Form 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
March 31, 2021
☐ TRANSITION 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 |
CONYERS PARK II ACQUISITION CORP.
Delaware | 83-4629508 | |||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
18100 Von Karman Avenue, Suite 1000 Irvine, CA 92612 (Address of principal executive offices) (949) 797-2900 ( |
Registrant’s telephone number, including area code: (212) 429-2211
Not Applicable(Former name or former address, if changed since last report)
code)
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 | ||
Warrants | ADVWW | Nasdaq |
| Large accelerated filer | ☐ | Accelerated filer | ☒ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
| Emerging growth company | ☐ | |||||
☒
CONYERS PARK II ACQUISITION CORP.
Quarterly Report on Form 10-Q
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CONYERS PARK II ACQUISITION CORP.
Condensed Balance Sheets
| June 30, 2020 | December 31, 2019 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 827,094 | $ | 951,060 | ||||
| Prepaid expenses | 216,666 | 316,667 | ||||||
| Prepaid income taxes | – | 25,327 | ||||||
| Total current assets | 1,043,760 | 1,293,054 | ||||||
| Marketable securities held in Trust Account | 454,300,367 | 452,816,525 | ||||||
| Total assets | $ | 455,344,127 | $ | 454,109,579 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 23,269 | $ | 100,000 | ||||
| Accounts payable - related party | 215,595 | 127,912 | ||||||
| Income taxes payable | 304,574 | – | ||||||
| Total current liabilities | 543,438 | 227,912 | ||||||
| Deferred underwriting commissions | 15,750,000 | 15,750,000 | ||||||
| Total liabilities | 16,293,438 | 15,977,912 | ||||||
| Commitments and contingencies | ||||||||
| Class A common stock, $0.0001 par value; 500,000,000 shares authorized; 43,405,068 and 43,313,166 shares subject to possible redemption at June 30, 2020 and December 31, 2019, respectively | 434,050,680 | 433,131,660 | ||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | – | – | ||||||
| Class A common stock, $0.0001 par value; 500,000,000 shares authorized; 1,594,932 and 1,686,834 shares issued and outstanding (excluding 43,405,068 and 43,313,166 shares subject to possible redemption) at June 30, 2020 and December 31, 2019, respectively | 159 | 169 | ||||||
| Class B common stock, $0.0001 par value; 50,000,000 shares authorized; 11,250,000 shares issued and outstanding | 1,125 | 1,125 | ||||||
| Additional paid-in capital | 1,610,562 | 2,529,572 | ||||||
| Retained earnings | 3,388,163 | 2,469,141 | ||||||
| Total stockholders’ equity | 5,000,009 | 5,000,007 | ||||||
| Total liabilities and stockholders’ equity | $ | 455,344,127 | $ | 454,109,579 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
CONYERS PARK II ACQUISITION CORP.
Unaudited Condensed StatementS of Operations
| For the Period From | ||||||||||||
| For The Three | For The Six | May 2, 2019 | ||||||||||
| Months Ended | Months Ended | (inception) Through | ||||||||||
| June 30, 2020 | June 30, 2020 | June 30, 2019 | ||||||||||
| General and administrative expenses | $ | 110,177 | $ | 322,037 | $ | 2,000 | ||||||
| State franchise taxes | 50,000 | 100,000 | – | |||||||||
| Loss from operations | (160,177 | ) | (422,037 | ) | (2,000 | ) | ||||||
| Interest income earned on cash equivalents and marketable securities held in Trust Account | 211,780 | 1,670,961 | – | |||||||||
| Income before income tax expense | 51,603 | 1,248,924 | (2,000 | ) | ||||||||
| Income tax expense | 33,974 | 329,902 | – | |||||||||
| Net income / (loss) | $ | 17,629 | $ | 919,022 | $ | (2,000 | ) | |||||
| Weighted average shares outstanding of Class A common stock | 45,000,000 | 45,000,000 | – | |||||||||
| Basic and diluted net income per share, Class A | $ | 0.00 | $ | 0.02 | $ | 0.00 | ||||||
| Weighted average shares outstanding of Class B common stock (1) | 11,250,000 | 11,250,000 | 11,250,000 | |||||||||
| Basic and diluted net income per share, Class B | $ | 0.00 | $ | 0.00 | $ | (0.00 | ) | |||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
CONYERS PARK II ACQUISITION CORP.
Unaudited Condensed StatementS of Changes in Stockholders’ Equity
| For the Three and Six Months Ended June 30, 2020 | ||||||||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | Additional Paid-in | Retained | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Earnings | Equity | ||||||||||||||||||||||
| Balance as of December 31, 2019 | 1,686,834 | $ | 169 | 11,250,000 | $ | 1,125 | $ | 2,529,572 | $ | 2,469,141 | $ | 5,000,007 | ||||||||||||||||
| Common stock subject to possible redemption | (90,139 | ) | (9 | ) | – | – | (901,381 | ) | – | (901,390 | ) | |||||||||||||||||
| Net income | – | – | – | – | – | 901,393 | 901,393 | |||||||||||||||||||||
| Balance as of March 31, 2020 | 1,596,695 | $ | 160 | 11,250,000 | $ | 1,125 | $ | 1,628,191 | $ | 3,370,534 | $ | 5,000,010 | ||||||||||||||||
| Common stock subject to possible redemption | (1,763 | ) | (1 | ) | – | – | (17,629 | ) | – | (17,630 | ) | |||||||||||||||||
| Net income | – | – | – | – | – | 17,629 | 17,629 | |||||||||||||||||||||
| Balance as of June 30, 2020 | 1,594,932 | $ | 159 | 11,250,000 | $ | 1,125 | $ | 1,610,562 | $ | 3,388,163 | $ | 5,000,009 | ||||||||||||||||
| For the Period From May 2, 2019 (inception) Through June 30, 2019 | ||||||||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | Additional Paid-in | Accumulated Retained | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance as of May 2, 2019 (inception) | – | $ | – | – | $ | – | $ | – | $ | – | $ | – | ||||||||||||||||
| Issuance of Class B common stock to Sponsor (1) | – | – | 11,500,000 | $ | 1,150 | 23,850 | – | 25,000 | ||||||||||||||||||||
| Net income | – | – | – | – | – | (2,000 | ) | (2,000 | ) | |||||||||||||||||||
| Balance as of June 30, 2019 | – | $ | – | 11,500,000 | $ | 1,150 | $ | 23,850 | $ | (2,000 | ) | $ | 23,000 | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
CONYERS PARK II ACQUISITION CORP.
Unaudited Condensed StatementS of Cash Flows
| For the Period | ||||||||
| For The Six | From May 2, 2019 | |||||||
| Months Ended | (inception) Through | |||||||
| June 30, 2020 | June 30, 2019 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income / (loss) | $ | 919,022 | $ | (2,000 | ) | |||
| Adjustments to reconcile net income / (loss) to net cash used in operating activities: | ||||||||
| Interest income earned on marketable securities held in Trust Account | (1,668,594 | ) | – | |||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expenses | 100,001 | – | ||||||
| Prepaid income taxes | 25,327 | – | ||||||
| Accounts payable and accrued expenses | (76,731 | ) | 2,000 | |||||
| Accounts payable - related party | 87,683 | – | ||||||
| Income taxes payable | 304,574 | – | ||||||
| Net cash used in operating activities | (308,718 | ) | – | |||||
| Cash flows from investing activities: | ||||||||
| Investment income released from Trust Account | $ | 184,752 | $ | – | ||||
| Net cash provided by investing activities | 184,752 | – | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from promissory note – related party | – | 130,340 | ||||||
| Payment of offering costs | – | (130,340 | ) | |||||
| Net cash used by financing activities | – | – | ||||||
| Net change in cash and cash equivalents | (123,966 | ) | – | |||||
| Cash and cash equivalents at beginning of period | 951,060 | – | ||||||
| Cash and cash equivalents at end of period | $ | 827,094 | $ | – | ||||
| Supplemental disclosure of noncash investing and financing activities: | ||||||||
| Change in value of Class A common stock subject to possible redemption | $ | 919,020 | $ | – | ||||
| Deferred offering costs included in accounts payable and accrued expenses | $ | – | $ | 206,297 | ||||
| Deferred offering costs paid by Sponsor in exchange for issuance of Class B common stock | $ | – | $ | 25,000 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
(in thousands, except per share data) | March 31, 2021 | December 31, 2020 | ||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 156,351 | $ | 204,301 | ||||
Restricted cash | 17,473 | 15,665 | ||||||
Accounts receivable, net of allowance for expected credit losses of $16,533 and $16,377, respectively | 576,282 | 574,142 | ||||||
Prepaid expenses and other current assets | 137,085 | 105,643 | ||||||
Total current assets | 887,191 | 899,751 | ||||||
Property and equipment, net | 73,876 | 80,016 | ||||||
Goodwill | 2,173,924 | 2,163,339 | ||||||
Other intangible assets, net | 2,412,136 | 2,452,796 | ||||||
Investments in unconsolidated affiliates | 116,176 | 115,624 | ||||||
Other assets | 62,867 | 65,966 | ||||||
Total assets | $ | 5,726,170 | $ | 5,777,492 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Current portion of long-term debt | $ | 13,304 | $ | 63,745 | ||||
Accounts payable | 189,846 | 195,452 | ||||||
Accrued compensation and benefits | 123,335 | 142,136 | ||||||
Other accrued expenses | 141,467 | 121,758 | ||||||
Deferred revenue | 54,187 | 51,898 | ||||||
Total current liabilities | 522,139 | 574,989 | ||||||
Long-term debt, net of current portion | 2,028,090 | 2,029,328 | ||||||
Deferred income tax liabilities, net | 492,185 | 491,242 | ||||||
Warrant liability | 26,761 | 21,234 | ||||||
Other long-term liabilities | 134,178 | 141,910 | ||||||
Total liabilities | 3,203,353 | 3,258,703 | ||||||
Commitments and contingencies (Note 10) | 0 | 0 | ||||||
Redeemable noncontrolling interest | 1,873 | — | ||||||
Equity attributable to stockholders of Advantage Solutions Inc. | ||||||||
Preferred stock, 0 par value, 10,000,000 shares authorized; 0ne issued and outstanding as of March 31, 2021 and December 31, 2020, respectively | 0— | — | ||||||
Common stock, $0.0001 par value, 3,290,000,000 shares authorized; 318,449,966 and 318,425,182 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively | 32 | 32 | ||||||
Additional paid in capital | 3,354,383 | 3,348,546 | ||||||
Accumulated deficit | (921,217 | ) | (921,101 | ) | ||||
Loans to Topco | (6,322 | ) | (6,316 | ) | ||||
Accumulated other comprehensive (loss) income | (1,746 | ) | 674 | |||||
Total equity attributable to stockholders of Advantage Solutions Inc. | 2,425,130 | 2,421,835 | ||||||
Nonredeemable noncontrolling interest | 95,814 | 96,954 | ||||||
Total stockholders’ equity | 2,520,944 | 2,518,789 | ||||||
Total liabilities, redeemable noncontrolling interest, and stockholders’ equity | $ | 5,726,170 | $ | 5,777,492 | ||||
Note 1—DescriptionStatements.
Three Months Ended March 31, | ||||||||
(in thousands, except share and per share data) | 2021 | 2020 | ||||||
Revenues | $ | 791,021 | $ | 879,396 | ||||
Cost of revenues (exclusive of depreciation and amortization | 653,339 | 746,693 | ||||||
Selling, general, and administrative expenses | 40,481 | 41,056 | ||||||
Depreciation and amortization | 59,613 | 60,209 | ||||||
Total expenses | 753,433 | 847,958 | ||||||
Operating income | 37,588 | 31,438 | ||||||
Other expenses: | ||||||||
Change in fair value of warrant liability | 5,526 | — | ||||||
Interest expense, net | 30,865 | 51,794 | ||||||
Total other expenses | 36,391 | 51,794 | ||||||
Income (loss) before income taxes | 1,197 | (20,356 | ) | |||||
Provision for income taxes | 1,743 | 1,367 | ||||||
Net loss | (546 | ) | (21,723 | ) | ||||
Less: net loss attributable to noncontrolling interest | (430 | ) | (15 | ) | ||||
Net loss attributable to stockholders of Advantage Solutions Inc. | (116 | ) | (21,708 | ) | ||||
Other comprehensive loss, net of tax: | ||||||||
Foreign currency translation adjustments | (2,420 | ) | (8,160 | ) | ||||
Total comprehensive loss attributable to stockholders of Advantage Solutions Inc. | $ | (2,536 | ) | $ | (29,868 | ) | ||
Net loss per common share: | ||||||||
Basic and diluted | $ | (0.00 | ) | $ | (0.11 | ) | ||
Weighted-average number of common shares: | ||||||||
Basic and diluted | 317,601,345 | 203,750,000 | ||||||
Accumulated | Advantage | |||||||||||||||||||||||||||||||||||
Additional | Loans | Other | Solutions Inc. | Nonredeemable | Total | |||||||||||||||||||||||||||||||
Common Stock | Paid-in | Accumulated | to | Comprehensive | Stockholders’ | noncontrolling | Stockholders’ | |||||||||||||||||||||||||||||
(in | Shares | Amount | Capital | Deficit | Topco | Income (Loss) | Equity | Interests | Equity | |||||||||||||||||||||||||||
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 loss | — | — | — | (116 | ) | — | — | (116 | ) | (430 | ) | (546 | ) | |||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | (2,420 | ) | (2,420 | ) | (710 | ) | (3,130 | ) | |||||||||||||||||||||||
Total comprehensive loss | (2,536 | ) | (1,140 | ) | (3,676 | ) | ||||||||||||||||||||||||||||||
Loans to Topco | — | — | — | — | (6 | ) | — | (6 | ) | — | (6 | ) | ||||||||||||||||||||||||
Equity-based compensation of Topco | — | — | (4,049 | ) | — | — | — | (4,049 | ) | — | (4,049 | ) | ||||||||||||||||||||||||
| Vesting of stock based compensation awards | 24,784 | — | — | — | — | — | — | — | 0 | |||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 9,886 | — | — | — | 9,886 | — | 9,886 | |||||||||||||||||||||||||||
Balance at March 31, 2021 | 318,449,966 | $ | 32 | $ | 3,354,383 | $ | (921,217 | ) | $ | (6,322 | ) | $ | (1,746 | ) | $ | 2,425,130 | $ | 95,814 | $ | 2,520,944 | ||||||||||||||||
Accumulated | Advantage | |||||||||||||||||||||||||||||||||||
Additional | Loans | Other | Solutions Inc. | Nonredeemable | Total | |||||||||||||||||||||||||||||||
Common Stock | Paid-in | Accumulated | to | Comprehensive | Stockholders’ | noncontrolling | Stockholders’ | |||||||||||||||||||||||||||||
(in | Shares | Amount | Capital | Deficit | Topco | Income (Loss) | Equity | Interests | Equity | |||||||||||||||||||||||||||
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 loss | — | — | — | (21,708 | ) | — | — | (21,708 | ) | (15 | ) | (21,723 | ) | |||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | (8,160 | ) | (8,160 | ) | (4,289 | ) | (12,449 | ) | |||||||||||||||||||||||
Total comprehensive loss | (29,868 | ) | (4,304 | ) | (34,172 | ) | ||||||||||||||||||||||||||||||
Balance at March 31, 2020 | 203,750,000 | $ | 20 | $ | 2,337,471 | $ | (767,003 | ) | $ | (6,244 | ) | $ | (16,313 | ) | $ | 1,547,931 | $ | 87,703 | $ | 1,635,634 | ||||||||||||||||
Three Months Ended March 31, | ||||||||
(in thousands) | 2021 | 2020 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (546 | ) | $ | (21,723 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities | ||||||||
| Noncash interest (income) expense | (3,084 | ) | 4,121 | |||||
Depreciation and amortization | 59,613 | 60,209 | ||||||
Changes in fair value of warrant liability | 5,526 | — | ||||||
Fair value adjustments related to contingent consideration | (584 | ) | 4,607 | |||||
Deferred income taxes | 1,793 | 22,987 | ||||||
Equity-based compensation of Topco | (4,048 | ) | — | |||||
Stock-based compensation | 9,886 | — | ||||||
Equity in earnings of unconsolidated affiliates | (1,513 | ) | (1,112 | ) | ||||
Distribution received from unconsolidated affiliates | 150 | 221 | ||||||
Loss on disposal of property and equipment | 1,566 | — | ||||||
Changes in operating assets and liabilities, net of effects from purchases of businesses: | ||||||||
Accounts receivable | (781 | ) | 37,343 | |||||
Prepaid expense and other assets | (25,917 | ) | (23,401 | ) | ||||
Accounts payable | (7,779 | ) | (28,998 | ) | ||||
Accrued compensation and benefits | (18,349 | ) | (6,020 | ) | ||||
Deferred revenues | 2,538 | 7,062 | ||||||
Other accrued expenses and other liabilities | 11,416 | (4,331 | ) | |||||
Net cash provided by operating activities | 29,887 | 50,965 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of businesses, net of cash acquired | (14,034 | ) | (51,389 | ) | ||||
Purchase of property and equipment | (5,247 | ) | (8,453 | ) | ||||
Net cash used in investing activities | (19,281 | ) | (59,842 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Borrowings under lines of credit | 8,773 | 89,529 | ||||||
Payments on lines of credit | (59,604 | ) | (9,703 | ) | ||||
Principal payments on long-term debt | (3,510 | ) | (6,524 | ) | ||||
Contingent consideration payments | — | (2,150 | ) | |||||
Holdback payments | (173 | ) | — | |||||
Net cash (used in) provided by financing activities | (54,514 | ) | 71,152 | |||||
Net effect of foreign currency fluctuations on cash | (2,234 | ) | (6,883 | ) | ||||
Net change in cash, cash equivalents and restricted cash | (46,142 | ) | 55,392 | |||||
Cash, cash equivalents and restricted cash, beginning of period | 219,966 | 199,025 | ||||||
Cash, cash equivalents and restricted cash, end of period | $ | 173,824 | $ | 254,417 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
Purchase of property and equipment recorded in accounts payable and accrued expenses | $ | 869 | $ | 876 | ||||
outsourced solutions to consumer goods companies and retailers.
As of June 30, 2020, the Company had not commenced any operations. All activity for the period from May 2, 2019 (inception) through June 30, 2020 relates to the Company’s formation and the preparation for its initial public offering (the “Initial Public Offering”) as described below, and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering.
The Company’s sponsor is Conyers Park II Sponsor LLC, a Delaware limited liability(“Merger Sub”), and Karman Topco L.P., then the parent company (the “Sponsor”of Legacy Advantage (“Topco”). The registration statement for the Company’s Initial Public Offering was declared effective on July 17, 2019. On July 22, 2019, the Company consummated its Initial Public Offering of 45,000,000 units (the “Units”), including 5,000,000 additional Units to cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, which is discussed in Note 3, generating gross proceeds of $450 million, and incurring offering costs of approximately $25.36 million, inclusive of approximately $15.75 million in deferred underwriting commissions following the partial exercise of the underwriters’ over-allotment option (Note 5).
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (the “Private Placement”) of 7,333,333 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant with the Sponsor, generating gross proceeds of $11.0 million (Note 4).
Upon the closing of the Initial Public Offering and the Private Placement, $450 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account (the “Trust Account”), located in the United States at J.P. Morgan Chase Bank, N.A., with Continental Stock Transfer & Trust Company acting as trustee, and was invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, orConyers Park neither engaged in any open-ended investment company that holds itself outoperations nor generated any revenue. Based on Conyers Park’s business activities, it was a “shell company” as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the assets held in the Trust Account as described below.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the signing of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company will provide the holders (the “Public Stockholders”) of shares of its Class A common stock, par value $0.0001 (the “Class A common Stock”), sold in the Initial Public Offering (the “Public Shares”), with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 5). These Public Shares were classified as temporary equity upon the completion of the Initial Public Offering. In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to the amended and restated certificate of incorporation which the Company adopted upon the consummation of the Initial Public Offering (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transactions is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem the Public Shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Stockholder may elect to redeem its Public Shares irrespective of whether such Public Stockholder votes for or against the proposed transaction. If the Company seeks stockholder approval in connection with a Business Combination, the initial stockholders (as defined below) have agreed to vote their Founder Shares (as defined in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination. In addition, the initial stockholders have agreed to waive their redemption rights with respect to their Founder Shares and any Public Shares acquired by them in connection with the completion of a Business Combination.
Notwithstanding the foregoing, the Amended and Restated Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The Company’s Sponsor, officers and directors (the “initial stockholders”) have agreed not to propose an amendmentmerger pursuant to the AmendedMerger Agreement, and Restated CertificateMerger Sub was merged with and into Legacy Advantage with Legacy Advantage surviving the merger as a wholly owned subsidiary of Incorporation (a) that would modifyConyers Park (the “Merger” and, together with the substance or timing ofother transactions contemplated by the Company’s obligation to redeem 100% of its Public Shares ifMerger Agreement, the Company does not complete a Business Combination within 24 months from“Transactions”). On the Closing Date, and in connection with the closing of the Initial Public Offering, or July 22, 2021,Transactions (the “Combination Period”“Closing”) or (b) which adversely affects, Conyers Park changed its name to Advantage Solutions Inc. and Legacy Advantage changed its name to ASI Intermediate Corp.
If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purposeat an exercise price
The initial stockholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 5) held in the Trust Account in the event the Company does not complete a Business Combination during the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.00 per share initially held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claimsarket under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”)symbol “ADVWW”. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all third parties, including vendors, service providers (excluding the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
The accompanyingcondensed consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and notes thereto includedfor the year ended December 31, 2020 and the related footnotes thereto. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.
Emerging Growth Company
Once adopted, the amendments in this update must be applied prospectively for all eligible contract modifications for that topic. The Company is an “emerging growth company,” as definedevaluating the potential impact of this adoption on its consolidated financial statements.
Three Months Ended March 31, | ||||||||
(in thousands) | 2021 | 2020 | ||||||
Sales brand-centric services | $ | 293,531 | $ | 317,598 | ||||
Sales retail-centric services | 240,793 | 190,200 | ||||||
Total sales revenues | 534,324 | 507,798 | ||||||
Marketing brand-centric services | 116,982 | 96,365 | ||||||
Marketing retail-centric services | 139,715 | 275,233 | ||||||
Total marketing revenues | 256,697 | 371,598 | ||||||
Total revenues | $ | 791,021 | $ | 879,396 | ||||
Further, Section 102(b)(1)Company’s satisfaction of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, thoseapplicable obligation(s) and are included in Deferred revenues in the Condensed Consolidated Balance Sheets. Deferred revenues are recognized as revenues when the related services are performed for the client. Revenues recognized during the three months ended March 31, 2021 that have not had a Securities Act registration statement declared effective or do not have a classwere included in Deferred revenues as of securities registeredDecember 31, 2020 were $26.1 million. Revenues recognized during the three months ended March 31, 2020 that were included in Deferred revenues as of December 31, 2019 were $24.0 million.
This may make comparison ofbusiness combination were recorded on the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Liquidity
As of June 30, 2020, the Company had $827,094 in its operating bank account, working capital of $500,322 and $5,241,118 of interest income available in the Trust Account to pay for the Company’s tax obligations, if any, and which may be withdrawn for working capital purposes.
The Company’s liquidity needs have been satisfied prior to the completion of the Initial Public Offering through receipt of a $25,000 capital contribution from the Sponsor in exchange for the issuance of the Founder Shares to the Sponsor and the advancement of funds by the Sponsor under the Note (see Note 4) to cover the Company’s expenses in connection with the Initial Public Offering. As of June 30, 2020, no amounts remained outstanding under the Note. Subsequent to the consummation of the Initial Public Offering and Private Placement, the Company’s liquidity needs have been satisfied from the proceeds from the consummation of the Private Placement not held in the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (see Note 4). As of June 30, 2020, there were no amounts outstanding under any Working Capital Loan.
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the acquisition date based upon the estimated fair value at such date. The excess of the purchase consideration over the estimated fair value of the net tangible and identifiable intangible assets acquired was recorded as goodwill. The allocation of the excess purchase price was based upon preliminary estimates and assumptions and is subject to revision when the Company receives final information. Accordingly, the measurement period for such purchase price allocations will end when the information, or the facts and circumstances, becomes available, but will not exceed twelve months. The results of operations of each acquired business has been included in the Condensed Consolidated Statements of Comprehensive Loss since its respective date of acquisition.
Going Concern
In connection with the Company’s assessmentacquisitions completed during the three months ended March 31, 2021, as of going concern considerationsthe applicable acquisition dates, are as follows:
(in thousands) | ||||
Consideration: | ||||
Cash | $ | 14,034 | ||
Holdbacks | 1,443 | |||
Fair value of contingent consideration | 2,692 | |||
Total consideration | $ | 18,169 | ||
Recognized amounts of identifiable assets acquired and liabilities assumed: | ||||
Assets | ||||
Accounts receivable | $ | 2,998 | ||
Property and equipment | 87 | |||
Identifiable intangible assets | 9,103 | |||
Total assets | 12,188 | |||
Liabilities | ||||
Total liabilities | 3,678 | |||
Redeemable noncontrolling interest | 1,804 | |||
Total identifiable net assets | 6,706 | |||
Goodwill arising from acquisitions | $ | 11,463 | ||
(in thousands) | Amount | Weighted Average Useful Life | ||||||
Client relationships | $ | 8,102 | 8 years | |||||
Trade Names | 1,001 | 5 years | ||||||
Total identifiable intangible assets | $ | 9,103 | ||||||
Three Months Ended March 31, | ||||||||
(in thousands, except per share data) | 2021 | 2020 | ||||||
Total revenues | $ | 792,444 | $ | 881,119 | ||||
Net income (loss) attributable to stockholders of Advantage Solutions Inc. | $ | (300 | ) | $ | (21,804 | ) | ||
Basic and diluted net income (loss) per common share | $ | (0.00 | ) | $ | (0.10 | ) | ||
Note 2—Summary of Significant Accounting Policies
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $827,094 and $951,060 in cash and cash equivalents as of June 30, 2020 and December 31, 2019, respectively.
Marketable Securities Held in Trust Account
The Company’s portfolio of marketable securities is comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securitiesacquired 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 months ended March 31, 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 includedpresented.
(in thousands) | Sales | Marketing | Total | |||||||||
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 | 11,463 | — | 11,463 | |||||||||
Measurement period adjustments | 167 | (1,045 | ) | (878 | ) | |||||||
Balance at March 31, 2021 | 1,474,008 | 699,916 | 2,173,924 | |||||||||
| (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. |
March 31, 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 | $ | 2,463,217 | $ | 1,022,275 | $ | — | $ | 1,440,942 | |||||||||||
| Trade names | 8 years | 134,749 | 69,307 | — | 65,442 | |||||||||||||||
Developed technology | 5 years | 10,160 | 6,497 | — | 3,663 | |||||||||||||||
Covenant not to compete | 5 years | 6,100 | 4,011 | — | 2,089 | |||||||||||||||
Total finite-lived intangible assets | 2,614,226 | 1,102,090 | — | 1,512,136 | ||||||||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||||||
Trade names | 1,480,000 | — | 580,000 | 900,000 | ||||||||||||||||
Total other intangible assets | $ | 4,094,226 | $ | 1,102,090 | $ | 580,000 | $ | 2,412,136 | ||||||||||||
| (1) | During the fiscal year ended December 31, 2018, the Company recognized a non-cash intangible asset impairment charge of $580.0million, 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 | ||||||||||||
(in thousands) | ||||
Remainder of 2021 | 147,319 | |||
2022 | 194,208 | |||
2023 | 190,663 | |||
2024 | 189,711 | |||
2025 | 184,576 | |||
Thereafter | 605,659 | |||
Total amortization expense | $ | 1,512,136 | ||
March 31, | December 31, | |||||||
(in thousands) | 2021 | 2020 | ||||||
New Term Loan Facility | $ | 1,321,688 | $ | 1,325,000 | ||||
Notes | 775,000 | 775,000 | ||||||
New Revolving Credit Facility | — | 50,000 | ||||||
Notes payable and deferred obligations | 2,973 | 3,618 | ||||||
| 2,099,661 | 2,153,618 | |||||||
Less: current portion | 13,304 | 63,745 | ||||||
Less: debt issuance costs | 58,267 | 60,545 | ||||||
Long-term debt, net of current portion | $ | 2,028,090 | $ | 2,029,328 | ||||
(in thousands) | ||||
Remainder of 2021 | $ | 9,987 | ||
2022 | 13,294 | |||
2023 | 13,293 | |||
2024 | 13,274 | |||
2025 | 13,277 | |||
Thereafter | 2,036,536 | |||
Total future minimum principal payments | $ | 2,099,661 | ||
Fair
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
In some circumstances, 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.
March 31, 2021 | ||||||||||||||||
(in thousands) | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets measured at fair value | ||||||||||||||||
Cash and cash equivalents | $ | 156,351 | $ | 156,351 | $ | — | $ | — | ||||||||
Derivative financial instruments | 7,281 | — | 7,281 | — | ||||||||||||
Total assets measured at fair value | $ | 163,632 | $ | 156,351 | $ | 7,281 | $ | — | ||||||||
Liabilities measured at fair value | ||||||||||||||||
Derivative financial instruments | $ | 1,515 | $ | — | $ | 1,515 | $ | — | ||||||||
Warrant liability | 26,761 | — | — | 26,761 | ||||||||||||
Contingent consideration liabilities | 46,841 | — | — | 46,841 | ||||||||||||
Total liabilities measured at fair value | $ | 75,117 | $ | — | $ | 1,515 | $ | 73,602 | ||||||||
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 | ||||||||
March 31, 2021 | December 31, 2020 | |||||||
Fair value warrants per share | $ | 3.65 | $ | 2.90 | ||||
Share Price | $ | 11.81 | $ | 13.17 | ||||
Exercise price per share | $ | 11.50 | $ | 11.50 | ||||
| Term (years) | 4.6 years | 4.8 years | ||||||
| Implied volatility | 34.0 | % | 17.0 | % | ||||
Risk-free interest rate | 0.9 | % | 0.4 | % | ||||
Dividend yield | 0.0 | % | 0.0 | % | ||||
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 Comprehensive Loss.
March 31, | ||||||||
(in thousands) | 2021 | 2020 | ||||||
Beginning of the period | $ | 45,901 | $ | 47,649 | ||||
Fair value of acquisitions | 2,692 | 17,210 | ||||||
Payments | — | (2,375 | ) | |||||
Measurement period adjustments | (1,181 | ) | — | |||||
Changes in fair value | (584 | ) | 4,577 | |||||
Foreign exchange translation effects | 13 | (775 | ) | |||||
End of the period | $ | 46,841 | $ | 66,286 | ||||
(in thousands) | Carrying Value | Fair Value (Level 2) | ||||||
Balance at March 31, 2021 | ||||||||
New Term Loan Credit Facility | $ | 1,321,688 | $ | 1,451,134 | ||||
Notes | 775,000 | 902,118 | ||||||
Notes payable and deferred obligations | 2,973 | 2,973 | ||||||
Total long-term debt | $ | 2,099,661 | $ | 2,356,225 | ||||
(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 | ||||
Use of Estimates
The preparationthe closing of the unaudited condensed financial statements in conformity with GAAP requires the Company’s management to make estimatesConyers Park’s initial public offering and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the daterelated over-allotment option. As a result of the unaudited condensed financial statements and the reported amountsClosing, each private placement warrant entitles CP Sponsor to purchase one share of revenues and expenses during the reporting periods. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future conforming events. Accordingly, the actual results could differ from those estimates.
Offering Costs Associated with the Initial Public Offering
Offering costs consist of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that are directly related to the Initial Public Offering and were charged to stockholders’ equity upon the completion of the Initial Public Offering on July 22, 2019.
our Class A Common Stock Subjectat
Shareswhich, 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
(in thousands) | Sales | Marketing | Total | |||||||||
Three Months Ended March 31, 2021 | ||||||||||||
Revenues | $ | 534,324 | $ | 256,697 | $ | 791,021 | ||||||
Depreciation and amortization | $ | 42,564 | $ | 17,049 | $ | 59,613 | ||||||
Operating income | $ | 35,148 | $ | 2,440 | $ | 37,588 | ||||||
Three Months Ended March 31, 2020 | ||||||||||||
Revenues | $ | 507,798 | $ | 371,598 | $ | 879,396 | ||||||
Depreciation and amortization | $ | 43,107 | $ | 17,102 | $ | 60,209 | ||||||
Operating income | $ | 24,194 | $ | 7,244 | $ | 31,438 | ||||||
(in thousands) | 2021 | |||
Beginning Balance | $ | 0 | ||
Fair value at acquisition | 1,804 | |||
Net income attributable to redeemable noncontrolling interests | 38 | |||
Foreign currency translation adjustment | 31 | |||
Ending Balance | $ | 1,873 | ||
Number of PSUs | Weighted Average Grant | |||||||
Outstanding at January 1, 2021 | 0 | $ | 0 | |||||
Granted | 2,594,566 | $ | 13.21 | |||||
Vested | 24,784 | $ | 13.33 | |||||
Forfeited | 0 | $ | 0 | |||||
Outstanding at March 31, 2021 | 2,569,782 | $ | 13.21 | |||||
Number of RSUs | Weighted Average Grant | |||||||
Outstanding at January 1, 2021 | 0 | $ | 0 | |||||
Granted | 1,745,087 | $ | 13.19 | |||||
Vested | 0 | $ | 0 | |||||
Forfeited | 23,810 | $ | 13.33 | |||||
Outstanding at March 31, 2021 | 1,721,277 | $ | 13.18 | |||||
Net Income Per Share
Net incomeoutstanding share option awards,
(in thousands, except share and earnings per share data) | March 31, 2021 | March 31, 2020 | ||||||
Basic and diluted: | ||||||||
Net loss attributable to stockholders of Advantage Solutions Inc. | $ | (116 | ) | $ | (21,708 | ) | ||
Weighted-average number of common shares | 317,601,345 | 203,750,000 | ||||||
Basic and diluted net loss per common share | $ | (0.00 | ) | $ | (0.11 | ) | ||
The Company’s unaudited condensed statements of operations include a presentation of income per share for common stockwere issued to Topco at Closing (the “Performance
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC Topic 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of June 30, 2020 and December 31, 2019, the Company had a deferred tax asset of approximately $126,000 and $59,000, respectively, which had a full valuation allowance recorded against it of approximately $126,000 and $59,000, respectively.
FASB ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of June 30, 2020 and December 31, 2019. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties as of June 30, 2020 and December 31, 2019. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company’s current taxable income primarily consists of interest income on the Trust Account. The Company’s general and administrative costs are generally considered start-up costs and are not currently deductible. During the three and six months ended June 30, 2020, the Company recorded income tax expense of approximately $33,974 and $329,902, respectively, primarily related to interest income earned on the Trust Account. The Company’s effective tax rate for the three and six months ended June 30, 2020 was approximately 66% and 26%, respectively, which differs from the expected income tax rate due to the start-up costs (discussed above) which are not currently deductible. The Company may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Company is subject to income tax examinations by major taxing authorities since inception.
Recent Accounting Pronouncements
The Company’s management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.
Note 3—Initial Public Offering
On July 22, 2019, the Company sold 45,000,000 Units, including 5,000,000 Over-Allotment Units, at a price of $10.00 per Unit, generating gross proceeds of $450 million, and incurring offering costs of approximately $25.36 million, inclusive of approximately $15.75 million in deferred underwriting commissions.
Each Unit consists of one share of Class A common stock and one-fourth of one redeemable warrant (each, a “Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share subject to adjustment (see Note 6).
Note 4—Related Party Transactions
Founder Shares
In May 2019, the Sponsor paid $25,000 to cover certain offering costs of the Company in consideration of 11,500,000 shares of Class B common stock, par value $0.0001, (the “Founder Shares”). In June 2019, the Sponsor transferred 25,000 Founder Shares to each of the Company’s independent directors. The initial stockholders have agreed to forfeit up to 1,500,000 Founder Shares to the extent that the over-allotment option is not exercised in full by the underwriters. The forfeiture will be adjusted to the extent that the over-allotment option is not exercised in full by the underwriters so that the Founder Shares will represent 20% of the Company’s issued and outstanding shares after the Initial Public Offering. The underwriters exercised their over-allotment option in part on July 22, 2019. On September 3, 2019, the remainder of the underwriters’ over-allotment option expired and the Sponsor forfeited 250,000 Founder Shares. As of June 30, 2020, there were 11,250,000 shares of Class B common stock outstanding.
The initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of the shares of Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property.
Private Placement Warrants
Concurrently with the closing of the Initial Public Offering, on July 22, 2019 the Company sold 7,333,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrant to the Sponsor, generating gross proceeds of approximately $11.0 million. Each whole Private Placement Warrant is exercisable for one share of Class A common stock at a price of $11.50 per share. Certain of the proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering and are held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants are non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.
The Sponsor and the Company’s officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination is not consummated within the Combination Period, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1.5 million ofClosing, and 0 such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. To date, the Company had no borrowings under any Working Capital Loan.
Promissory Note
Prior to the closing of the Initial Public Offering, the Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). The Note was non-interest bearing and payable on the earlier of December 31, 2019 or the completion of the Initial Public Offering. On July 22, 2019, the total balance of $141,636 of the Note was repaid to the Sponsor.
Administrative Support Agreement
Commencing on the effective date of the Initial Public Offering, the Company agreed to pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of an initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. Duringwere exercised during the three and six months ended June 30,March 31, 2021 and 2020, the Company incurred $30,000 and $60,000, respectively, in expenses in connection with such services, as reflected in the accompanying unaudited condensed statement
Underwriting Agreement
The Company granted the underwriters a 45-day option from the date of the final prospectus relating to the Initial Public Offering to purchase up to 6,000,000 Over-Allotment Units to cover over-allotments, if any, at the Initial Public Offering price less underwriting discounts and commissions. On July 22, 2019, the underwriters partially exercised their over-allotment option for 5,000,000 Over-Allotment Units.
Based on the partial exercise of the underwriters’ over-allotment option, the underwriters were entitled to underwriting discounts of $0.20 per unit, or $9.0 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or approximately $15.75 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Note 6—Stockholders’ Equity
Class A Common Stock — The Company is authorized to issue 500,000,000 shares of Class A common stock with a par value of $0.0001 per share. As of June 30, 2020 and December 31, 2019, there were 45,000,000 shares of Class A common stock issued and outstanding, including 43,405,068 and 43,313,166 shares of Class A common stock subject to possible redemption, respectively.
Class B Common Stock — The Company is authorized to issue 50,000,000 shares of Class B common stock with a par value of $0.0001 per share. As of June 30, 2020 and December 31, 2019, there were 11,250,000 shares of Class B common stock outstanding.
Holders of shares of Class A common stock and holders of shares of Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders, except as required by law or stock exchange rule; provided that only holders of shares of Class B common stock have the right to vote on the election of the Company’s directors prior to the initial Business Combination.
The Class B common stock will automatically convert into Class A common stock at the time of the initial Business Combination at a ratio such that the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of (i) the total number of shares of Class A common stock issued and outstanding upon completion of the Initial Public Offering, plus (ii) the total number of shares of Class A common stock issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding any shares of Class A common stock or equity-linked securities exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to the Sponsor upon conversion of Working Capital Loans.
Preferred Stock—The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share, and with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of June 30, 2020 and December 31, 2019, there were no shares of preferred stock issued or outstanding.
Warrants—Public Warrants may only be exercised for a whole number of shares. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than twenty business days, after the closing of a Business Combination, the Company will use commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the Public Warrants. If the shares issuable upon exercise of the warrants are not registered under the Securities Act, the Company will be required to permit holders to exercise their warrants on a cashless basis. However, no warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption from registration is available. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Private Placement Warrants are identical to the Public Warrants included in the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the initial stockholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Commencing 90 days after the Public Warrants become exercisable, the Company may redeem the Public Warrants:
In addition, the Company may redeem the Public Warrants for cash (except with respect to the Private Placement Warrants):
If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. Additionally, in no event will the Company be required to net cash settle any Warrants. If the Company is unable to complete the initial Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
Note 7—Fair Value Measurements
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
| June 30, 2020 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
| Marketable securities held in Trust Account | $ | 454,300,367 | $ | – | $ | – | ||||||
| Total | $ | 454,300,367 | $ | – | $ | – | ||||||
| December 31, 2019 | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||
| Marketable securities held in Trust Account | $ | 452,816,525 | $ | – | $ | – | ||||||
| Total | $ | 452,816,525 | $ | – | $ | – | ||||||
Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting periods. There were no transfers between levels for the three and six months ended June 30, 2020.
Level 1 instruments include investments in money market funds and U.S. Treasury securities. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.
Note 8—Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, the Company did not identify subsequent events that would have required adjustment or disclosure in the unaudited condensed financial statements.
Referencesall 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.
Three Months Ended March 31, | ||||||||||||||||
(amounts in thousands) | 2021 | 2020 | ||||||||||||||
Revenues | $ | 791,021 | 100.0 | % | $ | 879,396 | 100.0 | % | ||||||||
Cost of revenues | 653,339 | 82.6 | % | 746,693 | 84.9 | % | ||||||||||
Selling, general, and administrative expenses | 40,481 | 5.1 | % | 41,056 | 4.7 | % | ||||||||||
Depreciation and amortization | 59,613 | 7.5 | % | 60,209 | 6.8 | % | ||||||||||
Total expenses | 753,433 | 95.2 | % | 847,958 | 96.4 | % | ||||||||||
Operating income | 37,588 | 4.8 | % | 31,438 | 3.6 | % | ||||||||||
Other expenses: | ||||||||||||||||
Change in fair value of warrant liability | 5,526 | 0.7 | % | — | 0.0 | % | ||||||||||
Interest expense, net | 30,865 | 3.9 | % | 51,794 | 5.9 | % | ||||||||||
Total other expenses | 36,391 | 4.6 | % | 51,794 | 5.9 | % | ||||||||||
Loss before income taxes | 1,197 | 0.2 | % | (20,356 | ) | (2.3 | )% | |||||||||
Provision for income taxes | 1,743 | 0.2 | % | 1,367 | 0.2 | % | ||||||||||
Net loss | $ | (546 | ) | (0.1 | )% | $ | (21,723 | ) | (2.5 | )% | ||||||
Other Financial Data | ||||||||||||||||
Adjusted Net Income (1) | $ | 46,264 | 5.8 | % | $ | 26,849 | 3.1 | % | ||||||||
Adjusted EBITDA (1) | $ | 111,428 | 14.1 | % | $ | 106,351 | 12.1 | % | ||||||||
| (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 loss to Adjusted Net Income and Adjusted EBITDA, see “ —Non-GAAP Financial Measures |
Three Months Ended March 31, | Change | |||||||||||||||
(amounts in thousands) | 2021 | 2020 | $ | % | ||||||||||||
Sales | $ | 534,324 | $ | 507,798 | $ | 26,526 | 5.2 | % | ||||||||
Marketing | 256,697 | 371,598 | (114,901 | ) | (30.9 | )% | ||||||||||
Total revenues | $ | 791,021 | $ | 879,396 | $ | (88,375 | ) | (10.0 | )% | |||||||
Three Months Ended March 31, | Change | |||||||||||||||
(amounts in thousands) | 2021 | 2020 | $ | % | ||||||||||||
Sales | $ | 35,148 | $ | 24,194 | $ | 10,954 | 45.3 | % | ||||||||
Marketing | 2,440 | 7,244 | (4,804 | ) | (66.3 | )% | ||||||||||
Total operating income | $ | 37,588 | $ | 31,438 | $ | 6,150 | 19.6 | % | ||||||||
Three Months Ended March 31, | Change | |||||||||||||||
(amounts in thousands) | 2021 | 2020 | $ | % | ||||||||||||
Sales | $ | 84,076 | $ | 78,563 | $ | 5,513 | 7.0 | % | ||||||||
Marketing | 27,352 | 27,788 | (436 | ) | (1.6 | )% | ||||||||||
Total Adjusted EBITDA | $ | 111,428 | $ | 106,351 | $ | 5,077 | 4.8 | % | ||||||||
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Net loss | $ | (546 | ) | $ | (21,723 | ) | ||
Less: Net loss attributable to noncontrolling interest | (430 | ) | (15 | ) | ||||
Add: | ||||||||
Equity based compensation of Topco and Advantage Sponsors’ management fee (a) | (2,814 | ) | 3,837 | |||||
Change in fair value of warrant liability | 5,526 | — | ||||||
Fair value adjustments related to contingent consideration related to acquisitions (c) | (1,043 | ) | 4,095 | |||||
Acquisition-related expenses (d) | 5,146 | 5,529 | ||||||
Restructuring expenses (e) | 4,096 | 1,098 | ||||||
Litigation expenses (f) | (818 | ) | 104 | |||||
Amortization of intangible assets (g) | 49,438 | 47,846 | ||||||
Costs associated with COVID-19, net of benefits received(h) | 1,293 | 1,000 | ||||||
Costs associated with the Take 5 Matter (i) | 901 | 939 | ||||||
Tax adjustments related to non-GAAP adjustments(j) | (15,345 | ) | (15,891 | ) | ||||
Adjusted Net Income | $ | 46,264 | $ | 26,849 | ||||
Consolidated | Three Months Ended March 31, | |||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Net loss | $ | (546 | ) | $ | (21,723 | ) | ||
Add: | ||||||||
Interest expense, net | 30,865 | 51,794 | ||||||
Provision for income taxes | 1,743 | 1,367 | ||||||
Depreciation and amortization | 59,613 | 60,209 | ||||||
Equity based compensation of Topco and Advantage Sponsors’ management fee (a) | (2,814 | ) | 3,837 | |||||
Change in fair value of warrant liability | 5,526 | — | ||||||
Stock based compensation expense (b) | 8,655 | — | ||||||
Fair value adjustments related to contingent consideration related to acquisitions (c) | (1,043 | ) | 4,095 | |||||
Acquisition-related expenses (d) | 5,146 | 5,529 | ||||||
EBITDA for economic interests in investments (k) | (1,189 | ) | (1,898 | ) | ||||
Restructuring expenses (e) | 4,096 | 1,098 | ||||||
Litigation expenses (f) | (818 | ) | 104 | |||||
Costs associated with COVID-19, net of benefits received(h) | 1,293 | 1,000 | ||||||
Costs associated with the Take 5 Matter (i) | 901 | 939 | ||||||
Adjusted EBITDA | $ | 111,428 | $ | 106,351 | ||||
Sales Segment | Three Months Ended March 31, | |||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Operating income | $ | 35,148 | $ | 24,194 | ||||
Add: | ||||||||
Depreciation and amortization | 42,564 | 43,107 | ||||||
Equity based compensation of Topco and Advantage Sponsors’ management fee (a) | (1,838 | ) | 3,199 | |||||
Stock based compensation expense (b) | 4,694 | — | ||||||
Fair value adjustments related to contingent consideration related to acquisitions (c) | 778 | 4,312 | ||||||
Acquisition-related expenses (d) | 3,320 | 4,156 | ||||||
EBITDA for economic interests in investments (k) | (1,487 | ) | (2,071 | ) | ||||
Restructuring expenses (e) | 780 | 752 | ||||||
Litigation expenses (f) | (516 | ) | 104 | |||||
Costs associated with COVID-19, net of benefits received(h) | 633 | 810 | ||||||
Sales Segment Adjusted EBITDA | $ | 84,076 | $ | 78,563 | ||||
Marketing Segment | Three Months Ended March 31, | |||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Operating income | $ | 2,440 | $ | 7,244 | ||||
Add: | ||||||||
Depreciation and amortization | 17,049 | 17,102 | ||||||
Equity based compensation of Topco and Advantage Sponsors’ management fee (a) | (976 | ) | 638 | |||||
Stock based compensation expense (b) | 3,961 | — | ||||||
Fair value adjustments related to contingent consideration related to acquisitions (c) | (1,821 | ) | (217 | ) | ||||
Acquisition-related expenses (d) | 1,826 | 1,373 | ||||||
EBITDA for economic interests in investments (k) | 298 | 173 | ||||||
Restructuring expenses (e) | 3,316 | 346 | ||||||
Litigation expenses (f) | (302 | ) | — | |||||
Costs associated with COVID-19, net of benefits received(h) | 660 | 190 | ||||||
Costs associated with the Take 5 Matter (i) | 901 | 939 | ||||||
Marketing Segment Adjusted EBITDA | $ | 27,352 | $ | 27,788 | ||||
| (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 months ended March 31, 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. |
| (b) | Represents non-cash compensation expense related to issuance of PSUs, RSUs and stock options under the 2020 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 |
| (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) | Represents fees and costs associated with various internal reorganization activities among our consolidated entities. |
| (f) | Represents legal settlements that are unusual or infrequent costs associated with our operating activities. |
| (g) | Represents the amortization of intangible assets recorded in connection with the 2014 Topco Acquisition and our other acquisitions. |
| (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 grantsfor COVID-19 relief. |
| (i) | Represents $0.9 million and $0.9 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 months ended March 31, 2021 and 2020, respectively. |
| (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) | 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. |
Three Months Ended March 31, | ||||||||
(in thousands) | 2021 | 2020 | ||||||
Net cash provided by operating activities | $ | 29,887 | $ | 50,965 | ||||
Net cash used in investing activities | (19,281 | ) | (59,842 | ) | ||||
Net cash (used in) provided by financing activities | (54,514 | ) | 71,152 | |||||
Net effect of foreign currency fluctuations on cash | (2,234 | ) | (6,883 | ) | ||||
Net change in cash, cash equivalents and restricted cash | $ | (46,142 | ) | $ | 55,392 | |||
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Reportthe 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
Overview
We are a blank check company incorporated on May 2, 2019 as a Delaware corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combinationSeptember 30, 2020 were repaid and terminated with one or more businesses (the “Business Combination”) that we have not yet identified. Although we are not limited to a particular industry or geographic region for purposes of consummating our Business Combination, we intend to focus on the consumer sector and consumer-related businesses. Our sponsor is Conyers Park II Sponsor LLC, a Delaware limited liability company (our “Sponsor”).
Our registration statement for our initial public offering (the “Initial Public Offering”) was declared effective on July 17, 2019. On July 22, 2019, we consummated our Initial Public Offering of 45,000,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units being offered, the “Public Shares”), including 5,000,000 additional Units to cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $450 million, and incurring offeringincremental costs of approximately $25.36 million, inclusive of approximately $15.75 million in deferred underwriting commissions.
Simultaneously with the closing$86.8 million. For a description of the Initial Public Offering, we consummated the private placement (the “Private Placement”) of 7,333,333 warrants (each, a “Private Placement Warrant”First Lien Credit Agreement and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant with our Sponsor, generating gross proceeds of approximately $11.0 million.
Upon the closing of the Initial Public Offering and the Private Placement, $450 million ( $10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account (the “Trust Account”), located in the United States at J.P. Morgan Chase Bank, N.A., with Continental Stock Transfer & Trust Company acting as trustee, and was invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in any open-ended investment companySecond Lien Credit Agreement that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the assets held in the Trust Account as described below.
If we are unable to complete a Business Combination within 24 months from the closing of our Initial Public Offering, or July 22, 2021 (the “Combination Period”), we will (i) cease all operations except for the purpose of winding up; (ii) as promptly and as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us for working capital purposes or to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of the then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any); and (iii) as promptly and as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, liquidate and dissolve, subject in the case of clauses (ii) and (iii), to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
Results of Operations
Our entire activity since inception through June 30, 2020 related to our formation, the preparation for the Initial Public Offering, and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after completion of our initial Business Combination. We will generate non-operating income in the form of interest income on cash and cash equivalents. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended June 30, 2020, we had net income of $17,629, which consisted of $211,780 in interest earned on cash equivalents and marketable securities held in the Trust Account, offset by $110,177 in general and administrative costs.
For the six months ended June 30, 2020, we had net income of $919,022, which consisted of $1,670,961 in interest earned on cash equivalents and marketable securities held in the Trust Account, offset by $322,037 in general and administrative costs.
For the period from May 2, 2019 through June 30, 2019, we had net loss of $2,000, which consisted of $2,000 in general and administrative costs.
Liquidity and Capital Resources
As of June 30, 2020, the Company had $827,094 in its operating bank account, working capital of $500,322 and $5,241,118 of interest income available in the Trust Account to pay for the Company’s tax obligations, if any, and which may be withdrawn for working capital purposes. We will use these funds to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a business combination.
Our liquidity needs have been satisfied prior to the completion of the Initial Public Offering through receipt of a $25,000 capital contribution from our Sponsor in exchange for the issuance of the Founder Shares to our Sponsor and the advancement of funds by our Sponsor to cover our expenses in connection with the Initial Public Offering. In addition, advanced approximately $142,000 to us for offering expenses. We have fully repaid this advance from our Sponsor as of June 30, 2020. Subsequent to the consummation of the Initial Public Offering and Private Placement, our liquidity needs have been satisfied from the proceeds from the consummation of the Private Placement not held in the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or our officers and directors may, but are not obligated to, provide us Working Capital Loans. As of June 30, 2020, there were no amounts outstanding under any Working Capital Loan.
We continue to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity from our Sponsor or an affiliate of our Sponsor, or our officers and directors to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Contractual Obligations
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the final prospectus relating to the Initial Public Offering to purchase up to 6,000,000 Over-Allotment Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. On July 22, 2019, the underwriters partially exercised their over-allotment option for 5,000,000 Over-Allotment Units.
Assuming the partial exercise of the underwriters’ over-allotment option for 5,000,000 Over-Allotment Units, the underwriters were entitled to underwriting discounts of $0.20 per unit, or $9.0 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or approximately $15.75 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
Administrative Support Agreement
Commencing on the effective date of the Initial Public Offering, we agreed to pay our Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of the initial Business Combination or our liquidation, we will cease paying these monthly fees. During the three and six months ended June 30, 2020, the Company incurred $30,000 and $60,000, respectively, in expenses in connection with such services, as reflected in the accompanying unaudited condensed statement of operations. As of June 30, 2020 and December 31, 2019, we had approximately $120,000 and $60,000, respectively, in accounts payable for related party in connection with such services as reflected in the accompanying unaudited condensed balance sheets.
Registration and Stockholder Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any, will be entitled to registration rights pursuant to a registration and stockholder rights agreement entered intorefinanced in connection with the consummation of the Initial Public Offering. These holders will be entitledTransactions on October 28, 2020, please see the additional information set forth in Note 7—
special-purpose entities.
Class and Estimates
Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable shares of Class A common stock (including shares of Class A common stock that feature redemption rights that are either withinfiled May 17, 2021 for the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, shares of Class A common stock are classified as stockholders’ equity. The Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at June 30,year ended December 31, 2020 and December 31, 2019, 43,405,068 and 43,313,166 shares of Class A common stock are subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets, respectively.
Net Income Per Share
Net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstandingdid not materially change during the periods. The Company has not consideredthree months ended March 31, 2021.
The Company’sour unaudited condensed statement of operations include a presentation of income per share for common stock subject to redemption in a manner similar to the two-class method of income per share. Net income per share, basic and diluted for Class A common stock are calculated by dividing the interest income earned on investments and marketable securities held in the Trust Account of $211,780, net of applicable taxes of $83,974 and working capital of $110,177 (up to $1,000,000) available to be withdrawn from the Trust Account, resulting in a total of $17,629consolidated financial statements for the three months ended June 30, 2020 by the weighted average numberMarch 31, 2021 and 2020. included in “Part I, Financial Information - Item 1. Financial Statements” in this Quarterly Report.
We
Under the supervision and
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported withinnot
Changes in Internal Control over Financial Reporting
There was no changematerial weaknesses in our internal control over financial reporting described above.
ITEM 1A. | RISK FACTORS |
The securitiesmore detail in which we invest the funds held in the trust account could bear a negative ratePart I, Item 2 “Management’s Discussion and Analysis of interest, which could reduce the valueFinancial Condition and Results of the assets held in trust such that the per-share redemption amount received by public stockholders may be less than $10.00 per share.
The proceeds held in the trust account are and will be invested only in U.S. government treasury obligations with a maturityOperations” of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. While short-term U.S. government treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event that we are unable to complete our initial business combination or make certain amendments to our amended and restated certificate of incorporation, our public stockholders are entitled to receive their pro-rata share of the proceeds held in the trust account, plus any interest income, net of funds not previously released to us to pay for our working capital requirements as well as our franchise and income taxes (less, in the case we are unable to complete our initial business combination, $100,000 of interest to pay dissolution expenses). Negative interest rates could reduce the value of the assets held in trust such that the per-share redemption amount received by public stockholders may be less than $10.00 per share.
Unregistered Sales
On May 2, 2019, the Sponsor paid $25,000, or approximately $0.002 per share, on behalf of the Company in exchange for a capital contribution and in consideration of 11,500,000 shares of Class B common stock, par value $0.0001 per share. Such securities were issued in connection with the Company’s organization pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). On September 3, 2019, the remainder of the underwriters’ over-allotment option expired and the Sponsor forfeited 250,000 Founder Shares. As of June 30, 2020, there were 11,250,000 shares of Class B common stock outstanding.
On July 22, 2019, the Sponsor purchased 7,333,333 Private Placement Warrants, each exercisable to purchase one share of Class A common stock at $11.50 per share, at a price of $1.50 per warrant ($11,000,000 in the aggregate), in a private placement that closed simultaneously with the closing of the Initial Public Offering. This issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
No underwriting discounts or commissions were paid with respect to such sales.
Use of Proceeds
In connection with the Initial Public Offering, we incurred offering costs of approximately $25.36 million (including underwriting commissions of approximately $9.0 million and deferred underwriting commissions of approximately $15.75 million). Other incurred offering costs consisted principally preparation fees related to the Initial Public Offering. After deducting the underwriting discounts and commissions (excluding the deferred portion, which amount will be payable upon consummation of the Initial Business Combination, if consummated) and the Initial Public Offering expenses, $450 million of the net proceeds from our Initial Public Offering and certain of the proceeds from the private placement of the Private Placement Warrants (or $10.00 per Unit sold in the Initial Public Offering) was placed in the Trust Account. The net proceeds of the Initial Public Offering and certain proceeds from the sale of the Private Placement Warrants are held in the Trust Account and invested as described elsewhere in this Quarterly Report on Form
There has been no material change In
None.
| ADVANTAGE SOLUTIONS INC. | |||
| By: | /s/ Tanya Domier | ||
| Chief Executive Officer and Director | |||
| Date: | May 17, 2021 | ||
| By: | /s/ Brian Stevens | ||
| Brian Stevens | |||
| Chief Financial Officer and Chief Operating Officer (Principal Financial Officer) | |||
| Date: | May 17, 2021 | ||
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