Advantage Solutions exceeded 2023 financial guidance with solid fourth-quarter performance and expects continued growth in 2024
IRVINE, Calif., February 29, 2024 – Advantage Solutions Inc. (NASDAQ: ADV) (“Advantage,” “Advantage Solutions,” the “company,” “we” or “our”), a leading provider of sales and marketing services to consumer goods manufacturers and retailers, today reported financial results for its fourth quarter and fiscal full year ended December 31, 2023. The results continue to reflect a trendline of improving financial performance and progress executing its transformation strategy.
“Our ongoing efforts to strengthen our culture, simplify our operations, improve our financial discipline and enhance our processes as a unified company resulted in a solid fourth-quarter performance,” said Advantage Solutions CEO Dave Peacock. “I am incredibly proud of our team’s success as we delivered full-year revenue growth and Adjusted EBITDA results ahead of expectations. We are committed to continuing to evolve our position in the marketplace and deliver long-term, profitable growth by enhancing our service level with clients and customers.”
The company also continues to evaluate its service offerings, consistent with its stated strategy, to ensure more focus on its mission of converting shoppers into buyers for consumer goods companies and retailers. To that end, Advantage Solutions completed additional actions to advance its transformation. Those include:
1
“We believe the path to unlock Advantage Solutions’ potential lies in our core capabilities,” Peacock said. “The actions we have taken to date and potential future actions under consideration are designed to make us more nimble, insights-driven, and efficient to provide unmatched service to our clients and customers.”
In 2023, the company reduced the face value of its debt by $168.2 million in voluntary open-market repurchases of its term loan and senior secured notes while executing $6.4 million in share repurchases. Advantage’s capital allocation philosophy focuses on maximizing returns for equity holders, including deleveraging its balance sheet and investing behind core business offerings to fuel future growth.
“We believe having a healthy balance sheet and a sound infrastructure are crucial to providing clients and customers with best-in-class service,” Peacock said. “Advantage is committed to quickly implementing the right plans to generate more cash to invest in the business and position the company for long-term success.”
Fiscal Year 2023 Highlights Compared to 2022
Revenues
|
|
Year Ended December 31, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales |
|
$ |
2,445,015 |
|
|
$ |
2,507,017 |
|
|
$ |
(62,002 |
) |
|
|
(2.5 |
%) |
Marketing |
|
|
1,779,831 |
|
|
|
1,542,725 |
|
|
|
237,106 |
|
|
|
15.4 |
% |
Total Revenues |
|
$ |
4,224,846 |
|
|
$ |
4,049,742 |
|
|
$ |
175,104 |
|
|
|
4.3 |
% |
Adjusted EBITDA and Adjusted EBITDA by Segment
|
|
Year Ended December 31, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales |
|
$ |
265,255 |
|
|
$ |
294,234 |
|
|
$ |
(28,979 |
) |
|
|
(9.8 |
%) |
Marketing |
|
|
159,092 |
|
|
|
141,761 |
|
|
|
17,331 |
|
|
|
12.2 |
% |
Total Adjusted EBITDA |
|
$ |
424,347 |
|
|
$ |
435,995 |
|
|
$ |
(11,648 |
) |
|
|
(2.7 |
%) |
Consolidated revenues grew 4.3% to $4.2 billion and increased 6.8% excluding the impact of foreign exchange and divestitures (including the deconsolidation of the European joint venture). Revenue growth in the marketing segment was driven primarily by the continued recovery of in-store sampling and demonstration services and pricing realization. The decline in the sales segment was driven by completed divestitures and an intentional client exit in late 2022, partially offset by price and volume realization.
Operating income was $76.2 million, an increase of $1.5 billion due to a non-cash goodwill impairment and intangible asset impairment charge in the fourth quarter of 2022. Inflationary cost pressures related to wage and incentive compensation and internal reorganization activities negatively impacted operating income in 2023 but were largely in line with expectations. The Company recorded a non-cash intangible asset impairment expense and a non-cash gain on the deconsolidation of subsidiaries related to the European deconsolidation in the fourth quarter of 2023.
Adjusted EBITDA declined 2.7% to $424.3 million. Price increases and increased in-store sampling and demonstration activity drove improved performance in the marketing segment. This was offset by a decline in revenues in the sales segment, inflationary cost pressure, incentive compensation, and higher technology expenses.
Net loss was $60.3 million compared with net loss of $1.4 billion in 2022 due to the one-time impairment charges. Net loss in the current period was also impacted by an unfavorable interest expense due to higher interest rates, partially offset by lower debt balances.
2
Fourth Quarter 2023 Highlights Compared to Fourth Quarter 2022
Revenues
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
(in thousands) |
|
(unaudited) |
|
|
(unaudited) |
|
|
|
|
|
|
|
||||
Sales |
|
$ |
603,297 |
|
|
$ |
664,670 |
|
|
$ |
(61,373 |
) |
|
|
(9.2 |
%) |
Marketing |
|
|
476,452 |
|
|
|
438,093 |
|
|
|
38,359 |
|
|
|
8.8 |
% |
Total Revenues |
|
$ |
1,079,749 |
|
|
$ |
1,102,763 |
|
|
$ |
(23,014 |
) |
|
|
(2.1 |
%) |
Adjusted EBITDA and Adjusted EBITDA by Segment
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
(in thousands) |
|
(unaudited) |
|
|
(unaudited) |
|
|
|
|
|
|
|
||||
Sales |
|
$ |
68,811 |
|
|
$ |
78,076 |
|
|
$ |
(9,265 |
) |
|
|
(11.9 |
%) |
Marketing |
|
|
46,105 |
|
|
|
34,590 |
|
|
|
11,515 |
|
|
|
33.3 |
% |
Total Adjusted EBITDA |
|
$ |
114,916 |
|
|
$ |
112,666 |
|
|
$ |
2,250 |
|
|
|
2.0 |
% |
Consolidated revenues declined 2.1% to $1.1 billion and increased 3.4%, excluding the impact of foreign exchange, acquisitions and divestitures. The drivers of top-line performance were similar to what drove the full-year results.
Operating income in the quarter was $46.2 million, an increase of $1.6 billion due to a non-cash goodwill impairment and intangible asset impairment charge in the prior year period. Price actions in the quarter helped to mostly offset inflationary cost pressures related to wages and benefits. Additional costs related to various internal reorganization activities were recognized in the quarter. The Company recorded a non-cash intangible asset impairment charge and a gain on deconsolidation of subsidiaries related to the European deconsolidation in the current period.
The continuing trend for improved performance led to an Adjusted EBITDA of $114.9 million, which resulted in modest year-over-year growth and margin expansion.
Net income was $17.8 million compared with a net loss of $1.4 billion in the prior year, which was impacted by the one-time impairment charges. Net income in the current period was consistent with expectations for operating performance and the net effects of the current interest rate environment and reduction in debt balances.
Balance Sheet Highlights
As of December 31, 2023, the company’s cash and cash equivalents were $126.5 million, including the reduction in cash from the deconsolidation of the European joint venture and the use of cash for debt and share repurchases in the fourth quarter. Total Debt was $1,897.5 million, and Net Debt was $1,771.0 million. The debt capitalization consists primarily of the $1,149.1 million First Lien Term Loan and $743.0 million of senior secured notes.
During the quarter, Advantage voluntarily repurchased approximately $25.0 million of its First Lien Term Loan and approximately $32.0 million of its senior secured notes at attractive discounts, resulting in a net leverage ratio of approximately 4.2x Adjusted EBITDA as of December 31, 2023, compared to 4.5x at the end of 2022. Approximately 89% of the company’s debt is hedged or at a fixed interest rate.
Fiscal Year 2024 Outlook
In light of growing business momentum and improving market dynamics, management expects 2024 revenue and Adjusted EBITDA growth in the range of low single digits, excluding the in-year impact of the completed divestitures on the 2023 results. The company plans to execute additional simplification objectives in 2024, including activities related to improving operating efficiencies and investments behind the business from a talent and technology perspective. As a result, capital expenditures are expected to be $90 million to $110 million with a tapering in the spending planned for 2025 and a return to historical spending levels in 2026. The company also establishes a long-term net leverage target
3
below 3.5x LTM Adjusted EBITDA. Additional guidance metrics can be found in the company’s supplemental earnings presentation.
Conference Call Details
Advantage will host a conference call at 8:30 am ET on February 29, 2024 to discuss its fourth quarter and full year 2023 financial performance and business outlook. To participate, please dial 877-407-4018 within the United States or +1-201-689-8471 outside the United States approximately 10 minutes before the scheduled start of the call. The conference ID for the call is 13742873. The conference call will also be accessible live via audio broadcast on the Investor Relations section of the Advantage website at ir.advantagesolutions.net.
A replay of the conference call will be available online on the investor section of the Advantage website. In addition, an audio replay of the call will be available for one week following the call and can be accessed by dialing 844-512-2921 within the United States or +1-412-317-6671 outside the United States. The replay ID is 13742873.
About Advantage Solutions
Advantage Solutions is a leading provider of outsourced sales and marketing solutions uniquely positioned at the intersection of brands and retailers. Our data- and technology-driven services — which include headquarter sales, retail merchandising, in-store and online sampling, digital commerce, omnichannel marketing, retail media and others — help brands and retailers of all sizes get products into the hands of consumers, wherever they shop. As a trusted partner and problem solver, we help our clients sell more while spending less. Advantage has offices throughout North America and strategic investments in select markets throughout Africa, Asia, Australia, Latin America and Europe through which the company serves the global needs of multinational, regional and local manufacturers. For more information, please visit advantagesolutions.net.
Included with this press release are the company’s consolidated and condensed financial statements as of and for the three and twelve months ended December 31, 2023. These financial statements should be read in conjunction with the information contained in the company’s Annual Report on Form 10-K, to be filed with the Securities and Exchange Commission on or about March 1, 2024.
Forward-Looking Statements
Certain statements in this press release may be considered forward-looking statements within the meaning of the federal securities laws, including statements regarding the expected future performance of Advantage's business and projected financial results. Forward-looking statements generally relate to future events or Advantage’s future financial or operating performance. These forward-looking statements generally are identified by the words “may”, “should”, “expect”, “intend”, “will”, “would”, “could”, “estimate”, “anticipate”, “believe”, “predict”, “confident”, “potential” or “continue”, or the negatives of these terms or variations of them or similar terminology. Such forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those expressed or implied by such forward looking statements.
These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by Advantage and its management at the time of such statements, are inherently uncertain. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, market-driven wage changes or changes to labor laws or wage or job classification regulations, including minimum wage; the COVID-19 pandemic and other future potential pandemics or health epidemics; Advantage’s ability to continue to generate significant operating cash flow; client procurement strategies and consolidation of Advantage’s clients’ industries creating pressure on the nature and pricing of its services; consumer goods manufacturers and retailers reviewing and changing their sales, retail, marketing and technology programs and relationships; Advantage’s ability to successfully develop and maintain relevant omni-channel services for our clients in an evolving industry and to otherwise adapt to significant technological change; Advantage’s ability to maintain proper and effective internal control over financial reporting in the future; potential and actual harms to Advantage’s business arising from the Take 5 Matter; Advantage’s substantial indebtedness and our ability to refinance at favorable rates; and other risks and uncertainties set forth in the section titled “Risk Factors” in the Annual Report on Form 10-K to be filed by the company with the Securities and Exchange Commission (the “SEC”) on or about March 1, 2024, and in its other filings made from time to time with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are
4
cautioned not to put undue reliance on forward-looking statements, and Advantage assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Non-GAAP Financial Measures and Related Information
This press release includes certain financial measures not presented in accordance with generally accepted accounting principles (“GAAP”), including Adjusted EBITDA, Adjusted EBITDA by Segment and Net Debt. These are not measures of financial performance calculated in accordance with GAAP and may exclude items that are significant in understanding and assessing Advantage’s financial results. Therefore, the measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP, and should not be considered in isolation or as an alternative to net income, cash flows from operations or other measures of profitability, liquidity or performance under GAAP. You should be aware that Advantage’s presentation of these measures may not be comparable to similarly titled measures used by other companies. Reconciliations of historical non-GAAP measures to their most directly comparable GAAP counterparts are included below.
Advantage believes these non-GAAP measures provide useful information to management and investors regarding certain financial and business trends relating to Advantage’s financial condition and results of operations. Advantage believes that the use of Adjusted EBITDA, Adjusted EBITDA by Segment and Net Debt provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing Advantage’s financial measures with other similar companies, many of which present similar non-GAAP financial measures to investors. Non-GAAP financial measures are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and income are excluded or included in determining these non-GAAP financial measures. Additionally, other companies may calculate non-GAAP measures differently, or may use other measures to calculate their financial performance, and therefore Advantage’s non-GAAP measures may not be directly comparable to similarly titled measures of other companies.
Adjusted EBITDA and Adjusted EBITDA by Segment mean net (loss) income before (i) interest expense, net, (ii) provision for (benefit from) income taxes, (iii) depreciation, (iv) impairment of goodwill and indefinite-lived assets, (v) amortization of intangible assets, (vi) gain on deconsolidation of subsidiaries, (vii) loss on divestitures, (viii) equity-based compensation of Karman Topco L.P., (ix) changes in fair value of warrant liability, (x) stock based compensation expense, (xi) fair value adjustments of contingent consideration related to acquisitions, (xii) acquisition and divestiture related expenses, (xiii) costs associated with COVID-19, net of benefits received, (xiv) EBITDA for economic interests in investments, (xv) reorganization expenses, (xvi) litigation expenses, (xvii) recovery from and costs associated with the Take 5 Matter and (xviii) other adjustments that management believes are helpful in evaluating our operating performance.
Net Debt represents the sum of current portion of long-term debt and long-term debt, less cash and cash equivalents and debt issuance costs. With respect to Net Debt, cash and cash equivalents are subtracted from the GAAP measure, total debt, because they could be used to reduce the debt obligations. We present Net Debt because we believe this non-GAAP measure provides useful information to management and investors regarding certain financial and business trends relating to the company’s financial condition and to evaluate changes to the company's capital structure and credit quality assessment.
Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
This press release also includes certain estimates and projections of Adjusted EBITDA, including with respect to expected fiscal 2024 results. Due to the high variability and difficulty in making accurate estimates and projections of some of the information excluded from Adjusted EBITDA, together with some of the excluded information not being ascertainable or accessible, Advantage is unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measures without unreasonable effort. Consequently, no disclosure of estimated or projected comparable GAAP measures is included and no reconciliation of such forward-looking non-GAAP financial measures is included.
5
Advantage Solutions Inc.
Consolidated Balance Sheets
|
|
December 31, |
|
|||||
(in thousands, except share data) |
|
2023 |
|
|
2022 |
|
||
ASSETS |
|
|
|
|
|
|
||
Current assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
126,479 |
|
|
$ |
120,715 |
|
Restricted cash |
|
|
16,363 |
|
|
|
17,817 |
|
Accounts receivable, net of allowance for expected credit |
|
|
703,252 |
|
|
|
869,000 |
|
Prepaid expenses and other current assets |
|
|
165,940 |
|
|
|
149,476 |
|
Total current assets |
|
|
1,012,034 |
|
|
|
1,157,008 |
|
Property and equipment, net |
|
|
73,910 |
|
|
|
70,898 |
|
Goodwill |
|
|
855,391 |
|
|
|
887,949 |
|
Other intangible assets, net |
|
|
1,580,134 |
|
|
|
1,897,503 |
|
Investments in unconsolidated affiliates |
|
|
211,393 |
|
|
|
129,491 |
|
Other assets |
|
|
46,461 |
|
|
|
119,522 |
|
Total assets |
|
$ |
3,779,323 |
|
|
$ |
4,262,371 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
||
Current liabilities |
|
|
|
|
|
|
||
Current portion of long-term debt |
|
$ |
13,580 |
|
|
$ |
13,991 |
|
Accounts payable |
|
|
181,076 |
|
|
|
261,464 |
|
Accrued compensation and benefits |
|
|
165,701 |
|
|
|
154,744 |
|
Other accrued expenses |
|
|
153,015 |
|
|
|
133,173 |
|
Deferred revenues |
|
|
27,925 |
|
|
|
37,329 |
|
Total current liabilities |
|
|
541,297 |
|
|
|
600,701 |
|
Long-term debt, net of current portion |
|
|
1,852,784 |
|
|
|
2,022,819 |
|
Deferred income tax liabilities |
|
|
204,251 |
|
|
|
297,874 |
|
Warrant liability |
|
|
667 |
|
|
|
953 |
|
Other long-term liabilities |
|
|
76,247 |
|
|
|
110,554 |
|
Total liabilities |
|
|
2,675,246 |
|
|
|
3,032,901 |
|
|
|
|
|
|
|
|
||
Redeemable noncontrolling interest |
|
|
— |
|
|
|
3,746 |
|
|
|
|
|
|
|
|
||
Equity attributable to stockholders of Advantage Solutions Inc. |
|
|||||||
Preferred stock, no par value, 10,000,000 shares |
|
|
— |
|
|
|
— |
|
Common stock, $0.0001 par value, 3,290,000,000 |
|
|
32 |
|
|
|
32 |
|
Additional paid in capital |
|
|
3,449,261 |
|
|
|
3,408,836 |
|
Accumulated deficit |
|
|
(2,314,650 |
) |
|
|
(2,247,109 |
) |
Loans to Karman Topco L.P. |
|
|
(6,387 |
) |
|
|
(6,363 |
) |
Accumulated other comprehensive loss |
|
|
(3,945 |
) |
|
|
(18,849 |
) |
Treasury stock, at cost; 3,600,075 and 1,610,014 shares |
|
|
(18,949 |
) |
|
|
(12,567 |
) |
Total equity attributable to stockholders of Advantage |
|
|
1,105,362 |
|
|
|
1,123,980 |
|
Nonredeemable noncontrolling interest |
|
|
(1,285 |
) |
|
|
101,744 |
|
Total stockholders’ equity |
|
|
1,104,077 |
|
|
|
1,225,724 |
|
Total liabilities, redeemable noncontrolling interest, |
|
$ |
3,779,323 |
|
|
$ |
4,262,371 |
|
6
Advantage Solutions Inc.
Consolidated Statements of Operations and Comprehensive (Loss) Income
|
Three Months Ended |
|
|
Year Ended |
|
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
||||
(in thousands, except share and per share data) |
(unaudited) |
|
|
(unaudited) |
|
|
|
|
|
|
|
|
||||
Revenues |
$ |
1,079,749 |
|
|
$ |
1,102,763 |
|
|
$ |
4,224,846 |
|
|
$ |
4,049,742 |
|
|
Cost of revenues |
|
915,985 |
|
|
|
956,927 |
|
|
|
3,660,464 |
|
|
|
3,493,183 |
|
|
Selling, general, and administrative expenses |
|
80,854 |
|
|
|
51,863 |
|
|
|
265,091 |
|
|
|
187,504 |
|
|
Impairment of goodwill and indefinite-lived assets |
|
43,500 |
|
|
|
1,572,523 |
|
|
|
43,500 |
|
|
|
1,572,523 |
|
|
Depreciation and amortization |
|
54,390 |
|
|
|
59,078 |
|
|
|
224,697 |
|
|
|
233,075 |
|
|
Gain on deconsolidation of subsidiaries |
|
(58,891 |
) |
|
|
— |
|
|
|
(58,891 |
) |
|
|
— |
|
|
(Gain) loss on divestitures |
|
(1,140 |
) |
|
|
(90 |
) |
|
|
19,068 |
|
|
|
2,863 |
|
|
Income from unconsolidated investments |
|
(1,141 |
) |
|
|
— |
|
|
|
(5,273 |
) |
|
|
— |
|
|
Total expenses |
|
1,033,557 |
|
|
|
2,640,301 |
|
|
|
4,148,656 |
|
|
|
5,489,148 |
|
|
Operating income (loss) |
|
46,192 |
|
|
|
(1,537,538 |
) |
|
|
76,190 |
|
|
|
(1,439,406 |
) |
|
Other (income) expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of warrant liability |
|
(873 |
) |
|
|
220 |
|
|
|
(286 |
) |
|
|
(21,236 |
) |
|
Interest expense, net |
|
45,850 |
|
|
|
40,831 |
|
|
|
165,802 |
|
|
|
104,459 |
|
|
Total other expenses |
|
44,977 |
|
|
|
41,051 |
|
|
|
165,516 |
|
|
|
83,223 |
|
|
Income (loss) before income taxes |
|
1,215 |
|
|
|
(1,578,589 |
) |
|
|
(89,326 |
) |
|
|
(1,522,629 |
) |
|
(Benefit from) provision for income taxes |
|
(16,573 |
) |
|
|
(156,860 |
) |
|
|
(29,008 |
) |
|
|
(145,337 |
) |
|
Net income (loss) |
|
17,788 |
|
|
|
(1,421,729 |
) |
|
|
(60,318 |
) |
|
|
(1,377,292 |
) |
|
Less: net income attributable to noncontrolling interest |
|
359 |
|
|
|
2,168 |
|
|
|
2,940 |
|
|
|
3,210 |
|
|
Net income (loss) attributable to stockholders of Advantage |
|
17,429 |
|
|
|
(1,423,897 |
) |
|
|
(63,258 |
) |
|
|
(1,380,502 |
) |
|
Other comprehensive loss, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments |
|
6,280 |
|
|
|
11,129 |
|
|
|
5,817 |
|
|
|
(14,370 |
) |
|
Total comprehensive (loss) income attributable to |
$ |
23,709 |
|
|
$ |
(1,412,768 |
) |
|
$ |
(57,441 |
) |
|
$ |
(1,394,872 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic (loss) earnings per common share |
$ |
0.05 |
|
|
$ |
(4.45 |
) |
|
$ |
(0.20 |
) |
|
$ |
(4.33 |
) |
|
Diluted (loss) earnings per common share |
$ |
0.05 |
|
|
$ |
(4.45 |
) |
|
$ |
(0.20 |
) |
|
$ |
(4.33 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average number of common shares: |
|
324,639,562 |
|
|
|
319,682,507 |
|
|
|
323,677,515 |
|
|
|
318,682,548 |
|
|
Weighted-average number of common shares, |
|
340,320,151 |
|
|
|
319,682,507 |
|
|
|
323,677,515 |
|
|
|
318,682,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
7
Advantage Solutions Inc.
Consolidated Statement of Cash Flows
|
|
Year Ended December 31, |
|
|||||||||
(in thousands) |
|
2023 |
|
|
2022 |
|
|
2021 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|||
Net (loss) income |
|
$ |
(60,318 |
) |
|
$ |
(1,377,292 |
) |
|
$ |
57,549 |
|
Adjustments to reconcile net (loss) income to net cash provided by |
|
|
|
|
|
|
|
|
|
|||
Noncash interest income |
|
|
(7,660 |
) |
|
|
(43,785 |
) |
|
|
(8,315 |
) |
Amortization of deferred financing fees |
|
|
8,292 |
|
|
|
8,860 |
|
|
|
9,250 |
|
Impairment of goodwill and indefinite-lived assets |
|
|
43,500 |
|
|
|
1,572,523 |
|
|
|
— |
|
Extinguishment costs related to repayment and repricing of long-term debt |
|
|
— |
|
|
|
— |
|
|
|
1,569 |
|
Depreciation and amortization |
|
|
224,697 |
|
|
|
233,075 |
|
|
|
240,041 |
|
Change in fair value of warrant liability |
|
|
(286 |
) |
|
|
(21,236 |
) |
|
|
955 |
|
Fair value adjustments related to contingent consideration |
|
|
10,362 |
|
|
|
4,774 |
|
|
|
5,763 |
|
Deferred income taxes |
|
|
(80,416 |
) |
|
|
(190,754 |
) |
|
|
(10,012 |
) |
Equity-based compensation of Karman Topco L.P. |
|
|
(2,524 |
) |
|
|
(6,934 |
) |
|
|
(15,030 |
) |
Stock-based compensation |
|
|
42,880 |
|
|
|
39,825 |
|
|
|
39,412 |
|
Equity in earnings of unconsolidated affiliates |
|
|
(5,511 |
) |
|
|
(10,609 |
) |
|
|
(10,298 |
) |
Distribution received from unconsolidated affiliates |
|
|
2,100 |
|
|
|
1,826 |
|
|
|
1,465 |
|
Loss on disposal of property and equipment |
|
|
3,318 |
|
|
|
644 |
|
|
|
7,162 |
|
Loss on divestitures |
|
|
19,068 |
|
|
|
2,863 |
|
|
|
— |
|
Gain on deconsolidation of subsidiaries |
|
|
(58,891 |
) |
|
|
— |
|
|
|
— |
|
Gain on repurchases from the Term Loan Facility and Senior Secured Notes debt |
|
|
(8,665 |
) |
|
|
— |
|
|
|
— |
|
Changes in operating assets and liabilities, net of effects from |
|
|
|
|
|
|
|
|
|
|||
Accounts receivable, net |
|
|
45,601 |
|
|
|
(75,688 |
) |
|
|
(215,501 |
) |
Prepaid expenses and other assets |
|
|
50,626 |
|
|
|
(22,738 |
) |
|
|
(14,000 |
) |
Accounts payable |
|
|
(26,175 |
) |
|
|
(17,635 |
) |
|
|
46,000 |
|
Accrued compensation and benefits |
|
|
26,941 |
|
|
|
16,678 |
|
|
|
(2,363 |
) |
Deferred revenues |
|
|
6,974 |
|
|
|
(11,551 |
) |
|
|
(2,694 |
) |
Other accrued expenses and other liabilities |
|
|
5,082 |
|
|
|
18,412 |
|
|
|
(4,962 |
) |
Net cash provided by operating activities |
|
|
238,995 |
|
|
|
121,258 |
|
|
|
125,991 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|||
Purchase of businesses, net of cash acquired |
|
|
— |
|
|
|
(74,206 |
) |
|
|
(42,668 |
) |
Purchase of investment in unconsolidated affiliates |
|
|
(3,023 |
) |
|
|
(775 |
) |
|
|
(2,000 |
) |
Purchase of property and equipment |
|
|
(46,271 |
) |
|
|
(40,455 |
) |
|
|
(31,175 |
) |
Proceeds from divestitures |
|
|
21,108 |
|
|
|
1,896 |
|
|
|
— |
|
Deconsolidation of subsidiaries cash and |
|
|
(31,465 |
) |
|
|
— |
|
|
|
— |
|
Proceeds from sale of investment in unconsolidated affiliates |
|
|
4,428 |
|
|
|
— |
|
|
|
— |
|
Net cash used in investing activities |
|
|
(55,223 |
) |
|
|
(113,540 |
) |
|
|
(75,843 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|||
Borrowings under lines of credit |
|
|
99,538 |
|
|
|
326,090 |
|
|
|
61,629 |
|
Payments on lines of credit |
|
|
(99,102 |
) |
|
|
(326,968 |
) |
|
|
(111,736 |
) |
Proceeds from government loans for COVID-19 relief |
|
|
1,339 |
|
|
|
— |
|
|
|
2,975 |
|
Principal payments on long-term debt |
|
|
(13,602 |
) |
|
|
(13,394 |
) |
|
|
(13,309 |
) |
Repurchases of Term Loan Facility and Senior Secured Notes debt |
|
|
(156,559 |
) |
|
|
— |
|
|
|
— |
|
Proceeds from issuance of common stock |
|
|
2,248 |
|
|
|
3,320 |
|
|
|
794 |
|
Payments for taxes related to net share settlement |
|
|
(1,880 |
) |
|
|
— |
|
|
|
— |
|
Contingent consideration payments |
|
|
(4,898 |
) |
|
|
(23,164 |
) |
|
|
(9,814 |
) |
Holdback payments |
|
|
(1,886 |
) |
|
|
(11,057 |
) |
|
|
(3,989 |
) |
Purchase of treasury stock |
|
|
(6,382 |
) |
|
|
— |
|
|
|
(12,567 |
) |
Financing fees paid |
|
|
— |
|
|
|
(1,464 |
) |
|
|
(74 |
) |
Contribution from noncontrolling interest |
|
|
— |
|
|
|
5,217 |
|
|
|
— |
|
Redemption of noncontrolling interest |
|
|
(154 |
) |
|
|
(224 |
) |
|
|
(209 |
) |
Net cash used in financing activities |
|
|
(181,338 |
) |
|
|
(41,644 |
) |
|
|
(86,300 |
) |
Net effect of foreign currency changes on cash |
|
|
1,876 |
|
|
|
(8,179 |
) |
|
|
(3,177 |
) |
Net change in cash, cash equivalents and restricted cash |
|
|
4,310 |
|
|
|
(42,105 |
) |
|
|
(39,329 |
) |
Cash, cash equivalents and restricted cash, beginning of period |
|
|
138,532 |
|
|
|
180,637 |
|
|
|
219,966 |
|
Cash, cash equivalents and restricted cash, end of period |
|
$ |
142,842 |
|
|
$ |
138,532 |
|
|
$ |
180,637 |
|
SUPLLEMENTARY NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|||
Exchange of ownership of SPV for fair value of GSH |
|
$ |
15,854 |
|
|
$ |
— |
|
|
$ |
— |
|
Non-cash proceeds from divestitures |
|
$ |
4,283 |
|
|
$ |
— |
|
|
$ |
— |
|
Purchase of property and equipment recorded in accounts payable |
|
$ |
1,201 |
|
|
$ |
842 |
|
|
$ |
759 |
|
SUPPLEMENTAL CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
|
|||
Cash payments for interest |
|
$ |
174,767 |
|
|
$ |
126,560 |
|
|
$ |
137,467 |
|
Cash received from interest rate derivatives |
|
$ |
28,808 |
|
|
$ |
6,527 |
|
|
$ |
— |
|
Cash payments for income taxes, net |
|
$ |
39,007 |
|
|
$ |
45,729 |
|
|
$ |
40,189 |
|
8
Advantage Solutions Inc.
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(Unaudited)
Consolidated |
Three Months Ended |
|
|
Year Ended |
|
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
$ |
17,788 |
|
|
$ |
(1,421,729 |
) |
|
$ |
(60,318 |
) |
|
$ |
(1,377,292 |
) |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
45,850 |
|
|
|
40,831 |
|
|
|
165,802 |
|
|
|
104,459 |
|
|
(Benefit from) provision for income taxes |
|
(16,573 |
) |
|
|
(156,860 |
) |
|
|
(29,008 |
) |
|
|
(145,337 |
) |
|
Depreciation and amortization |
|
54,390 |
|
|
|
59,078 |
|
|
|
224,697 |
|
|
|
233,075 |
|
|
Impairment of goodwill and indefinite-lived assets |
|
43,500 |
|
|
|
1,572,523 |
|
|
|
43,500 |
|
|
|
1,572,523 |
|
|
Gain on deconsolidation of subsidiaries |
|
(58,891 |
) |
|
|
— |
|
|
|
(58,891 |
) |
|
|
— |
|
|
(Gain) loss on divestitures |
|
(1,140 |
) |
|
|
(90 |
) |
|
|
19,068 |
|
|
|
2,863 |
|
|
Equity-based compensation of Karman Topco L.P.(a) |
|
754 |
|
|
|
208 |
|
|
|
(2,524 |
) |
|
|
(6,934 |
) |
|
Change in fair value of warrant liability |
|
(873 |
) |
|
|
220 |
|
|
|
(286 |
) |
|
|
(21,236 |
) |
|
Fair value adjustments related to contingent consideration |
|
(1,229 |
) |
|
|
(674 |
) |
|
|
10,362 |
|
|
|
4,774 |
|
|
Acquisition and divestiture related expenses(c) |
|
2,503 |
|
|
|
4,149 |
|
|
|
7,024 |
|
|
|
21,039 |
|
|
Reorganization expenses(d) |
|
17,620 |
|
|
|
1,636 |
|
|
|
57,021 |
|
|
|
6,094 |
|
|
Litigation expenses(e) |
|
855 |
|
|
|
6,157 |
|
|
|
9,519 |
|
|
|
5,357 |
|
|
Costs associated with COVID-19, net of benefits received(f) |
|
(2 |
) |
|
|
2,263 |
|
|
|
3,283 |
|
|
|
7,208 |
|
|
Costs associated with (recovery from) the Take 5 Matter(g) |
|
63 |
|
|
|
377 |
|
|
|
(1,380 |
) |
|
|
2,465 |
|
|
Stock-based compensation expense(h) |
|
10,370 |
|
|
|
9,919 |
|
|
|
42,880 |
|
|
|
39,825 |
|
|
EBITDA for economic interests in investments(i) |
|
(69 |
) |
|
|
(5,342 |
) |
|
|
(6,402 |
) |
|
|
(12,888 |
) |
|
Adjusted EBITDA |
$ |
114,916 |
|
|
$ |
112,666 |
|
|
$ |
424,347 |
|
|
$ |
435,995 |
|
|
Sales Segment |
Three Months Ended |
|
|
Year Ended |
|
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating (loss) income |
$ |
29,471 |
|
|
$ |
(1,389,107 |
) |
|
$ |
38,443 |
|
|
$ |
(1,323,192 |
) |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
36,791 |
|
|
|
40,075 |
|
|
|
154,891 |
|
|
|
161,385 |
|
|
Impairment of goodwill and indefinite-lived assets |
|
43,500 |
|
|
|
1,421,719 |
|
|
|
43,500 |
|
|
|
1,421,719 |
|
|
Gain on deconsolidation of subsidiaries |
|
(58,891 |
) |
|
|
— |
|
|
|
(58,891 |
) |
|
|
— |
|
|
(Gain) loss on divestitures |
|
(1,086 |
) |
|
|
(90 |
) |
|
|
14,911 |
|
|
|
2,863 |
|
|
Equity-based compensation of Karman Topco L.P.(a) |
|
552 |
|
|
|
283 |
|
|
|
(1,270 |
) |
|
|
(3,721 |
) |
|
Fair value adjustments related to contingent consideration |
|
(1,464 |
) |
|
|
(4,442 |
) |
|
|
6,616 |
|
|
|
550 |
|
|
Acquisition and divestiture related expenses(c) |
|
1,817 |
|
|
|
898 |
|
|
|
4,887 |
|
|
|
11,679 |
|
|
Reorganization expenses(d) |
|
12,166 |
|
|
|
1,307 |
|
|
|
36,853 |
|
|
|
4,826 |
|
|
Litigation expenses(e) |
|
223 |
|
|
|
6,157 |
|
|
|
6,860 |
|
|
|
6,057 |
|
|
Costs associated with COVID-19, net of benefits received(f) |
|
5 |
|
|
|
611 |
|
|
|
369 |
|
|
|
1,412 |
|
|
Stock-based compensation expense(h) |
|
5,439 |
|
|
|
6,016 |
|
|
|
23,850 |
|
|
|
24,025 |
|
|
EBITDA for economic interests in investments(i) |
|
288 |
|
|
|
(5,351 |
) |
|
|
(5,764 |
) |
|
|
(13,369 |
) |
|
Sales Segment Adjusted EBITDA |
$ |
68,811 |
|
|
$ |
78,076 |
|
|
$ |
265,255 |
|
|
$ |
294,234 |
|
|
9
Marketing Segment |
Three Months Ended |
|
|
Year Ended |
|
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income (loss) |
$ |
16,721 |
|
|
$ |
(148,431 |
) |
|
$ |
37,747 |
|
|
$ |
(116,214 |
) |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
17,599 |
|
|
|
19,003 |
|
|
|
69,806 |
|
|
|
71,690 |
|
|
Impairment of goodwill and indefinite-lived assets |
|
— |
|
|
|
150,804 |
|
|
|
— |
|
|
|
150,804 |
|
|
(Gain) loss on divestitures |
|
(54 |
) |
|
|
— |
|
|
|
4,157 |
|
|
|
— |
|
|
Equity-based compensation of Karman Topco L.P.(a) |
|
202 |
|
|
|
(75 |
) |
|
|
(1,254 |
) |
|
|
(3,213 |
) |
|
Fair value adjustments related to contingent consideration |
|
235 |
|
|
|
3,768 |
|
|
|
3,746 |
|
|
|
4,224 |
|
|
Acquisition and divestiture related expenses(c) |
|
686 |
|
|
|
3,251 |
|
|
|
2,137 |
|
|
|
9,360 |
|
|
Reorganization expenses(d) |
|
5,454 |
|
|
|
329 |
|
|
|
20,168 |
|
|
|
1,268 |
|
|
Litigation expenses (recovery)(e) |
|
632 |
|
|
|
— |
|
|
|
2,659 |
|
|
|
(700 |
) |
|
Costs associated with COVID-19, net of benefits received(f) |
|
(7 |
) |
|
|
1,652 |
|
|
|
2,914 |
|
|
|
5,796 |
|
|
Costs associated with (recovery from) the Take 5 Matter(g) |
|
63 |
|
|
|
377 |
|
|
|
(1,380 |
) |
|
|
2,465 |
|
|
Stock-based compensation expense(h) |
|
4,931 |
|
|
|
3,903 |
|
|
|
19,030 |
|
|
|
15,800 |
|
|
EBITDA for economic interests in investments(i) |
|
(357 |
) |
|
|
9 |
|
|
|
(638 |
) |
|
|
481 |
|
|
Marketing Segment Adjusted EBITDA |
$ |
46,105 |
|
|
$ |
34,590 |
|
|
$ |
159,092 |
|
|
$ |
141,761 |
|
|
|
|
(a) |
Represents expenses related to (i) equity-based compensation expense associated with grants of Common Series D Units of Karman Topco L.P. ("Topco") made to one of the equity holders of Topco and (ii) equity-based compensation expense associated with the Common Series C Units of Topco. |
(b) |
Represents adjustments to the estimated fair value of our contingent consideration liabilities related to our acquisitions. See Note 9—Fair Value of Financial Instruments to our consolidated financial statements for the years ended December 31, 2023 and 2022. |
(c) |
Represents fees and costs associated with activities related to our acquisitions, divestitures, and related reorganization activities, including professional fees, due diligence, and integration activities. |
(d) |
Represents fees and costs associated with various internal reorganization activities, including professional fees, lease exit costs, severance, and nonrecurring compensation costs. |
(e) |
Represents legal settlements, reserves, and expenses that are unusual or infrequent costs associated with our operating activities. |
(f) |
Represents (i) costs related to implementation of strategies for workplace safety in response to COVID-19, including additional sick pay for front-line associates and personal protective equipment; and (ii) benefits received from government grants for COVID-19 relief. |
(g) |
Represents (i) cash receipts from an insurance policy for claims related to the Take 5 Matter; and (ii) costs associated with the Take 5 Matter, primarily, professional fees and other related costs. |
(h) |
Represents non-cash compensation expense related to the 2020 Incentive Award Plan and the 2020 Employee Stock Purchase Plan. |
(i) |
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. |
|
|
|
|
|
|
|
|
|
|
10
Advantage Solutions Inc.
Disaggregated revenues
|
Three Months Ended |
|
|
Year Ended |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
(in thousands) |
(unaudited) |
|
|
(unaudited) |
|
|
|
|
|
|
|
||||
Sales brand-centric services |
$ |
328,983 |
|
|
$ |
358,966 |
|
|
$ |
1,362,612 |
|
|
$ |
1,364,673 |
|
Sales retail-centric services |
|
274,314 |
|
|
|
305,704 |
|
|
|
1,082,403 |
|
|
|
1,142,344 |
|
Total sales revenues |
|
603,297 |
|
|
|
664,670 |
|
|
|
2,445,015 |
|
|
|
2,507,017 |
|
Marketing brand-centric services |
|
149,473 |
|
|
|
166,063 |
|
|
|
545,243 |
|
|
|
559,218 |
|
Marketing retail-centric services |
|
326,979 |
|
|
|
272,030 |
|
|
|
1,234,588 |
|
|
|
983,507 |
|
Total marketing revenues |
|
476,452 |
|
|
|
438,093 |
|
|
|
1,779,831 |
|
|
|
1,542,725 |
|
Total Revenues |
$ |
1,079,749 |
|
|
$ |
1,102,763 |
|
|
$ |
4,224,846 |
|
|
$ |
4,049,742 |
|
11
Advantage Solutions Inc.
Reconciliation of Total Debt to Net Debt
(Unaudited)
|
December 31, 2023 |
|
|
(in millions) |
|
|
|
Current portion of long-term debt |
$ |
13.6 |
|
Long-term debt, net of current portion |
|
1,852.8 |
|
Less: Debt issuance costs |
|
(31.1 |
) |
Total Debt |
|
1,897.5 |
|
Less: Cash and cash equivalents |
|
126.5 |
|
Total Net Debt |
$ |
1,771.0 |
|
|
|
|
|
Adjusted EBITDA |
$ |
424.3 |
|
Net Debt / Adjusted EBITDA (Net Leverage) Ratio |
4.2x |
|
|
Investor Contacts:
Sean Choksi
sean.choksi@advantagesolutions.net
Ruben Mella
ruben.mella@advantagesolutions.net
Media Contacts:
Peter Frost
peter.frost@advantagesolutions.net
12
