Advantage Solutions Inc

Previous wording

This Quarterly Report on Form 10-Q (this “Quarterly Report”), including the section titled “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, our beliefs and our management’s assumptions. Such words as “expect,” “anticipate,” “outlook,” “could,” “target,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “should,” “may,” “assume” and “continue” as well as variations of such words and similar expressions are intended to identify such forward-looking statements, although not all forward-looking statements contain such terms. These statements are not guarantees of future performance and they involve certain risks, uncertainties and assumptions that are difficult to predict. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecasted by our forward-looking statements. More information regarding these risks and uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth in “Risk Factors” of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2024. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise.

Current wording

This Quarterly Report on Form 10-Q (this “Quarterly Report”), including the section titled “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") including statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, our beliefs and our management’s assumptions. Such words as “expect,” “anticipate,” “outlook,” “could,” “target,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “should,” “may,” “assume” and “continue” as well as variations of such words and similar expressions are intended to identify such forward-looking statements, although not all forward-looking statements contain such terms. These statements are not guarantees of future performance and they involve certain risks, uncertainties and assumptions that are difficult to predict. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecasted by our forward-looking statements. More information regarding these risks and uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth in “Risk Factors” of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2024. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise.

Previous wording

Effective January 1, 2024, we revised our reportable segments to align our business strategy, and the manner in which the Chief Executive Officer, our chief operating decision maker manages assesses the performance and makes decisions regarding the allocation of resources for the Company. Our revised reportable segments consist of Branded Services, Experiential Services, and Retailer Services.

Current wording

Effective January 1, 2024, we revised our reportable segments to align our business strategy, and the manner in which the Chief Executive Officer, our chief operating decision maker, manages and assesses the performance and makes decisions regarding the allocation of resources for us. Our revised reportable segments consist of Branded Services, Experiential Services, and Retailer Services.

Previous wording

We have reorganized our portfolio of businesses into a new, simplified structure that more closely aligns our business capabilities with economic buyers. As a result of this reorganization, we have formally disposed of certain business units. In addition to the business units already disposed of, there are certain other business units which are part of the overall reorganization plan that have not yet been disposed of or abandoned. We have determined that the other business units not yet disposed of met the held for sale and discontinued operations accounting criteria as of March 31, 2024 as their dispositions represent a strategic shift that has had a major effect on our operations and financial results. Refer to Note 2—Acquisitions, Divestitures, and Discontinued Operations. We continue to evaluate opportunities to further simplify our operations so we can focus more resources on our core businesses.

Current wording

We have reorganized our portfolio of businesses into a new, simplified structure that more closely aligns our business capabilities with economic buyers. As a result of this reorganization, we have formally disposed of certain business units. In addition to the business units already disposed of, there are certain other business units which are part of the overall reorganization plan that have not yet been disposed of or abandoned. We have determined that the other business units not yet disposed of met the held for sale and discontinued operations accounting criteria as of June 30, 2024 as their dispositions represent a strategic shift that has had a major effect on our operations and financial results. Refer to Note 2—Held for Sale, Divestitures and Discontinued Operations. We continue to evaluate opportunities to further simplify our operations so we can focus more resources on our core businesses.

Previous wording

Through our Branded Services segment, which generated approximately 39.2% and 47.1% of our revenues in the three months ended March 31, 2024 and 2023, respectively, we provide services to branded consumer goods manufacturers through three main categories: brokerage, branded merchandising and omni-commerce marketing services. Brokerage services is primarily an outsourced sales and services agency for branded consumer goods manufacturers at retailer headquarters, in-store and online. Additionally, we lead with insights to execute branded merchandising strategies for branded consumer goods manufacturers related to merchandising in-store and online to drive product sales. Our omni-commerce marketing services primarily relate to digital and field marketing services, including shopper marketing, targeted advertising, interactive design and development, inventory management, application development and content management solutions.

Current wording

Through our Branded Services segment, which generated approximately 37.5% and 46.4% of our revenues in the six months ended June 30, 2024 and 2023, respectively, we provide services to branded consumer goods manufacturers through three main categories: brokerage, branded merchandising and omni-commerce marketing services. Brokerage services is primarily an outsourced sales and services agency for branded consumer goods manufacturers at retailer headquarters, in-store and online. Additionally, we lead with insights to execute branded merchandising strategies for branded consumer goods manufacturers related to merchandising in-store and online to drive product sales. Our omni-commerce marketing services primarily relate to digital and field marketing services, including shopper marketing, targeted advertising, interactive design and development, inventory management, application development and content management solutions.

Previous wording

Through our Experiential Services segment, which generated approximately 35.0.% and 27.2% of our revenues in the three months ended March 31, 2024 and 2023, respectively, we help brands and retailers reach consumers and convert shoppers into buyers through in-store and online sampling and demonstrations. We manage highly customized, large-scale sampling programs for leading brands and retailers. We also manage, organize and execute special events for brands and retailers, including large-scale meetings, mobile tours, summits and festivals.

Current wording

Through our Experiential Services segment, which generated approximately 36.1% and 28.7% of our revenues in the six months ended June 30, 2024 and 2023, respectively, we help brands and retailers reach consumers and convert shoppers into buyers through in-store and online sampling and demonstrations. We manage highly customized, large-scale sampling programs for leading brands and retailers. We also manage, organize and execute special events for brands and retailers, including large-scale meetings, mobile tours, summits and festivals.

Previous wording

Through our Retailer Services segment, which generated approximately 25.8% and 25.7% of our revenues in the three months ended March 31, 2024 and 2023, respectively, we provide end-to-end advisory, retailer merchandising and agency services to retailers. Advisory services primarily consist of consulting services related to private brand development, including coordination related to the sourcing, manufacturing, branding and distribution of private label products to the end retailer. Retailer merchandising services primarily relate to the execution of merchandising strategies, including traditional services such as interior store construction, store resets, category updates and new item implementation. Agency services primarily consist of providing marketing strategies within retail locations, including retail media networks, and analyzing shopper behavior to offer planning, execution and measurement of insight-based, retailer-specific promotions that target retailers' specific shopper base to drive product sales.

Current wording

Through our Retailer Services segment, which generated approximately 26.3% and 24.9% of our revenues in the six months ended June 30, 2024 and 2023, respectively, we provide end-to-end advisory, retailer merchandising and agency services to retailers. Advisory services primarily consist of consulting services related to private brand development, including coordination related to the sourcing, manufacturing, branding and distribution of private label products to the end retailer. Retailer merchandising services primarily relate to the execution of merchandising strategies, including traditional services such as interior store construction, store resets, category updates and new item implementation. Agency services primarily consist of providing marketing strategies within retail locations, including retail media networks, and analyzing shopper behavior to offer planning, execution and measurement of insight-based, retailer-specific promotions that target retailers' specific shopper base to drive product sales.

Previous wording

Adjusted Net Income increased by $1.1 million, or 8.3%, to $14.9 million; and

Current wording

Adjusted Net Income increased by $8.0 million, or 20.3%, to $31.2 million; and

Previous wording

There are a number of factors, in addition to the deconsolidation of ASL and inflation, that affect the performance of our business and the comparability of our results from period to period including:

Current wording

There are a number of factors, in addition to the deconsolidation of our European joint venture in December 2023 and inflation, that affect the performance of our business and the comparability of our results from period to period including:

Previous wording

Acquisitions and Divestitures. We have grown our business in part by acquiring businesses, both domestic and international. 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 acquisitions that can be completed at attractive purchase prices. We also continue to evaluate our service offerings to ensure more focus on our mission of converting shoppers into buyers for consumer goods companies and retailers. To that end, we have disposed of certain businesses and classified others as held for sale. As part of the sales agreements for certain divestitures, we have agreed to provide certain transitional services as defined within the respective Transition Services Agreement for a period of time after sale. We continue to evaluate opportunities to further simplify our operations so we can focus more resources on our core businesses.

Current wording

Acquisitions and Divestitures. We have grown our business in part by acquiring businesses, both domestic and international. 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 acquisitions that can be completed at attractive purchase prices. We also continue to evaluate our service offerings to ensure more focus on our mission of converting shoppers into buyers for consumer goods companies and retailers. To that end, we have disposed of certain businesses and classified others as held for sale. As part of the sales agreements for certain divestitures, we have agreed to provide certain transitional services as defined within the respective transition services agreements for a period of time after sale. We continue to evaluate opportunities to further simplify our operations so we can focus more resources on our core businesses.

Previous wording

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. 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 Loss.

Current wording

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. Adjustments to the estimated fair value related to changes in unobservable inputs are reported in “Selling, general, and administrative expenses” in our Condensed Consolidated Statements of Operations and Comprehensive Loss.

Previous wording

Foreign Exchange Fluctuations. Our financial results are affected by fluctuations in the exchange rate between the U.S. dollar and other currencies, primarily the Canadian dollars due to our operations in such foreign jurisdictions. See also “ —Quantitative and Qualitative Disclosure of Market Risk—Foreign Currency Risk.”

Current wording

Foreign Exchange Fluctuations. Our financial results are affected by fluctuations in the exchange rate between the U.S. dollar and other currencies, primarily the Canadian dollar due to our operations in such foreign jurisdictions. See also “ —Quantitative and Qualitative Disclosure of Market Risk—Foreign Currency Risk.”

Previous wording

Selling, general and administrative expenses consist primarily of salaries, payroll taxes and benefits for corporate personnel. Other overhead costs include information technology, professional services fees, including accounting and legal services, and other general corporate expenses. We also incur expenses 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 related professional services. 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 costs related to our internal reorganization activities, acquisition and divestiture transactions. These transaction-related costs are comprised of fees related to change of equity ownership, professional fees, due diligence and integration or divestitures activities.

Current wording

Selling, general, and administrative expenses consist primarily of salaries, payroll taxes and benefits for corporate personnel. Other overhead costs include information technology, professional services fees, including accounting and legal services, and other general corporate expenses. We also incur expenses 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 Securities and Exchange Commission (“SEC”), as well as higher expenses for general and director and officer insurance, investor relations, and related professional services. 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 costs related to our internal reorganization activities, acquisition and divestiture transactions. These transaction-related costs are comprised of fees related to change of equity ownership, professional fees, due diligence and integration or divestitures activities.

Previous wording

Goodwill represents the excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired in an acquisition. We test for impairment of goodwill at the reporting unit level. We generally combine components that have similar economic characteristics, nature of services, types of clients, distribution methods and regulatory environment. Changes to our operating segments effective January 1, 2024, as described in Note 8—Segments, resulted in a change to our reporting units (Branded Services, Branded Agencies, Experiential Services, Merchandising and Retailer Agencies). As a result, the Company performed the required impairment assessments directly before and immediately after the change in reporting units as of January 1, 2024. The assets and liabilities were reassigned to the applicable reporting units and allocated goodwill using the relative fair value approach. The estimated fair value of the underlying reporting units were determined based on a combination of the income and market approaches. The income approach utilizes estimates of discounted cash flows for the underlying business, which requires assumptions for growth rates, EBITDA margins, terminal growth rate, discount rate, and incremental net working capital, all of which require significant management judgment. The market approach applies market multiples derived from historical earnings data of selected guideline publicly traded companies that are first screened by industry group and then further narrowed on the reporting units' business descriptions, markets served, competitors, EBITDA margins and revenue size. The Company compared a weighted average of the output from the income and market approaches to compute the fair value of the reporting units. The assumptions in the income and market approach are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. We based our fair value estimates on assumptions we believe to be reasonable but which are unpredictable and inherently uncertain. A change in these underlying assumptions would cause a change in the results of the tests and, as such, could cause fair value to be less than the carrying amounts and result in an impairment of goodwill in the future. Additionally, if actual results are not consistent with the estimates and assumptions or if there are significant changes to our planned strategy, it may cause fair value to be less than the carrying amounts and result in an impairment of goodwill in the future.

Current wording

Goodwill represents the excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired in an acquisition. We test for impairment of goodwill at the reporting unit level. We generally combine components that have similar economic characteristics, nature of services, types of clients, distribution methods and regulatory environment. Changes to our operating segments effective January 1, 2024, as described in Note 8—Segments, resulted in a change to our reporting units (Branded Services, Branded Agencies, Experiential Services, Merchandising and Retailer Agencies). As a result, the Company performed the required impairment assessments directly before and immediately after the change in reporting units as of January 1, 2024. The assets and liabilities were reassigned to the applicable reporting units and allocated goodwill using the relative fair value approach. The estimated fair values of the underlying reporting units were determined based on a combination of the income and market approaches. The income approach utilizes estimates of discounted cash flows for the underlying business, which requires assumptions for growth rates, EBITDA margins, terminal growth rate, discount rate, and incremental net working capital, all of which require significant management judgment. The market approach applies market multiples derived from historical earnings data of selected guideline publicly traded companies that are first screened by industry group and then further narrowed on the reporting units' business descriptions, markets served, competitors, EBITDA margins and revenue size. The Company compared a weighted average of the output from the income and market approaches to compute the fair value of the reporting units. The assumptions in the income and market approach are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. We based our fair value estimates on assumptions we believe to be reasonable but which are unpredictable and inherently uncertain. A change in these underlying assumptions would cause a change in the results of the tests and, as such, could cause fair value to be less than the carrying amounts and result in an impairment of goodwill in the future. Additionally, if actual results are not consistent with the estimates and assumptions or if there are significant changes to our planned strategy, it may cause fair value to be less than the carrying amounts and result in an impairment of goodwill in the future.

Previous wording

In conjunction with the tests performed as of January 1, 2024, each of the fair values for the reporting units tested was in excess of its carrying amount. The fair values of the Branded Agencies and Experiential Services reporting units exceeded their respective carrying values by less than 20%. As of March 31, 2024, there were no indicators of goodwill impairment.

Current wording

In conjunction with the tests performed as of January 1, 2024, each of the fair values for the reporting units tested was in excess of its carrying amount. The fair values of the Branded Agencies and Experiential Services reporting units exceeded their respective carrying values by less than 20%.

Previous wording

During the three months ended March 31, 2024, we entered into a definitive agreement to sell a collection of our foodservice businesses. Additionally, we classified certain assets and liabilities which are expected to be recovered through a sale transaction rather than through continuing use. We expect to use the divestiture proceeds to invest in our business, reduce debt, creating financial flexibility for opportunistic share repurchases or potential future acquisitions.

Current wording

During the six months ended June 30, 2024, we sold five businesses. Additionally, we classified certain assets and liabilities which are expected to be recovered through a sale transaction rather than through continuing use as held for sale as of June 30, 2024. We expect to use the divestiture proceeds to invest in our business, reduce debt, create financial flexibility for opportunistic share repurchases or potential future acquisitions.

Previous wording

Adjusted Net Income is a non-GAAP financial measure. Adjusted Net Income means net (loss) income before (i) impairment of goodwill and indefinite-lived assets, (ii) gain on deconsolidation of subsidiaries, (iii) (gain) loss on divestitures, (iv) amortization of intangible assets, (iv) equity-based compensation of Karman Topco L.P., (vi) changes in fair value of warrant liability, (vii) fair value adjustments of contingent consideration related to acquisitions, (viii) acquisition and divestitures related expenses, (ix) costs associated with COVID-19, net of benefits received, (x) net income attributable to noncontrolling interest, (xi) reorganization expenses, (xii) litigation expenses, (xiii) deferred financing fees, (xiv) gain on repurchases of Term Loan Facility and Senior Secured Notes debt, (xv) recovery from Take 5 and costs associated with the Take 5 Matter, (xvi) other adjustments that management believes are helpful in evaluating our operating performance, and (xvii) related tax adjustments.

Current wording

Adjusted Net Income is a non-GAAP financial measure. Adjusted Net Income means net (loss) income before (i) net income attributable to noncontrolling interest, (ii) impairment of goodwill and indefinite-lived assets, (iii) gain on deconsolidation of subsidiaries, (iv) equity-based compensation of Karman Topco L.P., (v) changes in fair value of warrant liability, (vi) fair value adjustments of contingent consideration related to acquisitions, (vii) acquisition and divestiture related expenses, (viii) reorganization expenses, (ix) litigation expenses, (x) (gain) loss on divestitures, (xi) amortization of intangible assets, (xii) costs associated with COVID-19, net of benefits received, (xiii) gain on repurchases of Term Loan Facility and Senior Secured Notes debt, (xiv) costs associated with (recovery from) the Take 5 Matter, (xv) other adjustments that management believes are helpful in evaluating our operating performance, and (xvi) related tax adjustments.

Previous wording

Adjusted EBITDA and Adjusted EBITDA by Segment are supplemental non-GAAP financial measures of our operating performance. Adjusted EBITDA, inclusive of continuing and discontinuing operations, means net (loss) income before (i) interest expense, net, (ii) (benefit from) provision for income taxes, (iii) depreciation, (iv) amortization of intangible assets, (v) equity-based compensation of Karman Topco L.P., (vi) changes in fair value of warrant liability, (vii) stock based compensation expense, (viii) fair value adjustments of contingent consideration related to acquisitions, (ix) acquisition and divestiture related expenses, (x) (gain) loss on divestiture, (xi) costs associated with COVID-19, net of benefits received, (xii) EBITDA for economic interests in investments, (xiii) reorganization expenses, (xiv) litigation expenses, (xv) costs associated with (recovery from) the Take 5 Matter and (xvi) other adjustments that management believes are helpful in evaluating our operating performance.

Current wording

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

Previous wording

Adjusted EBITDA by Segment means, with respect to the applicable operating segment, operating income from continuing operations plus operating income from discontinued operations before (i) depreciation, (ii) impairment of goodwill and indefinite-lived assets, (iii) gain on deconsolidation of subsidiaries, (iv) (gain) loss on divestitures, (v) equity-based compensation of Karman Topco L.P., (vi) changes in fair value of warrant liability, (vii) stock-based compensation expense, (viii) fair value adjustments of contingent consideration related to acquisitions, (ix) acquisition and divestitures related expenses, (x) costs associated with COVID-19, net of benefits received, (xi) EBITDA for economic interests in investments, (xii) reorganization expenses, (xiii) litigation expenses, (xiv) costs associated with (recovery from) the Take 5 Matter and (xv) other adjustments that management believes are helpful in evaluating our operating performance, in each case attributable to such segment.

Current wording

Adjusted EBITDA by Segment means, with respect to each segment, operating income (loss) from continuing operations before (i) depreciation, (ii) amortization of intangible assets, (iii) impairment of goodwill, (iv) stock-based compensation expense, (v) equity-based compensation of Karman Topco L.P., (vi) fair value adjustments of contingent consideration related to acquisitions, (vii) acquisition and divestiture related expenses, (viii) reorganization expenses, (ix) litigation expenses (recovery), (x) costs associated with COVID-19, net of benefits received, (xi) costs associated with (recovery from) the Take 5 Matter, (xii) EBITDA for economic interests in investments and (xiii) other adjustments that management believes are helpful in evaluating our operating performance, in each case, attributable to such segment.

Previous wording

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 non-cash 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 (loss) income or operating income (loss), our most directly comparable measures presented on a GAAP basis. 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 our non-GAAP measures may not be directly comparable to similarly titled measures of other companies.

Current wording

We present Adjusted EBITDA from Continuing Operations, Adjusted EBITDA from Discontinued Operations 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 non-cash 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 from Continuing Operations and Adjusted EBITDA from Discontinued Operations. None of Adjusted EBITDA from Continuing Operations, Adjusted EBITDA from Discontinued Operations nor Adjusted EBITDA by Segment should be considered as an alternative for Net (loss) income or operating income (loss), our most directly comparable measures presented on a GAAP basis. 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 our non-GAAP measures may not be directly comparable to similarly titled measures of other companies.

Previous wording

Reorganization charges include severance plans designed to integrate and reduce costs intended to further improve efficiencies in operational activities and align cost structures consistent with revenue levels associated with business changes. We recorded severance expenses of $9.6 million included in “Selling, general, and administrative expenses” in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023.

Current wording

Reorganization charges include severance plans designed to integrate and reduce costs intended to further improve efficiencies in operational activities and align cost structures consistent with revenue levels associated with business changes. We recorded severance expenses of $4.5 million and $14.1 million included in “Selling, general, and administrative expenses” in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2024, respectively.

Previous wording

Results of Operations for the Three Months Ended March 31, 2024 and 2023

Current wording

Results of Operations for the Three and Six Months Ended June 30, 2024 and 2023

Previous wording

The following table sets forth items derived from the Company’s consolidated statements of operations for the three months ended March 31, 2024 and 2023 in dollars and as a percentage of total revenues.

Current wording

The following table sets forth items derived from the Company’s consolidated statements of operations for the three and six months ended June 30, 2024 and 2023 in dollars and as a percentage of total revenues.

Previous wording

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

Current wording

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

Previous wording

The Branded Services segment revenues decreased $100.3 million during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. Excluding $93.4 million revenues from the deconsolidation of our European joint venture, the segment experienced a decrease of $6.9 million in organic revenues primarily due to an intentional client resignation and timing of shipments impacting client orders, partially offset by growth in our omni-commerce marketing services.

Current wording

The Branded Services segment revenues decreased $124.9 million during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Excluding $100.6 million revenues from the deconsolidation of our European joint venture, the segment experienced a decrease of $24.3 million in revenues primarily due to an intentional client resignation and softness in our omni-commerce marketing services.

Previous wording

The Experiential Services segment revenues increased $50.2 million during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. Excluding unfavorable foreign exchange rates of $2.1 million, the segment experienced an increase of $52.3 million in organic revenues. The increase in revenues was primarily due to an increase in our events per day volume and price realization.

Current wording

The Experiential Services segment revenues increased $34.3 million during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase in revenues was primarily due to an increase in our events per day volume.

Previous wording

Selling, general and administrative expenses as a percentage of revenues for the three months ended March 31, 2024 was 10.2%, compared to 6.0% for the three months ended March 31, 2023. The increase as a percentage of revenues was primarily due to the continued investment in our support services including our technology solutions and $26.0 million increase in costs associated with our internal reorganization activities, largely related to professional fees and severance.

Current wording

Selling, general, and administrative expenses as a percentage of revenues for the three months ended June 30, 2024 was 7.2%, compared to 5.0% for the three months ended June 30, 2023. The increase as a percentage of revenues was primarily due to the $14.5 million increase in costs associated with our internal reorganization activities, largely related to professional fees and severance and continued investment in our support services, including our technology solutions.

Previous wording

Depreciation and amortization expense was $51.4 million for the three months ended March 31, 2024 compared to $54.5 million for the three months ended March 31, 2023. The decrease is largely attributable to a decrease in the amortization expenses from our trade names and the divested businesses.

Current wording

Depreciation and amortization expense was $51.3 million for the three months ended June 30, 2024 compared to $52.5 million for the three months ended June 30, 2023. The decrease is primarily attributable to a decrease in the depreciation and amortization expenses from the deconsolidation of our European joint venture.

Previous wording

In the Branded Services segment, the decrease in operating income during the three months ended March 31, 2024 was primarily due to an increase in costs associated with our internal reorganization activities.

Current wording

In the Branded Services segment, the decrease in operating income during the three months ended June 30, 2024 was primarily due to the goodwill impairment and the decrease in revenue noted above and an increase in costs associated with our internal reorganization activities combined with continued investment in our support services, including our technology solutions.

Previous wording

In the Experiential Services segment, the increase in operating income during the three months ended March 31, 2024 was due to increase in revenues as described above offset by continued investment in our support services including our technology solutions.

Current wording

In the Experiential Services segment, the increase in operating income during the three months ended June 30, 2024 was due to increase in revenues as described above, partially offset by an increase in costs associated with our internal reorganization activities combined with continued investment in our support services, including our technology solutions.

Previous wording

Change in fair value of warrant liability was $0.3 million of non-cash expense for the three months ended March 31, 2024 compared to $0.1 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 March 31, 2023.

Current wording

Change in fair value of warrant liability was $0.7 million of non-cash gain for the three months ended June 30, 2024 compared to $0.1 million of non-cash expense resulting from a fair value adjustment to warrant liability with respect to the private placement warrants for the three months ended June 30, 2023.

Previous wording

Interest expense, net decreased by $11.4 million, or 24.2%, to $35.8 million for the three months ended March 31, 2024, from $47.2 million for the three months ended March 31, 2023. The decrease in interest expense was primarily due to change in fair value in our derivative instruments, and lower debt balance, including as a result of repurchases of certain of our Senior Secured Notes as further described in “Liquidity and Capital Resources—Description of Credit Facilities—Senior Secured Notes”, partially offset by higher interest rates for the three months ended March 30, 2024.

Current wording

Interest expense, net increased by $9.3 million, or 30.6%, to $39.8 million for the three months ended June 30, 2024, from $30.5 million for the three months ended June 30, 2023. The increase in interest expense was primarily due to changes in the fair value of our derivative instruments during the three months ended June 30, 2024, partially offset by lower debt balance as a result of repurchases of Term Loan Facility and Senior Secured Notes as further described in “Liquidity and Capital Resources—Description of Credit Facilities—Senior Secured Notes.”

Previous wording

Benefit from income taxes was $13.7 million for the three months ended March 31, 2024 as compared to $6.0 million of benefit for income taxes for the three months ended March 31, 2023. The fluctuation was primarily attributable to a larger pre-tax loss during the three months ended March 31, 2024 compared to a smaller pre-tax loss during the three months ended March 31, 2023 and separately, the application of the windfall of $0.7 million of stock based compensation for the three months ended March 31, 2024, as compared to a $2.3 million shortfall for the three months ended March 31, 2023, and the release of the valuation allowance of $1.1 million related to one of the Company’s investments for the three months ended March 31, 2024.

Current wording

Benefit from income taxes was $17.3 million for the three months ended June 30, 2024 as compared to $2.2 million of benefit from income taxes for the three months ended June 30, 2023. The fluctuation was primarily attributable to a larger pre-tax loss during the three months ended June 30, 2024 compared to a smaller pre-tax loss during the three months ended June 30, 2023. Also contributing to the variance was the application of a windfall of $0.4 million of stock based compensation for the three months ended June 30, 2024, as compared to a $0.9 million shortfall for the three months ended June 30, 2023.

Previous wording

Net loss from continuing operations was $49.1 million for the three months ended March 31, 2024, compared to net loss from continuing operations of $34.4 million for the three months ended March 31, 2023. The increase in net loss from continuing operations was primarily driven increase in costs associated with the continued investment in our support services including our technology solutions and $26.0 million increase in costs associated with our internal reorganization activities, largely related to professional fees and severance.

Current wording

Net loss from continuing operations was $113.0 million for the three months ended June 30, 2024, compared to net loss from continuing operations of $13.0 million for the three months ended June 30, 2023. The increase in net loss from continuing operations was primarily driven by $99.7 million goodwill impairment.

Previous wording

The increase in Adjusted Net Income for the three months ended March 31, 2024 was primarily attributable to the decrease in interest expense partially offset by the decrease in revenue as described above. For a reconciliation of Adjusted Net Income to Net income, see “ —Non-GAAP Financial Measures.”

Current wording

The increase in Adjusted Net Income for the three months ended June 30, 2024 was primarily attributable to increases in selling, general, and administrative expenses and interest expense partially offset by the increase in the benefit from income taxes. For a reconciliation of Adjusted Net Income to Net income, see “ —Non-GAAP Financial Measures.”

Previous wording

Adjusted EBITDA, inclusive of continuing and discontinuing operations, decreased by $13.3 million, or 14.5%, to $78.8 million for the three months ended March 31, 2024, from $92.1 million for the three months ended March 31, 2023. In the Branded Services segment, the decrease was primarily attributable to the decline in revenues as described above and increase in cost of revenues, largely due to high wage inflation. In the Retailer Services segment, the decrease was primarily attributable to the decline in revenues as described above coupled with continued investment in our support services including our technology solutions. In the Experiential Services segment, the increase was driven largely by the growth in revenues from the in-store sampling and demonstration services as described above offset by continued investment in our support services including our technology solutions. For a reconciliation of Adjusted EBITDA to Net income, see “—Non-GAAP Financial Measures.”

Current wording

Adjusted EBITDA from Continuing Operations remained relatively unchanged for the three months ended June 30, 2024 from the three months ended June 30, 2023. In the Branded Services segment, the decrease was primarily attributable to the decline in revenues as described above. In the Retailer Services segment, the increase was primarily attributable to increase in margins driven by price. In the Experiential Services segment, the increase was driven largely by the growth in revenues from the in-store sampling and demonstration services as described above offset by continued investment in our support services including our technology solutions. For a reconciliation of Adjusted EBITDA from Continuing Operations to Net income, see “—Non-GAAP Financial Measures.”

Previous wording

Total revenues decreased by $65.4 million, or 6.9%, during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. Excluding revenues from the deconsolidation of our European joint venture, and unfavorable foreign exchange rates, revenues increased 3.0%.

Current wording

Total revenues decreased by $153.7 million, or 8.1%, during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. Excluding revenues from the deconsolidation of our European joint venture, revenues increased 2.1%.

Previous wording

The Retailer Services segment revenues decreased $15.2 million during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The decrease in revenues was primarily due to a decrease in our retailer merchandising services as a result of the earlier timing for the Easter holiday and merchandising projects that were completed in prior year, partially offset by an increase in our agency services and price realization.

Current wording

The Retailer Services segment revenues decreased by $13.7 million during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The decrease in revenues was primarily due to a decrease in merchandising projects that were completed in the first quarter of the prior year, partially offset by an increase in our agency services and price realization.

Previous wording

Cost of revenues as a percentage of revenues for the three months ended March 31, 2024 was 86.9%, as compared to 87.6% for the three months ended March 31, 2023, which stayed relatively consistent.

Current wording

Cost of revenues as a percentage of revenues for the six months ended June 30, 2024 was 86.7%, as compared to 87.9% for the six months ended June 30, 2023, which stayed relatively consistent.

Previous wording

The income tax expense from discontinued operations was $12.1 million for the three months ended March 31, 2024, while the income tax benefit from discontinued operations was $1.7 million for the three months ended March 31, 2023. The income tax expense for the three months ended March 31, 2024 was impacted primarily by the sale of the Company’s foodservice businesses. The income tax benefit for the three months ended March 31, 2023 was primarily the result of pre-tax loss.

Current wording

Income tax expense from discontinued operations was $11.9 million for the six months ended June 30, 2024, while the income tax expense from discontinued operations was $1.3 million for the six months ended June 30, 2023. The income tax expense for the six months ended June 30, 2024 was impacted primarily by the sale of divested entities. The income tax benefit for the six months ended June 30, 2023 was primarily the result of pre-tax loss.

Previous wording

Net income from discontinued operations was $46.0 million for the three months ended March 31, 2024, compared to net loss from discontinued operations of $13.3 million for the three months ended March 31, 2023. The increase in net income from discontinued operations was primarily driven by the $56.7 million gain on divestiture of the foodservice businesses for the three months ended March 31, 2024.

Current wording

Net income from discontinued operations was $59.2 million for the six months ended June 30, 2024, compared to net loss from discontinued operations of $6.6 million for the six months ended June 30, 2023. The increase in net income from discontinued operations was primarily driven by the $70.2 million gain on divestitures for the six months ended June 30, 2024.