments in unconsolidated affiliates		117,098			115,624
Other assets		66,095			65,966

Total assets	$	5,721,461		$	5,777,492

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	13,303		$	63,745
Accounts payable		206,436			195,452
Accrued compensation and benefits		118,695			142,136
Other accrued expenses		129,548			121,758
Deferred revenue		53,881			51,898

Total current liabilities		521,863			574,989
Long-term debt, net of current portion		2,027,097			2,029,328
Deferred income tax liabilities		483,146			491,242
Warrant liability		19,701			21,234
Other long-term liabilities		133,167			141,910

Total liabilities		3,184,974			3,258,703

Redeemable noncontrolling interest		1,823			0

Equity attributable to stockholders of Advantage Solutions Inc.
Preferred stock, 0 par value, 10,000,000 shares authorized; 0ne issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		0			0
Common stock, $0.0001 par value, 3,290,000,000 shares authorized; 318,496,390 and 318,425,182 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		32			32
Additional paid in capital		3,361,262			3,348,546
Accumulated deficit		(915,096	)		(921,101	)
Loans to Karman Topco L.P.		(6,328	)		(6,316	)
Accumulated other comprehensive (loss) income		(1,122	)		674

Total equity attributable to stockholders of Advantage Solutions Inc.		2,438,748			2,421,835
Nonredeemable noncontrolling interest		95,916			96,954

Total stockholders’ equity		2,534,664			2,518,789

Total liabilities, redeemable noncontrolling interest, and stockholders’ equity	$	5,721,461		$	5,777,492


	September 30,			December 31,
(in thousands, except share and per share data)	2021			2020
ASSETS
Current assets
Cash and cash equivalents	$	168,028		$	204,301
Restricted cash		16,379			15,665
Accounts receivable, net of allowance for expected credit losses of $15,773 and $16,377, respectively		704,119			574,142
Prepaid expenses and other current assets		167,581			105,643
Total current assets		1,056,107			899,751
Property and equipment, net		65,083			80,016
Goodwill		2,203,121			2,163,339
Other intangible assets, net		2,338,520			2,452,796
Investments in unconsolidated affiliates		121,844			115,624
Other assets		68,226			65,966
Total assets	$	5,852,901		$	5,777,492
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt	$	13,369		$	63,745
Accounts payable		244,586			195,452
Accrued compensation and benefits		158,522			142,136
Other accrued expenses		155,371			121,758
Deferred revenue		56,250			51,898
Total current liabilities		628,098			574,989
Long-term debt, net of current portion		2,026,027			2,029,328
Deferred income tax liabilities		475,483			491,242
Warrant liability		16,210			21,234
Other long-term liabilities		147,967			141,910
Total liabilities		3,293,785			3,258,703

Redeemable noncontrolling interest		1,819			0
Equity attributable to stockholders of Advantage Solutions Inc.
Preferred stock, 0 par value, 10,000,000 shares authorized; NaN issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		0			0
Common stock, $0.0001 par value, 3,290,000,000 shares authorized; 318,573,563 and 318,425,182 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		32			32
Additional paid in capital		3,364,365			3,348,546
Accumulated deficit		(891,785	)		(921,101	)
Loans to Karman Topco L.P.		(6,334	)		(6,316	)
Accumulated other comprehensive (loss) income		(3,565	)		674
Total equity attributable to stockholders of Advantage Solutions Inc.		2,462,713			2,421,835
Nonredeemable noncontrolling interest		94,584			96,954
Total stockholders’ equity		2,557,297			2,518,789
Total liabilities, redeemable noncontrolling interest, and stockholders’ equity	$	5,852,901		$	5,777,492

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

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


		Page
PART I—FINANCIAL INFORMATION				3

Item 1. Financial Statements (Unaudited)				3

	Condensed Consolidated Balance Sheets		3

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)		4

	Condensed Consolidated Statements of Stockholders’ Equity		5

	Condensed Consolidated Statements of Cash Flows		7

	Notes to the Condensed Consolidated Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25	26

Item 3. Quantitative and Qualitative Disclosures About Market Risk			49	50

Item 4. Controls and Procedures			50	51

PART II—OTHER INFORMATION			53	54

Item 1. Legal Proceedings			53	54

Item 1A. Risk Factors			54	55

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			54	55

Item 3. Defaults Upon Senior Securities			54	55

Item 4. Mine Safety Disclosures			54	55

Item 5. Other Information			54	56

Item 6. Exhibits			55	56

Signatures			56	57


	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except share and per share data)	2021			2020			2021			2020
Revenues	$	849,954		$	641,543		$	1,640,975		$	1,520,939
Cost of revenues (exclusive of depreciation and amortization shown separately below)		698,226			509,923			1,351,565			1,256,616
Selling, general, and administrative expenses		46,607			80,569			87,088			121,625
Recovery from Take 5		—			(7,700	)		—			(7,700	)
Depreciation and amortization		62,674			58,748			122,287			118,957

Total operating expenses		807,507			641,540			1,560,940			1,489,498

Operating income		42,447			3			80,035			31,441
Other (income) expenses:
Change in fair value of warrant liability		(7,059	)		—			(1,533	)		—
Interest expense, net		37,189			51,521			68,054			103,315

Total other (income) expenses		30,130			51,521			66,521			103,315
Income (loss) before income taxes		12,317			(51,518	)		13,514			(71,874	)
Provision for (benefit from) income taxes		6,563			(13,704	)		8,306			(12,337	)

Net income (loss)		5,754			(37,814	)		5,208			(59,537	)
Less: net loss attributable to noncontrolling interest		(367	)		(410	)		(797	)		(425	)

Net income (loss) attributable to stockholders of Advantage Solutions Inc.		6,121			(37,404	)		6,005			(59,112	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		624			1,843			(1,796	)		(6,317	)

Total comprehensive income (loss) attributable to stockholders of Advantage Solutions Inc.	$	6,745		$	(35,561	)	$	4,209		$	(65,429	)

Net income (loss) per common share:
Basic	$	0.02		$	(0.18	)	$	0.02		$	(0.29	)

Diluted	$	0.00		$	(0.18	)	$	0.01		$	(0.29	)

Weighted-average number of common shares:
Basic		318,464,596			203,750,000			318,035,355			203,750,000

Diluted		323,294,273			203,750,000			321,350,145			203,750,000


	Nine Months Ended September 30,
(in thousands)	2021			2020

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	29,535		$	(22,832	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Noncash interest expense, net		2,893			11,928
Depreciation and amortization		181,450			177,513
Change in fair value of warrant liability		(5,024	)		0
Fair value adjustments related to contingent consideration		6,977			4,162
Deferred income taxes		(17,468	)		(3,432	)
Equity-based compensation of Topco		(13,140	)		1,650
Stock-based compensation		28,617			0
Equity in earnings of unconsolidated affiliates		(6,222	)		(3,116	)
Distribution received from unconsolidated affiliates		1,154			162
Noncash losses (gains) related to lease abandonments		2,253			(1,777	)
Loss on disposal of property and equipment		6,327			18,682
Changes in operating assets and liabilities, net of effects from purchases of businesses:
Accounts receivable		(121,036	)		131,229
Prepaid expenses and other assets		(58,889	)		31,839
Accounts payable		37,294			(10,992	)
Accrued compensation and benefits		16,684			20,942
Deferred revenues		2,869			3,247
Other accrued expenses and other liabilities		6,794			(69,100	)
Net cash provided by operating activities		101,068			290,105
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of businesses, net of cash acquired		(40,046	)		(51,389	)
Purchase of investment in unconsolidated affiliates		(2,000	)		0
Purchase of property and equipment		(24,106	)		(23,183	)
Net cash used in investing activities		(66,152	)		(74,572	)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under lines of credit		51,685			104,918
Payments on lines of credit		(102,493	)		(106,153	)
Proceeds from accounts receivable securitization facility		0			120,000
Proceeds from government loans for COVID-19 relief		0			2,846
Principal payments on long-term debt		(10,133	)		(19,793	)
Proceeds from issuance of common stock		794			0
Contingent consideration payments		(6,247	)		(11,364	)
Holdback payments		(2,389	)		0
Redemption of noncontrolling interest		(216	)		0
Net cash (used in) provided by financing activities		(68,999	)		90,454
Net effect of foreign currency fluctuations on cash		(1,476	)		(1,187	)
Net change in cash, cash equivalents and restricted cash		(35,559	)		304,800
Cash, cash equivalents and restricted cash, beginning of period		219,966			199,025
Cash, cash equivalents and restricted cash, end of period	$	184,407		$	503,825
SUPPLEMENTAL CASH FLOW INFORMATION
Purchase of property and equipment recorded in accounts payable and accrued expenses	$	322		$	135
Note payable related to settlement of contingent consideration	$	0		$	6,194


	Six Months Ended June 30,
(in thousands)	2021			2020

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	5,208		$	(59,537	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Noncash interest expense, net		419			8,120
Depreciation and amortization		122,287			118,957
Change in fair value of warrant liability		(1,533	)		—
Fair value adjustments related to contingent consideration		3,361			9,532
Deferred income taxes		(7,403	)		2,658
Equity-based compensation of Topco		(7,110	)		1,650
Stock-based compensation		20,204			—
Equity in earnings of unconsolidated affiliates		(3,260	)		(1,750	)
Distribution received from unconsolidated affiliates		1,154			221
Noncash losses (gains) related to lease abandonments		1,241			(25,825	)
Loss on disposal of property and equipment		6,199			10,978
Changes in operating assets and liabilities, net of effects from purchases of businesses:
Accounts receivable		(64,802	)		190,720
Prepaid expenses and other assets		3,309			49,796
Accounts payable		8,901			(44,723	)
Accrued compensation and benefits		(23,224	)		(26,649	)
Deferred revenues		1,717			5,154
Other accrued expenses and other liabilities		(10,744	)		(4,875	)

Net cash provided by operating activities		55,924			234,427

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of businesses, net of cash acquired		(20,426	)		(51,389	)
Purchase of property and equipment		(12,958	)		(15,425	)

Net cash used in investing activities		(33,384	)		(66,814	)

CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under lines of credit		41,736			97,658
Payments on lines of credit		(92,756	)		(98,640	)
Proceeds from accounts receivable securitization facility		—			120,000
Proceeds from issuance of long-term debt		—			2,787
Principal payments on long-term debt		(6,849	)		(13,281	)
Contingent consideration payments		(6,247	)		(7,641	)
Holdback payments		(173	)		—
Redemption of noncontrolling interest		(200	)		—

Net cash (used in) provided by financing activities		(64,489	)		100,883

Net effect of foreign currency fluctuations on cash		(855	)		(5,860	)
Net change in cash, cash equivalents and restricted cash		(42,804	)		262,636

Cash, cash equivalents and restricted cash, beginning of period		219,966			199,025

Cash, cash equivalents and restricted cash, end of period	$	177,162		$	461,661

SUPPLEMENTAL CASH FLOW INFORMATION
Purchase of property and equipment recorded in accounts payable and accrued expenses	$	628		$	25
Note payable related to settlement of contingent consideration	$	—		$	5,982


(in thousands)
Consideration:
Cash	$	40,046
Holdback		13,599
Fair value of contingent consideration		19,883
Total consideration	$	73,528
Recognized amounts of identifiable assets acquired and liabilities assumed:
Assets
Accounts receivable	$	12,834
Other assets		4,400
Property and equipment		1,001
Identifiable intangible assets		36,210
Total assets		54,445
Liabilities
Total liabilities		21,758
Redeemable noncontrolling interest		1,804
Total identifiable net assets		30,883
Goodwill arising from acquisitions	$	42,645


(in thousands)	Amount		Weighted Average Useful Life
Client relationships	$	27,860	7 years
Trade names		5,250	5 years
Developed technology		3,100	7 years
Total identifiable intangible assets	$	36,210


(in thousands)	Amount		Weighted Average Useful Life
Client relationships	$	10,082		7 years
Trade n ames		1,001		10 years

Total identifiable intangible assets	$	11,083


(in thousands)
Consideration
Cash	$	51,389
Holdbacks		3,487
Fair value of contingent consideration		17,210
Total consideration	$	72,086
Recognized amounts of identifiable assets acquired and liabilities assumed:
Assets
Accounts receivable	$	2,605
Other assets		2,925
Property and equipment		321
Identifiable intangible assets		32,610
Total assets		38,461
Liabilities
Total liabilities		4,402
Total identifiable net assets		34,059
Goodwill arising from acquisitions	$	38,027


~~(in thousands)~~	~~Amount~~		Weighted Average Useful Life
~~Client relationships~~	$	~~32,610~~		~~10 years~~


		June 30, 2021
(in thousands)	Weighted Average Useful Life	Gross Carrying Value		Accumulated Amortization		Accumulated Impairment Charges (1)		Net Carrying Value
Finite-lived intangible assets:
Client relationships	14 years	$	2,465,579	$	1,067,784	$	—	$	1,397,795
Trade names	8 years		134,885		72,339		—		62,546
Developed technology	5 years		10,160		7,005		—		3,155
Covenant not to compete	5 years		6,100		4,316		—		1,784

Total finite-lived intangible assets			2,616,724		1,151,444		—		1,465,280

Indefinite-lived intangible assets:
Trade names			1,480,000		—		580,000		900,000

Total other intangible assets		$	4,096,724	$	1,151,444	$	580,000	$	2,365,280


(in thousands)
Remainder of 2021	$	98,662
2022		194,917
2023		191,363
2024		189,968
2025		184,611
Thereafter		605,759

Total amortization expense	$	1,465,280


	June 30, 2021		December 31, 2020
(in thousands)


New Term Loan Facility	$	1,318,375	$	1,325,000
Notes		775,000		775,000
New Revolving Credit Facility		—		50,000
Notes payable and deferred obligations		2,953		3,618

		2,096,328		2,153,618
Less: current portion		13,303		63,745
Less: debt issuance costs		55,928		60,545

Long-term debt, net of current portion	$	2,027,097	$	2,029,328


(in thousands)	Carrying Value		Fair Value (Level 2)
Balance at June 30, 2021
New Term Loan Credit Facility	$	1,318,375	$	1,461,643
Notes		775,000		899,251
Notes payable and deferred obligations		2,953		2,953

Total long-term debt	$	2,096,328	$	2,363,847


	Revenues								Accounts Receivable
	Three Months Ended				Six Months Ended				as of
(In thousands)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020		June 30, 2021		December 31, 2020
Client 1	$	2,071	$	0	$	4,495	$	0	$	0	$	0
Client 2		0		0		0		3,866		0		0
Client 3		107		0		214		0		736		572
Client 4		116		514		333		608		5,152		4,819
Client 5		264		33		407		209		1,276		1,285
Client 6		37		66		126		171		1,041		915

Total	$	2,595	$	613	$	5,575	$	4,854	$	8,205	$	7,591


Performance Period	Number of Shares Threshold		Number of Shares Target		Number of Shares Maximum		Weighted Average Fair Value per Share		Maximum Potential Expense to be Recognized *		Maximum Remaining Expense to be Recognized *
January 1, 2021—December 31, 2021		1,273,231		2,546,461		3,816,120	$	13.22	$	50,446	$	40,721