Executive Overview
We are a leading business solutions provider to consumer goods manufacturers and
retailers. We have a strong platform of competitively advantaged sales and
marketing services built over multiple decades - essential, business critical
services like headquarter sales, retail merchandising,
in-store
sampling, digital commerce and shopper marketing. For brands and retailers of
all sizes, we help get the right products on the shelf (whether physical or
digital) and into the hands of consumers (however they shop). We use a scaled
platform to innovate as a trusted partner with our clients, solving problems to
increase their efficiency and effectiveness across a broad range of channels.
We have two reportable segments: sales and marketing.
Through our sales segment, which generated approximately 66.8% and 63.6% of our
total revenues in the six months ended June 30, 2021 and 2020, respectively, we
offer headquarter sales representation services to consumer goods manufacturers,
for whom we prepare and present to retailers a business case to increase
distribution of manufacturers' products and optimize how they are displayed,
priced and promoted. We also make
in-store
merchandising visits for both manufacturer and retailer clients to ensure the
products we represent are adequately stocked and properly displayed.
Through our marketing segment, which generated approximately 33.2% and 36.4% of
our total revenues in the six months ended June 30, 2021 and 2020, respectively,
we help brands and retailers reach consumers through two main categories within
the marketing segment. The first and largest category is our retail experiential
business, also known as
in-store
sampling or demonstrations, where we manage highly customized large-scale
sampling programs (both
in-store
and online) for leading retailers. The second category is our collection of
specialized agency services, in which we provide private label services to
retailers and develop granular marketing programs for brands and retailers
through our shopper, consumer and digital marketing agencies.
Business Combination with Conyers Park
On September 7, 2020, Advantage Solutions Inc., now known as ASI Intermediate
Corp. ("ASI"), entered into an agreement and plan of merger (as amended,
modified, supplemented or waived, the "Merger Agreement"), with Conyers Park II
Acquisition Corp., a Delaware corporation now known as Advantage Solutions Inc.
("Conyers Park"), CP II Merger Sub, Inc., a Delaware corporation and wholly
owned subsidiary of Conyers Park ("Merger Sub"), and Karman Topco L.P., then the
parent company of ASI ("Topco").
In September 2020 and in connection with its entry into the Merger Agreement,
Conyers Park entered into subscription agreements (collectively, the
"Subscription Agreements") pursuant to which certain investors, including
participating equity holders of Topco (the "Advantage Sponsors"), agreed to
purchase Class A Common Stock of Conyers Park ("Common Stock") at a purchase
price of $10.00 per share (the "PIPE Investment").
On October 27, 2020, Conyers Park held a special meeting of stockholders (the
"Special Meeting"), at which the Conyers Park stockholders considered and
adopted, among other matters, a proposal to approve the business combination,
including (a) adopting the Merger Agreement and (b) approving the other
transactions contemplated by the Merger Agreement and related agreements.
Pursuant to the terms of the Merger Agreement, following the Special Meeting, on
October 28, 2020 (the "Closing Date"), Merger Sub was merged with and into ASI
with ASI being the surviving company in the merger (the "Merger" and, together
with the other transactions contemplated by the Merger Agreement, the
"Transactions"). On the Closing Date, the PIPE Investment was consummated, and
85,540,000 shares of Common Stock were sold for aggregate gross proceeds of
$855.4 million. Of the 85,540,000 shares of Common Stock, the Advantage Sponsors
acquired 34,410,000 shares of Common Stock, and other purchasers acquired
51,130,000 shares of Common Stock.

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Holders of 32,114,818 shares of Common Stock sold in Conyers Park's initial
public offering properly exercised their right to have such shares redeemed for
a full pro rata portion of the trust account holding the proceeds therefrom,
calculated as of two business days prior to the Closing Date, equal to $10.06
per share, or $323.1 million in the aggregate (collectively, the "Redemptions").
As a result of the Merger, among other things, pursuant to the Merger Agreement,
Conyers Park issued to Topco, as sole stockholder of ASI prior to the Merger,
aggregate consideration equal to (a) 203,750,000 shares of Common Stock, and (b)
5,000,000 shares of Common Stock that vested upon achievement of a market
performance condition on January 15, 2021 (the "Performance Shares"). After
giving effect to the Transactions, the Redemptions, and the consummation of the
PIPE Investment, there were 313,425,182 shares of Common Stock issued and
outstanding as of the Closing Date, excluding the Performance Shares. The Common
Stock and outstanding warrants of Conyers Park (renamed "Advantage Solutions
Inc." following the Transactions) commenced trading on the Nasdaq Global Select
Market under the symbols "ADV" and "ADVWW", respectively, on October 29, 2020.
As noted above, an aggregate of $323.1 million was paid from the Conyers Park's
trust account to holders in connection with the Redemptions, and the remaining
balance immediately prior to the closing of the Transactions of approximately
$131.2 million remained in the trust account. The remaining amount in the trust
account was used to fund the Transactions, including the entry into the New
Senior Secured Credit Facilities (as defined below).
In connection with the Merger, ASI repaid and terminated $3.3 billion of debt
arrangements under its First Lien Credit Agreement, Second Lien Credit
Agreement, and accounts receivable securitization facility (the "AR Facility")
that existed in 2020 (collectively, the "Prior Credit Facilities") with
incremental costs of $86.8 million. This amount was repaid by ASI through a
combination of (i) cash on hand, (ii) proceeds from certain private investments
in Common Stock, (iii) the entry by Advantage Sales & Marketing Inc., a wholly
owned subsidiary of ASI, into (a) a new senior secured asset-based revolving
credit facility, which permits borrowing in an aggregate principal amount of up
to $400.0 million, subject to borrowing base capacity (the "New Revolving Credit
Facility"), of which $100.0 million of principal amount was borrowed as of
October 28, 2020, and (b) a new secured first lien term loan credit facility in
an aggregate principal amount of $1.325 billion (the "New Term Loan Facility"
and, together with the New Revolving Credit Facility, the "New Senior Secured
Credit Facilities"), and (iv) the issuance by Advantage Solutions FinCo LLC, a
direct subsidiary of Advantage Sales & Marketing Inc. ("Finco"), of
$775.0 million aggregate principal amount of 6.50% Senior Secured Notes due 2028
(the "Notes").
The Merger was accounted for as a reverse recapitalization in accordance with
GAAP. Under this method of accounting, Conyers Park was treated as the
"acquired" company for financial reporting purposes. This determination was
primarily based on Topco having a relative majority of the voting power of the
combined entity, the operations of ASI prior to the Merger comprising the only
ongoing operations of the combined entity, and senior management of ASI
comprising the senior management of the combined entity. Accordingly, for
accounting purposes, the financial statements of the combined entity represent a
continuation of the financial statements of ASI with the acquisition being
treated as the equivalent of ASI issuing stock for the net assets of Conyers
Park, accompanied by a recapitalization. The net assets of Conyers Park was
stated at historical cost, with no goodwill or other intangible assets recorded.
Impacts of
the COVID-19 Pandemic
The
COVID-19
pandemic has had, and is likely to continue to have, a severe and unprecedented
impact on the world. Measures to prevent its spread, including
government-imposed restrictions on large gatherings, closures of
face-to-face
events, "shelter in place" health orders and travel restrictions have had a
significant effect on certain of our business operations. In response to these
business disruptions, we have taken several actions including reducing certain
of our discretionary expenditures, eliminating
non-essential
travel, terminating or amending certain office leases, furloughing, instituting
pay reductions and deferrals and terminating some of our employees, particularly
with respect to
COVID-19
impacted operations.

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These measures to prevent the spread of
COVID-19
have adversely impacted certain areas of our business operations, including our
in-store
sampling, foodservice and international businesses. Most notably, we temporarily
suspended all
in-store
sampling in all U.S. locations starting in March and April of 2020 as well as in
certain international locations. While the restrictions relating to
in-store
sampling services materially and adversely affected our results of operations
during the year ended December 31, 2020 and the six months ended June 30, 2021,
we have started to
re-open
in-store
sampling activities in certain retailers in certain geographies on a prudent,
phased basis, and we have been successful in growing other adjacent services in
our experiential marketing business such as online grocery
pick-up
sampling and virtual product demonstrations, both of which have seen increased
adoption and demand. While not back to
pre-pandemic
levels, more recently, we have seen growth in our foodservice business, which
was impacted by lower away-from-home demand on various channels, including
restaurants, education and travel and lodging. Additionally, our international
business has started to show growth after restrictions were lifted on activity
in the various international geographies in which we operate.
During the year ended December 31, 2020 and the six months ended June 30, 2021,
we experienced a positive impact in our headquarter sales and private label
services where, due to the large increase in consumer purchases at retail to
support incremental
at-home
consumption, our operations have experienced a favorable increase in volume and
demand. Additionally, our
e-commerce
services have benefited due to the increase in consumer purchasing with online
retailers.
These differing impacts are reflected in our financial results for the six
months ended June 30, 2021, which show that compared to the six months ended
June 30, 2020:

         •   our sales segment revenues, operating income, and Adjusted EBITDA
             increased 13.2%, 126.7%, and 3.0%, respectively, and;


• our market segment revenues and operating income decreased 1.4% and


             105.6%, respectively, and Adjusted EBITDA increased 20.0%.


We expect the ultimate significance of the impact of the pandemic on our
financial condition, results of operations and cash flows will be dictated by
the length of time that such circumstances continue and any future restrictions
imposed on our business and operations, which will depend on the currently
unknowable extent and duration of the
COVID-19
pandemic and the nature and effectiveness of governmental, commercial and
personal actions taken in response. We believe the impact of the pandemic will
decrease in the second half of 2021 as businesses and individuals choose to have
more
in-person
activities.
Summary
Our financial performance for the three months ended June 30, 2021 as compared
to the three months ended June 30, 2020 includes:

  •   revenues increasing by $208.4 million, or 32.5%, to $849.9 million;



  •   operating income increasing from zero to $42.4 million;



  •   net income increasing by $43.6 million, or 115.2%, to $5.8 million;



     •    Adjusted Net Income increasing by $2.6 million, or 6.7%, to
          $41.4 million; and


• Adjusted EBITDA increasing by $9.9 million, or 8.9%, to $121.9 million.

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

• revenues increasing by $120.0 million, or 7.9%, to $1,640.9 million;

• operating income increasing by $48.6 million, or 154.6%, to $42.4 million;





  •   net income increasing by $63.2 million, or 106.2%, to $5.2 million;



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     •    Adjusted Net Income increasing by $22.0 million, or 33.5%, to
          $87.7 million; and


• Adjusted EBITDA increasing by $15.0 million, or 6.9%, to $233.4 million.




During the six months ended June 30, 2021, we acquired three sales businesses.
The aggregate purchase price for these three acquisitions was $27.0 million, of
which $20.4 million was paid in cash, $5.1 million in contingent consideration
and $1.4 million in holdback.
             Factors Affecting Our Business and Financial Reporting
There are a number of factors, in addition to the impact of the
ongoing COVID-19 pandemic,
that affect the performance of our business and the comparability of our results
from period to period including:

     •    Organic Growth.
           Part of our strategy is to generate organic growth by expanding our
          existing client relationships, continuing to win new clients, pursuing
          channel expansion and new industry opportunities, enhancing our digital

technology solutions, developing our international platform, delivering


          operational efficiencies and expanding into logical adjacencies. We
          believe that by pursuing these organic growth opportunities we will be
          able to continue to enhance our value proposition to our clients and
          thereby grow our business.



     •    Acquisitions.
           We have grown and expect to continue to grow our business in part by
          acquiring quality businesses, both domestic and international. In
          December 2017, we completed the acquisition of Daymon Worldwide Inc., a
          leading provider of private label development and management,
          merchandising and experiential marketing services. In addition to the

Daymon acquisition, we have completed 66 acquisitions from January 2014


          to June 30, 2021, ranging in purchase prices from approximately
          $0.3 million to $98.5 million. Many of our acquisition agreements include
          contingent consideration arrangements, which are described below. We have
          completed acquisitions at what we believe are attractive purchase prices

and have regularly structured our agreements to result in the generation

of long-lived tax assets, which have in turn reduced our effective


          purchase prices when incorporating the value of those tax assets. We
          continue to look for strategic and
          tuck-in
          acquisitions that can be completed at attractive purchase prices.



     •    Contingent Consideration.
           Many of our acquisition agreements include contingent

consideration

arrangements, which are generally based on the achievement of financial

performance thresholds by the operations attributable to the acquired

businesses. The contingent consideration arrangements are based upon our

valuations of the acquired businesses and are intended to share the

investment risk with the sellers of such businesses if projected

financial results are not achieved. The fair values of these contingent


          consideration arrangements are included as part of the purchase price of
          the acquired companies on their respective acquisition dates. For each

transaction, we estimate the fair value of contingent consideration

payments as part of the initial purchase price. We review and assess the


          estimated fair value of contingent consideration on a quarterly basis,
          and the updated fair value could differ materially from our initial
          estimates. Changes in the estimated fair value of contingent
          consideration liabilities related to the time component of the present

value calculation are reported in "Interest expense, net." Adjustments to

the estimated fair value related to changes in all other unobservable

inputs are reported in "Selling, general and administrative expenses" in

our Condensed Consolidated Statements of Operations and Comprehensive


          Income (Loss).



     •    Depreciation and Amortization.
           As a result of the acquisition of our business by Topco on July 25, 2014

(the "2014 Topco Acquisition"), we acquired significant intangible

assets, the value of which is amortized, on a straight-line basis, over

15 years from the date of the 2014 Topco Acquisition, unless determined

to be indefinite-lived. The amortization of such intangible assets

recorded in our consolidated financial statements has a significant

impact on our operating income (loss) and net income (loss). Our

historical acquisitions have increased, and future acquisitions likely

will increase, our intangible assets. We do not believe the amortization


          expense associated with the intangibles created from our purchase



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accounting adjustments reflect a material economic cost to our business.


        Unlike depreciation expense which has an economic cost reflected by the
        fact that we must
        re-invest
        in property and equipment to maintain the asset base delivering our
        results of operations, we do not have any capital
        re-investment
        requirements associated with the acquired intangibles, such as client
        relationships and trade names, that comprise the majority of the
        finite-lived intangibles that create our amortization expense.



     •    Foreign Exchange Fluctuations.
           Our financial results are affected by fluctuations in the

exchange rate

between the U.S. dollar and other currencies, primarily Canadian dollars,

British pounds and euros, due to our operations in such foreign

jurisdictions. See also "


           -Quantitative and Qualitative Disclosure of Market Risk-Foreign Currency
          Risk.
          "



     •    Seasonality.
           Our quarterly results are seasonal in nature, with the fourth

fiscal


          quarter typically generating a higher proportion of our revenues than
          other fiscal quarters, as a result of higher consumer spending. We

generally record slightly lower revenues in the first fiscal quarter of

each year, as our clients begin to roll out new programs for the year,

and consumer spending generally is less in the first fiscal quarter than

other quarters. Timing of our clients' marketing expenses, associated

with marketing campaigns and new product launches, can also result in

fluctuations from one quarter to another.


                 How We Assess the Performance of Our Business

Revenues


Revenues related to our sales segment are primarily comprised of commissions,
fee-for-service
and cost-plus fees for providing retail merchandising services, category and
space management, headquarter relationship management, technology solutions and
administrative services. A small portion of our arrangements include performance
incentive provisions, which allow us to earn additional revenues on our
performance relative to specified quantitative or qualitative goals. We
recognize the incentive portion of revenues under these arrangements when the
related services are transferred to the customer.
Marketing segment revenues are primarily recognized in the form of a
fee-for-service
(including retainer fees, fees charged to clients based on hours incurred,
project-based fees or fees for executing
in-person
consumer engagements or experiences, which engagements or experiences we refer
to as events), commissions or on a cost-plus basis, in each case, related to
services including experiential marketing, shopper and consumer marketing
services, private label development or our digital, social and media services.
Given our acquisition strategy, we analyze our financial performance, in part,
by measuring revenue growth in two ways-revenue growth attributable to organic
activities and revenue growth attributable to acquisitions, which we refer to as
organic revenues and acquired revenues, respectively.
We define organic revenues as any revenues that are not acquired revenues. Our
organic revenues exclude the impacts of acquisitions and divestitures, when
applicable, which improves comparability of our results from period to period.
In general, when we acquire a business, the acquisition includes a contingent
consideration arrangement (e.g., an
earn-out
provision) and, accordingly, we separately track the financial performance of
the acquired business. In such cases, we consider revenues generated by such a
business during the 12 months following its acquisition to be acquired revenues.
For example, if we completed an acquisition on July 1, 2019 for a business that
included a contingent consideration arrangement, we would consider revenues from
the acquired business from July 1, 2019 to June 30, 2020 to be acquired
revenues. We generally consider growth attributable to the financial performance
of an acquired business after the
12-month
anniversary of the date of acquisition to be organic.
In limited cases, when the acquisition of an acquired business does not include
a contingent consideration arrangement, or we otherwise do not separately track
the financial performance of the acquired business due to operational
integration, we consider the revenues that the business generated in the 12
months prior to its acquisition to be our acquired revenues for the 12 months
following its acquisition, and any differences in revenues

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actually generated during the 12 months after its acquisition to be organic. For
example, if we completed an acquisition on July 1, 2020 for a business that did
not include a contingent consideration arrangement, we would consider the amount
of revenues from the acquired business from July 1, 2019 to June 30, 2020 to be
acquired revenues during the period from July 1, 2020 to June 30, 2021, with any
differences from that amount actually generated during the latter period to be
organic revenues.
All revenues generated by our acquired businesses are considered to be organic
revenues
after the 12-month anniversary of
the date of acquisition.
When we divest a business, we consider the revenues that the divested business
generated in the 12 months prior to its divestiture to be subtracted from
acquired revenues for the 12 months following its divestiture. For example, if
we completed a divestiture on July 1, 2020 for a business, we would consider the
amount of revenues from the divested business from July 1, 2019 to June 30, 2020
to be subtracted from acquired revenues during the period from July 1, 2020 to
June 30, 2021.
We measure organic revenue growth and acquired revenue growth by comparing the
organic revenues or acquired revenues, respectively, period over period, net of
any divestitures.
Cost of Revenues
Our cost of revenues consists of both fixed and variable expenses primarily
attributable to the hiring, training, compensation and benefits provided to both
full-time and part-time associates, as well as other project-related expenses. A
number of costs associated with our associates are subject to external factors,
including inflation, increases in market specific wages and minimum wage rates
at federal, state and municipal levels and minimum pay levels for exempt roles.
Additionally, when we enter into certain new client relationships, we may
experience an initial increase in expenses associated with hiring, training and
other items needed to launch the new relationship.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries,
payroll taxes and benefits for corporate personnel. Other overhead costs include
information technology, occupancy costs for corporate personnel, professional
services fees, including accounting and legal services, and other general
corporate expenses. Additionally, included in selling, general and
administrative expenses are costs associated with the changes in fair value of
the contingent consideration of acquisitions and other acquisition-related
costs. Acquisition-related costs are comprised of fees related to change of
equity ownership, transaction costs, professional fees, due diligence and
integration activities.
We also expect to incur additional expenses as a result of operating as a public
company, including expenses necessary to comply with the rules and regulations
applicable to companies listed on a national securities exchange and related to
compliance and reporting obligations pursuant to the rules and regulations of
the SEC, as well as higher expenses for general and director and officer
insurance, investor relations, and professional services.
Other (Income) Expenses
Change in Fair Value of Warrant Liability
Change in fair value of warrant liability represents a
non-cash
(income) expense resulting from a fair value adjustment to warrant liability
with respect to the private placement warrants and based on the input
assumptions used in the Black-Scholes option pricing model, including our stock
price at the end of the reporting period, the implied volatility or other inputs
to the model and the number of private placement warrants outstanding, which may
vary from period to period. We believe these amounts are not correlated to
future business operations.

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Interest Expense
Interest expense relates primarily to borrowings under our first lien credit
agreement and second lien credit agreement, which were paid off in connection
with the Merger, and New Senior Secured Credit Facilities as described below.
See " -
Liquidity and Capital Resources
."
Depreciation and Amortization
Amortization Expense
Included in our depreciation and amortization expense is amortization of
acquired intangible assets. We have ascribed value to identifiable intangible
assets other than goodwill in our purchase price allocations for companies we
have acquired. These assets include, but are not limited to, client
relationships and trade names. To the extent we ascribe value to identifiable
intangible assets that have finite lives, we amortize those values over the
estimated useful lives of the assets. Such amortization expense, although
non-cash
in the period expensed, directly impacts our results of operations. It is
difficult to predict with any precision the amount of expense we may record
relating to future acquired intangible assets.
As a result of the 2014 Topco Acquisition, we acquired significant intangible
assets, the value of which is amortized, on a straight-line basis, over 15 years
from the date of the 2014 Topco Acquisition, unless determined to be
indefinite-lived. We recognized a
non-cash
intangible asset impairment charge of $580.0 million during the year ended
December 31, 2018, related to our sales trade name resulting from the 2014 Topco
Acquisition considered to be indefinite lived. The impairment charge has been
reflected in "Impairment of goodwill and indefinite-lived assets" in our
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss),
in addition to a $652.0 million
non-cash
goodwill impairment charge in the sales reporting unit.
Depreciation Expense
Depreciation expense relates to the property and equipment that we own, which
represented less than 1% of our total assets at June 30, 2021.
Income Taxes
Income tax (benefit) expense and our effective tax rates can be affected by many
factors, including state apportionment factors, our acquisition strategy, tax
incentives and credits available to us, changes in judgment regarding our
ability to realize our deferred tax assets, changes in our worldwide mix of
pre-tax
losses or earnings, changes in existing tax laws and our assessment of uncertain
tax positions.
Cash Flows
We have positive cash flow characteristics, as described below, due to the
limited required capital investment in the fixed assets and working capital
needs to operate our business in the normal course. See "
 -Liquidity and Capital Resources.
"
Prior to the consummation of the Transactions (including our entry into the New
Senior Secured Credit Facilities), our principal sources of liquidity have been
cash flows from operations, borrowings under the Revolving Credit Facility (as
herein defined) and other debt. Following the Transactions, our principal
sources of liquidity are cash flows from operations, borrowings under the New
Revolving Credit Facility, and other debt. Our principal uses of cash are
operating expenses, working capital requirements, acquisitions and repayment of
debt.
Adjusted Net Income
Adjusted Net Income is a
non-GAAP
financial measure. Adjusted Net Income means net income (loss) before
(i) impairment of goodwill and indefinite-lived assets, (ii) amortization of
intangible assets, (iii) equity based compensation of Topco and Advantage
Sponsors' management fee, (iv) changes in fair value of warrant liability, (v)
fair value adjustments of contingent consideration related to acquisitions,
(vi) acquisition-related expenses, (vii) costs associated with
COVID-19,
net of benefits received, (viii) EBITDA for economic interests in investments,
(ix) restructuring expenses, (x) litigation expenses, (xi) (Recovery from) loss
on Take 5, (xii) deferred financing fees, (xiii) costs associated with the Take
5 Matter, (xiv) other adjustments that management believes are helpful in
evaluating our operating performance and (xv) related tax adjustments.

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We present Adjusted Net Income because we use it as a supplemental measure to
evaluate the performance of our business in a way that also considers our
ability to generate profit without the impact of items that we do not believe
are indicative of our operating performance or are unusual or infrequent in
nature and aid in the comparability of our performance from period to period.
Adjusted Net Income should not be considered as an alternative for net income
(loss), our most directly comparable measure presented on a GAAP basis.
Adjusted EBITDA and Adjusted EBITDA by Segment
Adjusted EBITDA and Adjusted EBITDA by segment are supplemental
non-GAAP
financial measures of our operating performance. Adjusted EBITDA means net
income (loss) before (i) interest expense, net, (ii) (benefit from) provision
for income taxes, (iii) depreciation, (iv) impairment of goodwill and
indefinite-lived assets, (v) amortization of intangible assets, (vi) equity
based compensation of Topco and Advantage Sponsors' management fee,
(vii) changes in fair value of warrant liability, (viii) stock-based
compensation expense, (ix) fair value adjustments of contingent consideration
related to acquisitions, (x) acquisition-related expenses, (xi) costs associated
with
COVID-19,
net of benefits received, (xii) EBITDA for economic interests in investments,
(xiii) restructuring expenses, (xiv) litigation expenses, (xv) (Recovery from)
loss on Take 5, (xvi) costs associated with the Take 5 Matter and (xvii) other
adjustments that management believes are helpful in evaluating our operating
performance.
We present Adjusted EBITDA and Adjusted EBITDA by segment because they are key
operating measures used by us to assess our financial performance. These
measures adjust for items that we believe do not reflect the ongoing operating
performance of our business, such as certain noncash items, unusual or
infrequent items or items that change from period to period without any material
relevance to our operating performance. We evaluate these measures in
conjunction with our results according to GAAP because we believe they provide a
more complete understanding of factors and trends affecting our business than
GAAP measures alone. Furthermore, the agreements governing our indebtedness
contain covenants and other tests based on measures substantially similar to
Adjusted EBITDA. Neither Adjusted EBITDA nor Adjusted EBITDA by segment should
be considered as an alternative for net income (loss), for our most directly
comparable measure presented on a GAAP basis.

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Results of Operations for the Three and Six Months Ended June 30, 2021 and 2020
The following table sets forth items derived from the Company's consolidated
statements of operations for the three and six months ended June 30, 2021 and
2020 in dollars and as a percentage of total revenues.

                                                     Three Months Ended June 30,                                  Six Months Ended June 30,
(amounts in thousands)                            2021                         2020                          2021                           2020
Revenues                                 $ 849,954        100.0 %     $ 641,543        100.0 %     $ 1,640,975        100.0 %     $ 1,520,939        100.0 %
Cost of revenues                           698,226         82.1 %       509,923         79.5 %       1,351,565         82.4 %       1,256,616         82.6 %
Selling, general, and administrative
expenses                                    46,607          5.5 %        80,569         12.6 %          87,088          5.3 %         121,625          8.0 %
Recovery from Take 5                            -           0.0 %        (7,700 )       (1.2 )%             -           0.0 %          (7,700 )       (0.5 )%
Depreciation and amortization               62,674          7.4 %        58,748          9.2 %         122,287          7.5 %         118,957          7.8 %

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

Operating income                            42,447          5.0 %             3          0.0 %          80,035          4.9 %          31,441          2.1 %
Other (income) expenses:
Change in fair value of warrant
liability                                   (7,059 )       (0.8 )%           -           0.0 %          (1,533 )       (0.1 )%             -           0.0 %
Interest expense, net                       37,189          4.4 %        51,521          8.0 %          68,054          4.1 %         103,315          6.8 %

Total other (income) expenses               30,130          3.5 %        51,521          8.0 %          66,521          4.1 %         103,315          6.8 %
Income (loss) before income taxes           12,317          1.4 %       

(51,518 ) (8.0 )% 13,514 0.8 % (71,874 )

   (4.7 )%
Provision for (benefit from) income
taxes                                        6,563          0.8 %       (13,704 )       (2.1 )%          8,306          0.5 %         (12,337 )       (0.8 )%

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

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


(1) Adjusted Net Income and Adjusted EBITDA is a financial measure that is not

calculated in accordance with GAAP. For a discussion of our presentation of

Adjusted Net Income and Adjusted EBITDA and reconciliations of net income


    (loss) to Adjusted Net Income and Adjusted EBITDA, see "
    -Non-GAAP
     Financial Measures
    ."

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



                             Three Months Ended June 30,                

Change


(amounts in thousands)        2021                 2020              $           %
Sales                    $      561,644       $      460,239     $ 101,405       22.0 %
Marketing                       288,310              181,304       107,006       59.0 %

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



Total revenues increased by $208.4 million, or 32.5%, during the three months
ended June 30, 2021, as compared to the three months ended June 30, 2020.
The sales segment revenues increased $101.4 million, of which $3.7 million were
revenues from acquired businesses during the three months ended June 30, 2021 as
compared to the three months ended June 30, 2020. Excluding revenues from
acquired businesses and favorable foreign exchange rates of $10.4 million, the
segment experienced an increase of $87.3 million in organic revenues primarily
due to growth in our retail merchandising services where we benefitted from
expansions with existing and new clients and our international and foodservice
businesses which experienced recoveries from temporary reductions as a result of
the
COVID-19
pandemic. The growth was offset by reduction in our headquarter sales where, due
to the large increase in consumer purchases at retail to support incremental
at-home
consumption, our operations had experienced a favorable increase in volume and
demand in the prior year.

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The marketing segment revenues increased $107.0 million during the three months
ended June 30, 2021 as compared to the three months ended June 30, 2020, which
includes revenues of $3.1 million from acquired businesses. Excluding revenues
from acquired businesses and favorable foreign exchange rates of $2.1 million,
the segment experienced an increase of $101.8 million in organic revenues. The
increase in revenues was primarily due to an increase in our
in-store
sampling services from gradually lifting temporary suspensions as a result of
recovery from the
COVID-19
pandemic and continued growth in our digital marketing services.
Cost of Revenues
Cost of revenues as a percentage of revenues for the three months ended June 30,
2021 was 82.1%, as compared to 79.5% for the three months ended June 30, 2020.
The increase as a percentage of revenues was largely attributable to the change
in the revenue mix of our services as a result of recoveries from the
COVID-19
pandemic and investment to stand up associates on behalf of clients to restart
services which were dormant during
COVID-19.
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of revenues for the
three months ended June 30, 2021 was 5.5%, as compared to 12.6% for the three
months ended June 30, 2020. The decrease as a percentage of revenues for the
three months ended June 30, 2021 was primarily attributable to $39.6 million
decrease in restructuring charges primarily associated with terminating certain
office leases, $2.1 million decrease in acquisition-related expenses, partially
offset by $9.0 million increase in stock-based compensation expense related to
issuance of performance restricted stock units ("PSUs") and restricted stock
units ("RSUs") with respect to our Class A common stock under the Advantage
Solutions Inc. 2020 Incentive Award Plan (the "2020 Plan").
Depreciation and Amortization Expense
Depreciation and amortization expense increased $3.9 million, or 6.7%, to
$62.7 million for the three months ended June 30, 2021, from $58.7 million for
the three months June 30, 2020. The increase is primarily due to increase in
depreciation expenses from our internally developed software and additional
amortization of intangibles assets from acquisitions.
Operating Income

                            Three Months Ended June 30,                 Change
(amounts in thousands)       2021                 2020              $            %
Sales                    $     44,673        $       11,021      $ 33,652       305.3 %
Marketing                      (2,226 )             (11,018 )       8,792       (79.8 )%

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




* Not meaningful


In the sales segment, the increase in operating income during the three months
ended June 30, 2021 was primarily attributable to growth in revenues as
described above together with the decrease in restructuring charges primarily
associated with terminating certain office leases and the change in fair value
adjustments related to contingent consideration.
In the marketing segment, the increase in operating income during the three
months ended June 30, 2021 was primarily attributable to the decrease in
restructuring charges primarily associated with terminating certain office
leases, partially offset by the change in fair value adjustments related to
contingent consideration and recovery from Take 5 as described above.

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Change in Fair Value of Warrant Liability
Change in fair value of warrant liability represents $7.1 million of
non-cash
gain resulting from a fair value adjustment to warrant liability with respect to
the private placement warrants for the three months ended June 30, 2021. Fair
value adjustments are based on the input assumptions used in the Black-Scholes
option pricing model, including our Class A common stock price at the end of the
reporting period, the implied volatility or other inputs to the model and the
number of private placement warrants outstanding, which may vary from period to
period.
Interest Expense, net
Interest expense decreased $14.3 million, or 27.8%, to $37.2 million for the
three months ended June 30, 2021, from $51.5 million for the three months ended
June 30, 2020. The decrease in interest expense, net was primarily due to the
decrease in total debt as a result of the Transactions.
Provision for (benefit from) Income Taxes
Provision for income taxes was $6.6 million for the three months ended June 30,
2021 as compared to a benefit from income taxes of $13.7 million for the three
months ended June 30, 2020. The fluctuation was primarily attributable to the
greater
pre-tax
income, unfavorable permanent book/tax differences related to officers'
compensation including stock based awards and discrete items recorded for the
three months ended June 30, 2021 related to the remeasurement of deferred tax
liabilities in the UK and US state jurisdictions due to income tax rate changes.
Net Income
Net income was $5.8 million for the three months ended June 30, 2021, compared
to net loss of $37.8 million for the three months ended June 30, 2020. The
increase in net income was primarily driven by the increase in operating income
and decrease in interest expense as a result of the consummation of the
Transactions and the fair value adjustment of warrant liability partially offset
by unfavorable variance associated with the provision for income taxes as
described above.
Adjusted Net Income
The increase in Adjusted Net Income for the three months ended June 30, 2021 was
attributable to the decrease in interest expense as a result of the consummation
of the Transactions and increase in provision for income taxes. For a
reconciliation of Adjusted Net Income to Net income (loss), see " -
Non-GAAP
Financial Measures."
Adjusted EBITDA and Adjusted EBITDA by Segment

                             Three Months Ended June 30,                Change
(amounts in thousands)        2021                 2020             $            %
Sales                    $       89,523       $       90,020     $   (497 )      (0.6 )%
Marketing                        32,448               22,024       10,424        47.3 %

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



Adjusted EBITDA increased $9.9 million, or 8.9 %, to $122.0 million for the
three months ended June 30, 2021, from $112.0 million for the three months ended
June 30, 2020.
The increase in Adjusted EBITDA was primarily attributable to the growth in
revenues as described above. For a reconciliation of Adjusted EBITDA to net
income, see "-
Non-GAAP
Financial Measures
."

                                       35

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

Revenues

                           Six Months Ended June 30,               Change
(amounts in thousands)        2021             2020             $            %
Sales                    $    1,095,968     $   968,037     $ 127,931        13.2 %
Marketing                       545,007         552,902        (7,895 )      (1.4 )%

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



Total revenues increased by $120.0 million, or 7.9%, during the six months ended
June 30, 2021, as compared to the six months ended June 30, 2020.
The sales segment revenues increased $127.9 million, of which $6.1 million were
revenues from acquired businesses during the six months ended June 30, 2021 as
compared to the six months ended June 30, 2020. Excluding revenues from acquired
businesses and favorable foreign exchange rates of $17.1 million, the segment
experienced an increase of $104.7 million in organic revenues primarily due to
growth in our headquarter and retail merchandising services where we benefitted
from expansions with existing and new clients and an increase in
eat-at-home
consumption due to the
COVID-19
pandemic, expansion in our
e-commerce
services, and our European businesses which experienced recoveries from
temporary reductions as a result of the
COVID-19
pandemic.
The marketing segment revenues declined $7.9 million during the six months ended
June 30, 2021 as compared to the six months ended June 30, 2020, which includes
revenues of $7.0 million from acquired businesses. Excluding revenues from
acquired businesses and favorable foreign exchange rates of $4.2 million, the
segment experienced a decline of $19.1 million in organic revenues. The slight
decrease in revenues was primarily due to the gradual lifting of temporary
suspensions or reductions of certain
in-store
sampling services as a result of the
COVID-19
pandemic partially offset by continued growth in our digital marketing services.
Cost of Revenues
Cost of revenues as a percentage of revenues for the six months ended June 30,
2021 was 82.4%, as compared to 82.6% for the six months ended June 30, 2020,
which is consistent year over year.
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of revenues for the
six months ended June 30, 2021 was 5.3%, as compared to 8.0% for the six months
ended June 30, 2020. The decrease as a percentage of revenues for the six months
ended June 30, 2021 was primarily attributable to $36.6 million decrease in
restructuring charges primarily associated with terminating certain office
leases, $12.5 million decrease in equity-based compensation expense associated
with our Common Series D Units, and $5.7 million of the change in fair value
adjustments related to contingent consideration, partially offset by
$17.6 million of stock-based compensation expense related to issuance of PSUs
and RSUs with respect to our Class A common stock under the 2020 Plan.
Depreciation and Amortization Expense
Depreciation and amortization expense increased $3.3 million, or 2.8%, to
$122.3 million for the six months ended June 30, 2021, from $119.0 million for
the six months June 30, 2020. The increase is primarily due to additional
amortization expenses of intangibles from acquisitions.

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Operating Income

                             Six Months Ended June 30,                 Change
(amounts in thousands)       2021                2020              $            %
Sales                    $      79,822       $      35,215      $ 44,607        126.7 %
Marketing                          213              (3,774 )       3,987       (105.6 )%

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



In the sales segment, the increase in operating income during the six months
ended June 30, 2021 was primarily attributable to growth in revenues as
described above together with our cost saving initiatives in response to
COVID-19
pandemic.
In the marketing segment, the increase in operating income during the six months
ended June 30, 2021 was primarily attributable to growth in revenues and the
cost saving initiatives in response to
COVID-19
pandemic, partially offset by recovery from Take 5 as described above.
Change in Fair Value of Warrant Liability
Change in fair value of warrant liability represents $1.5 million of
non-cash
gain resulting from a fair value adjustment to warrant liability with respect to
the private placement warrants for the six months ended June 30, 2021. Fair
value adjustment are based on the input assumptions used in the Black-Scholes
option pricing model, including our Class A common stock price at the end of the
reporting period, the implied volatility or other inputs to the model and the
number of private placement warrants outstanding, which may vary from period to
period.
Interest Expense, net
Interest expense decreased $35.3 million, or 34.1%, to $68.1 million for the six
months ended June 30, 2021, from $103.3 million for the six months ended
June 30, 2020. The decrease in interest expense, net was primarily due to the
decrease in total debt as a result of the Transactions.
Provision for (benefit from) Income Taxes
Provision for income taxes was $8.3 million for the six months ended June 30,
2021 as compared to a benefit from income taxes of $12.3 million for the six
months ended June 30, 2020. The fluctuation was primarily attributable to the
greater
pre-tax
income, unfavorable permanent differences related to officers' compensation
including stock based awards and discrete items recorded for the six months
ended June 30, 2021 related to valuation allowance for the Company's Mexico
operations and the remeasurement of deferred tax liabilities in the UK and US
state jurisdictions due to income tax rate changes.
Net Income
Net income was $5.2 million for the six months ended June 30, 2021, compared to
net loss of $59.5 million for the six months ended June 30, 2020. The increase
in net income was primarily driven by the increase in operating income and
decrease in interest expense as a result of the consummation of the Transactions
partially offset by unfavorable variances associated with the provision for
income taxes as described above.
Adjusted Net Income
The increase in Adjusted Net Income for the six months ended June 30, 2021 was
attributable to the decrease in interest expense as a result of the consummation
of the Transactions and increase in provision for income taxes. For a
reconciliation of Adjusted Net Income to Net income (loss), see "-
Non-GAAP
Financial Measures."

                                       37
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Adjusted EBITDA and Adjusted EBITDA by Segment

                           Six Months Ended June 30,              Change
(amounts in thousands)       2021               2020           $           %
Sales                    $     173,600       $  168,583     $  5,017        3.0 %
Marketing                       59,799           49,812        9,987       20.0 %

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



Adjusted EBITDA increased $15.0 million, or 6.9 %, to $233.4 million for the six
months ended June 30, 2021, from $218.4.0 million for the six months ended
June 30, 2020.
The increase in Adjusted EBITDA was primarily attributable to the growth in
revenues as described above. For a reconciliation of Adjusted EBITDA to net
income, see "-
Non-GAAP
Financial Measures
."

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                               Non-GAAP Financial
                                    Measures
Adjusted Net Income is a
non-GAAP
financial measure. Adjusted Net Income means net income (loss) before
(i) impairment of goodwill and indefinite-lived assets, (ii) amortization of
intangible assets, (iii) equity based compensation of Topco and Advantage
Sponsors' management fee, (iv) change in fair value of warrant liability,
(v) fair value adjustments of contingent consideration related to acquisitions,
(vi) acquisition-related expenses, (vii) costs associated with
COVID-19,
net of benefits received, (viii) EBITDA for economic interests in investments,
(ix) restructuring expenses, (x) litigation expenses, (xi) (Recovery from) loss
on Take 5, (xii) deferred financing fees, (xiii) costs associated with the Take
5 Matter, (xiv) other adjustments that management believes are helpful in
evaluating our operating performance and (xv) related tax adjustments.
We present Adjusted Net Income because we use it as a supplemental measure to
evaluate the performance of our business in a way that also considers our
ability to generate profit without the impact of items that we do not believe
are indicative of our operating performance or are unusual or infrequent in
nature and aid in the comparability of our performance from period to period.
Adjusted Net Income should not be considered as an alternative for our Net
income (loss), our most directly comparable measure presented on a GAAP basis.
A reconciliation of Adjusted Net Income to Net income (loss) is provided in the
following table:

                                          Three Months Ended June 30,       

Six Months Ended June 30,


                                           2021                 2020               2021               2020
(in thousands)
Net income (loss)                      $       5,754        $     (37,814 )    $       5,208        $ (59,537 )
Less: Net loss attributable to
noncontrolling interest                         (367 )               (410 )             (797 )           (425 )

Add:


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

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



Adjusted EBITDA and Adjusted EBITDA by segment are supplemental
non-GAAP
financial measures of our operating performance. Adjusted EBITDA means net
income (loss) before (i) interest expense, net, (ii) (benefit from) provision
for income taxes, (iii) depreciation, (iv) impairment of goodwill and
indefinite-lived assets, (v) amortization of intangible assets, (vi) equity
based compensation of Topco and Advantage Sponsors' management fee, (vii) change
in fair value of warrant liability, (viii) stock-based compensation expense,
(ix) fair value adjustments of contingent consideration related to acquisitions,
(x) acquisition-related expenses, (xi) costs associated with
COVID-19,
net of benefits received, (xii) EBITDA for economic interests in investments,
(xiii) restructuring expenses, (xiv) litigation expenses, (xv) (Recovery from)
loss on Take 5, (xvi) costs associated with the Take 5 Matter and (xvii) other
adjustments that management believes are helpful in evaluating our operating
performance.

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

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