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What changed in Advantage Solutions Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Advantage Solutions Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+346 added−383 removedSource: 10-K (2024-03-01) vs 10-K (2023-03-01)

Top changes in Advantage Solutions Inc.'s 2023 10-K

346 paragraphs added · 383 removed · 278 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur brand experiential solutions include large-scale festivals, lifestyle venues, pop-up-shops, mobile tours, as well as assisted sales programs whereby our associates act as extensions of client sales teams, educating consumers as well as store employees. 5 Retailer-Centric Services Retail Experiential We design and execute one-to-one engagement strategies in order to drive product trial and sales and help retailers differentiate their in-store experience and generate more loyalty from shoppers.
Biggest changeBrand Experiential We design and execute brand experiences in retail and non-retail settings in order to help brands engage, educate, acquire and retain consumers and impact purchase behavior. 4 Our brand experiential solutions include large-scale festivals and mobile tours, as well as assisted sales programs whereby our associates act as extensions of client sales teams, educating consumers as well as store employees.
We try to protect trade secrets and know-how by taking reasonable steps to keep them confidential, including entering into nondisclosure and confidentiality agreements with our employees, contractors and associates that contain confidentiality obligations and entering into invention assignment commitments that obligate employees, contractors and associates to assign to us any inventions developed in the course of their work for us.
We try to protect trade secrets and know-how by taking reasonable steps to keep them confidential, including entering into nondisclosure and confidentiality agreements with our employees, contractors and associates that contain 6 confidentiality obligations and entering into invention assignment commitments that obligate employees, contractors and associates to assign to us any inventions developed in the course of their work for us.
These regulatory requirements include, without limitation: • federal, state, local and foreign laws and regulations involving minimum wage, health care, overtime, sick leave, lunch and rest breaks and other similar wage, benefits and hour requirements and other similar laws; • Title VII of the Civil Rights Act and the Americans with Disabilities Act and regulations of the U.S.
These regulatory requirements include, without limitation: • federal, state, local and foreign laws and regulations involving minimum wage, health care, overtime, sick leave, lunch and rest breaks and other similar wage, benefits and hour requirements and other similar laws; 5 • Title VII of the Civil Rights Act and the Americans with Disabilities Act and regulations of the U.S.
All SEC filings are also available at the SEC’s website at www.sec.gov . our website and the information contained on or connected to our website are not incorporated by reference herein, and our web address is included as an inactive textual reference only. 7
All SEC filings are also available at the SEC’s website at www.sec.gov . our website and the information contained on or connected to our website are not incorporated by reference herein, and our web address is included as an inactive textual reference only.
Available Information We maintain a link to investor relations information on our website, www.advantagesolutions.ne t , where we make available, free of charge, our Securities and Exchange Commission (“SEC”) filings, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Available Information We maintain a link to investor relations information on our website, www.advantagesolutions.ne t , where we make available, free of charge, SEC filings, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Department of Agriculture), custom and import matters with respect to products imported to and exported across international borders; 6 • the U.S.
Department of Agriculture), custom and import matters with respect to products imported to and exported across international borders; • the U.S.
Item 1. Business Our Company We are a leading provider of outsourced solutions to consumer goods companies 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.
Item 1. Business Our Company 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.
We were ranked by Ad Age as the largest U.S. promotions agency and the largest U.S. experiential and event marketing agency from 2014 to 2022 based on prior year revenues. Within our marketing segment, we typically generate revenues on a fee-for-service, cost-plus, retainer or commission basis.
We were ranked by Ad Age as the largest U.S. promotions agency and the largest U.S. experiential and event marketing agency from 2014 to 2023 based on prior year revenues. Within our marketing segment, we typically generate revenues on a fee-for-service, cost-plus or commission basis.
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.
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.
Marketing Segment We believe that our marketing segment is differentiated from our competition by our people, retail connectivity, entrepreneurial marketing mindset and scale.
These services include: Marketing Segment We believe that our marketing segment is differentiated from our competition by our people, retail connectivity, entrepreneurial marketing mindset and scale.
Our retail services teams focus either on manufacturers or particular retail channels, such as grocery, drug, mass, convenience, club and natural/specialty, which allows them to develop expertise in either manufacturer products or a particular class of trade. Retailer-Centric Services Over the past decade we have leveraged our strategic position with retailers to develop solutions that address their needs.
Our retail services teams focus either on manufacturers or particular retail channels, such as grocery, drug, mass, convenience, club and natural/specialty, which allows them to develop expertise in either manufacturer products or a particular class of trade. 3 Retailer-Centric Services We leverage our strategic position with retailers to develop solutions that address their needs.
We offer our clients a full spectrum of flexible service models for our retail services coverage. In our dedicated coverage model, our associates perform services exclusively for a particular client and have intimate knowledge of its categories and products. Our syndicated coverage model utilizes shared teams in particular channels to perform services for multiple clients while in a store.
In our dedicated coverage model, our associates perform services exclusively for a particular client and have intimate knowledge of its categories and products. Our syndicated coverage model utilizes shared teams in particular channels to perform services for multiple clients while in a store.
Brand-Centric Merchandising We deploy teams in retail locations to support manufacturers’ in-store sales strategies. Our associates conduct both cyclical and ad hoc store visits to manage product availability and positioning, implement promotions, install point-of-purchase displays and perform other value-added merchandising services. Tablet technology and proprietary software are used extensively in the workflow.
Our associates conduct both cyclical and ad hoc store visits to manage product availability and positioning, implement promotions, install point-of-purchase displays and perform other value-added merchandising services. Tablet technology and software are used extensively in the workflow.
These professionals analyze consumer purchase and retailer data to identify opportunities to increase the sales of our clients’ products and categories. We perform these analyses using our proprietary business intelligence technology platform, which aggregates data to guide sales strategies to expand product distribution and optimize other factors such as assortment, planograms, pricing and trade promotions.
These professionals analyze consumer purchase and retailer data to identify opportunities to increase the sales of our clients’ products and categories. We use analytical tools, which aggregate data to guide sales strategies to expand product distribution and optimize other factors such as assortment, planograms, pricing and trade promotions.
Human Capital Management Our associates represent the most important assets to our business. As of December 31, 2022, we employed approximately 75,000 associates. Approximately 22,000 of these associates are full-time and approximately 53,000 are part-time. Approximately 57,000 of these associates are in the United States.
Human Capital Management Our people represent one of the most important assets to our business. As of December 31, 2023, we employed approximately 70,000 associates. Approximately 20,000 are full-time and approximately 50,000 are part-time. Approximately 59,000 of our associates are in the United States.
This includes in-store sampling and demo programs with fully-scaled operations including staffing, training, field management, assembly, fulfillment, technology and reporting. We deploy teams at certain retailers that develop event concepts in conjunction with marketing, merchandising and store operations and then secure supplier support and funding for the programs.
We deploy teams at certain retailers that develop event concepts in conjunction with marketing, merchandising and store operations and then secure supplier support and funding for the programs.
In store, our associates use our merchandising application and scanners to efficiently and effectively execute a range of activities such as distribution tasks, validating promotional compliance or answering survey questions. 3 Our software leverages daily point-of-sale store data, supply chain data and advanced algorithms to target and correct potential store-level merchandising issues in real time, such as stock keeping units that are void, out of stock or past expiration.
We leverage software for daily point-of-sale store data, supply chain data and advanced algorithms to target and correct potential store-level merchandising issues in real time, such as stock keeping units that are void, out of stock or past expiration.
We are able to leverage this intelligence to route our retail teams to stores where issues exist, or may soon exist, as well as prioritize our associates’ work to address the highest-value opportunities while conducting a store visit.
We use this information to improve the routing of our retail teams to stores where issues exist, or may soon exist, as well as prioritize our associates’ work to address the highest-value opportunities while conducting a store visit. We offer our clients a full spectrum of flexible service models for our retail services coverage.
Our rights to some of these trade names and trademarks may be limited to select markets. We also own domain names, including advantagesolutions.net. We rely on trade secrets, including unpatented know-how, and proprietary systems and information, to maintain and develop our technology-enabled services.
We rely on trade secrets, including unpatented know-how, and proprietary systems and information, to maintain and develop our technology-enabled services.
Manufacturers also hire us for national consumer promotions, which are designed to stimulate demand for, and awareness of, their products more broadly. Brand Experiential We design and execute brand experiences in retail and non-retail settings in order to help brands engage, educate, acquire and retain consumers and impact purchase behavior.
Manufacturers also hire us for national consumer promotions, which are designed to stimulate demand for, and awareness of, their products more broadly.
As a result, we also had to implement layoffs, furloughs and pay reductions for associates that were in, or support, these services in 2020. Intellectual Property We own or have the rights to use certain trade names and trademarks that are registered with the U.S.
Intellectual Property We own or have the rights to use certain trade names and trademarks that are registered with the U.S. Patent and Trademark Office or other foreign trademark registration offices or exist under common law in the United States and other jurisdictions.
Patent and Trademark Office or other foreign trademark registration offices or exist under common law in the United States and other jurisdictions. Trade names that are important in identifying and distinguishing our business include, but are not limited to, Advantage Solutions, Advantage Sales, Daymon, SAS, Club Demonstration Services, Advantage Marketing Partners and Waypoint.
Trade names that are important in identifying and distinguishing our business include, but are not limited to, Advantage Solutions, Advantage Sales, Daymon, SAS and, Club Demonstration Services. Our rights to some of these trade names and trademarks may be limited to select markets. We also own domain names, including advantagesolutions.net.
We also conduct advanced analytical services for clients such as retailer point-of-sale and shopper card analytics and primary market and shopper research. Administration Our associates utilize innovative technology and know-how to efficiently manage key back-office functions for clients such as receiving and processing purchase orders. Our team also manages trade promotion programs executed between manufacturers and retailers.
We also conduct advanced analytical services for clients such as retailer point-of-sale and shopper card analytics and primary market and shopper research. Brand-Centric Merchandising We deploy teams in retail locations to support manufacturers’ in-store sales strategies.
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Through our expanded “Order to Cash” service, we strive to deliver additional savings for clients by managing extra steps in the order process, including revenue reconciliation, cash application and collection management. Finally, we leverage this infrastructure to offer additional services that include call center support and vendor-managed inventory ( i.e ., building orders to ensure appropriate in-stock levels).
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In store, our associates use our merchandising application and scanners to efficiently and effectively execute a range of activities such as distribution tasks, validating promotional compliance or answering survey questions.
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Another application provides our associates with professional digital presentation materials enabling them to make quick and impactful recommendations to store managers for assortment changes, promotional events and display programs. We are also able to integrate point-of-sale data into these presentations to help store managers understand the potential store-level sales impact from such recommendations.
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Retailer-Centric Services Retail Experiential We design and execute one-to-one engagement strategies in order to drive product trial and sales and help retailers differentiate their in-store experience and generate more loyalty from shoppers. This includes in-store sampling and demo programs with fully-scaled operations including staffing, training, field management, assembly, fulfillment, technology and reporting.
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These services include: Digital Commerce We offer technology and e-commerce solutions to both manufacturers and retailers.
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Organizational Changes During the fourth quarter of 2023, certain organizational changes were announced that will impact our future internal reporting. As a result of these changes, we expect to have three reportable segments. We expect that any operational changes impacting our reportable segments will be effective in the first quarter of 2024.
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Our business intelligence solutions drive efficiencies for consumer goods manufacturers in two ways: first, certain of our technology solutions automate critical reporting processes and provide insights that allow manufacturers to make revenue-optimizing decisions ( e.g ., software applications that synthesize large amounts of commercial data into intuitive reports that allow managers to make more informed decisions with respect to sales and inventory levels); and second, when combined with our merchandising services delivered through our retail services teams, our digital and technology solutions optimize in-store operations and workflows. 4 Our e-commerce capabilities cover a comprehensive suite of services, including representation of consumer goods manufacturers to online retailers, trade marketing management, brand reputation management and content creation, management and syndication services.
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As of December 31, 2023, none of our associates in the United States were represented by a trade union or were the subject of a collective bargaining agreement. We are committed to creating a performance culture with a high degree of associate engagement.
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Our e-commerce services include facilitating the purchase of products directly by online retail partners, as well as, in some cases, purchasing and reselling clients’ products directly to the consumer, which affords us comprehensive coverage of manufacturers’ product portfolios.
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Our talent and leadership development programs are intended to foster our associates’ ambitions, help develop their careers and support their changing needs and the needs of the business. We believe that our associates’ contributions and active engagement with their fellow associates are important to our operational performance.
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Our trade marketing management services also support effective merchandising of our clients’ products in the online channel through optimizing pricing, promotion and placement of those products. In addition, through our brand reputation management services we help manage brands’ online reputation to increase community engagement and conversations that promote purchasing decisions.
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Furthermore, as our company, industry and clients evolve, we are focused at all levels on improving turnover, retention, development, and the overall associate experience. We experience meaningful turnover among our entry-level associates each year, and the turnover is most significant among those who work part-time. We experience less turnover among our mid-level and senior-level associates.
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Our content services help manufacturers and retailers create and syndicate product content that is designed to educate shoppers and increase online sales. These services include professional content production capabilities for product imaging and specifications and one of the world’s largest retailer content syndication networks. Our network allows us to distribute rich product content to over thousands e-commerce sites.
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Given the nature of these needs, our recruiting and retention practices are important to meeting the needs and expectations of our clients and customers. As such, we set clear objectives with our associates, analyze performance and reward and recognize associates who outperform.
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These assets, leveraged from our own production work or retailers’ and manufacturers’ brand development efforts ( e.g ., consumer-facing websites), help manufacturers and online retailers sell more by providing comprehensive and compelling product information for a more engaging shopper experience.
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At the same time, we remain committed to providing opportunities for our associates to grow and develop their careers with us and encourage internal promotions to leadership roles within our business units for high-performing or motivated associates.
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As of December 31, 2022, none of our associates in the United States were represented by a trade union. We experience meaningful turnover among our entry level associates each year, and the turnover is most significant among our part-time associates. Our recruiting and retention practices are important to meeting the needs and expectations of our clients and customers.
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No matter their career goals, we are committed to developing, rewarding and retaining high-quality associates as we transform our business in response to the ever-changing needs of our clients and industry. We strive to cultivate respect, trust and transparency, and we embrace a diversity of thought and of people.
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We experience less turnover among our mid-level and senior associates, and we believe our performance- based culture differentiates us from our competitors and other similar employers. Our culture is built on accountability for results. We set clear objectives with our associates, analyze performance and reward and recognize associates who outperform.
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We are committed to creating a workplace where everyone is respected, valued, feels a sense of belonging and has an equitable opportunity to succeed. We believe diversity, equity and inclusion are important components of our commitment to put people first and our long-term success as an enterprise.
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This results-driven culture permits us to offer our associates a pathway for professional growth through internal promotions. We strive to encourage our associates to be proactive, creative and entrepreneurial in providing solutions for our clients and customers.
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We believe that a diverse workforce that is reflective of our diverse customer base will position us to better understand customers’ wants and needs, which we believe drives our ability to deliver superior customer value and successfully innovate.
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We believe our encouragement has contributed to the service innovation that has fueled our growth, and that our commitment to results and continuous improvement has produced long-term relationships with our clients and customers. During the COVID-19 pandemic, our front-line associates performed incredible work for our clients, customers and communities.
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Diverse perspectives amongst our team allows them to evaluate issues through different experiences and perspectives and help guide us in a thoughtful way. Our diversity, equity and inclusion efforts include enterprise-wide training, a DE&I board, and eight distinct employee resource groups, and we encourage a culture of inclusivity.
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The health and welfare of our associates continues to be our primary concern, and we implemented a number of programs to assist our associates. Notwithstanding the dedication of our associates, a number of our services were adversely impacted by the COVID-19 pandemic.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

95 edited+13 added−35 removed235 unchanged
Biggest changeSummary of Principal Risks Associated with Our Business Set forth below is a summary of some of the principal risks we face: • market-driven wage changes or changes to labor laws or wage or job classification regulations, including minimum wage; • our ability to hire, timely train, and retain talented individuals for our workforce, and to maintain our corporate culture as we grow; • the effects of the COVID-19 pandemic and the measures taken to mitigate its spread including its adverse effects on our business, results of operations, financial condition and liquidity; • developments with respect to retailers that are out of our control; • our ability to continue to generate significant operating cash flow; • consolidation within the industry of our clients creating pressure on the nature and pricing of our services; • consumer goods manufacturers and retailers reviewing and changing their sales, retail, marketing, and technology programs and relationships; • our reliance on continued access to retailers’ platforms; • our ability to successfully develop and maintain relevant omni-channel services for our clients in an evolving industry and to otherwise adapt to significant technological change; • client procurement strategies putting additional operational and financial pressure on our services; • our ability to identify attractive acquisition targets, acquire them at attractive prices, and successfully integrate the acquired businesses; • difficulties in integrating acquired businesses; • our ability to avoid or manage business conflicts among competing brands; • limitations, restrictions, and business decisions involving our joint ventures and minority investments; • changes in applicable laws or regulations; • the possibility that we may be adversely affected by other political, economic, business, and/or competitive factors; • potential and actual harms to our business arising from the matter related to the 2018 acquisition of Take 5 Media Group (the “Take 5 Matter”); • failure to meet environmental, social and governance (“ESG”) expectations or standards or achieve our ESG goals could adversely affect our business, results of operations financial condition, or stock price; • our ability to respond to changes in digital practices and policies; • exposure to foreign currency exchange rate fluctuations and risks related to our international operations; • our substantial indebtedness and our ability to refinance at favorable rates; • our ability to maintain proper and effective internal control over financial reporting in the future; and • the ability to maintain applicable listing standards. 8 Risks Related to the Company’s Business and Industry Market-driven wage increases and changes to wage or job classification regulations, including minimum wages could adversely affect our business, financial condition or results of operations.
Biggest changeSummary of Principal Risks Associated with Our Business Set forth below is a summary of some of the principal risks we face: • market-driven wage changes or changes to labor laws or wage or job classification regulations, including minimum wage; • our ability to hire, timely train, and retain talented individuals for our workforce, and to maintain our corporate culture as we grow; • the effects of the COVID-19 pandemic or future pandemics and the measures taken to mitigate its spread including its adverse effects on our business, results of operations, financial condition and liquidity; • developments with respect to retailers that are out of our control; • our ability to continue to generate significant operating cash flow; • consolidation within the industry of our clients creating pressure on the nature and pricing of our services; • consumer goods manufacturers and retailers reviewing and changing their sales, retail, marketing, and technology programs and relationships; • our ability to successfully develop and maintain relevant omni-channel services for our clients in an evolving industry and to otherwise adapt to significant technological change; • client procurement strategies putting additional operational and financial pressure on our services; • our ability to avoid or manage business conflicts among competing brands; • limitations, restrictions, and business decisions involving our joint ventures and minority investments; • our ability to identify attractive acquisition targets, acquire them at attractive prices, and successfully integrate the acquired businesses; • difficulties in integrating acquired businesses; • complications with the design or implementation of our new enterprise resource planning system; • changes in applicable laws or regulations; • the possibility that we may be adversely affected by other political, economic, business, and/or competitive factors; 7 • potential and actual harms to our business arising from the matter related to the 2018 acquisition of Take 5 Media Group (the “Take 5 Matter”); • failure to meet environmental, social and governance (“ESG”) expectations or standards could adversely affect our business, results of operations, financial condition, or stock price; • our ability to respond to changes in digital practices and policies; • exposure to foreign currency exchange rate fluctuations and risks related to our international operations; • our substantial indebtedness and our ability to refinance at favorable rates; • our ability to maintain proper and effective internal control over financial reporting in the future; and • the ability to maintain applicable listing standards.
Additionally, in many countries outside of the United States, there has not been a historical practice of using third parties to provide sales and marketing services. Accordingly, while it is part of our strategy to expand into international markets, it may be difficult for us to grow our international business units on a timely basis, or at all.
Additionally, in many countries outside of the United States, there has not been a historical practice of using third parties to provide sales and marketing services. Accordingly, while it is part of our strategy to expand certain services into international markets, it may be difficult for us to grow our international business units on a timely basis, or at all.
Among other things, in the absence of a liquid public trading market: • you may not be able to liquidate your investment in shares of Class A common stock; • you may not be able to resell your shares of Class A common stock at or above the price attributed to them when we became a publicly traded company; • the market price of shares of Class A common stock may experience significant price volatility; and • there may be less efficiency in carrying out your purchase and sale orders.
Among other things, in the absence of a liquid public trading market: 23 • you may not be able to liquidate your investment in shares of Class A common stock; • you may not be able to resell your shares of Class A common stock at or above the price attributed to them when we became a publicly traded company; • the market price of shares of Class A common stock may experience significant price volatility; and • there may be less efficiency in carrying out your purchase and sale orders.
The replacement of any of our senior executives likely would involve significant time and costs and may significantly delay or prevent the achievement of our business 11 objectives and could therefore have an adverse impact on our business. In addition, we do not carry any “key person” insurance policies that could offset potential loss of service under applicable circumstances.
The replacement of any of our senior executives likely would involve significant time and costs and may significantly delay or prevent the achievement of our business objectives and could therefore have an adverse impact on our business. In addition, we do not carry any “key person” insurance policies that could offset potential loss of service under applicable circumstances.
We cannot assure you that we will be able to 26 maintain our current credit ratings, and any additional, actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under further review for a downgrade, may have a negative impact on our liquidity, capital position, ability to hedge certain financial risks, and access to capital markets.
We cannot assure you that we will be able to maintain our current credit ratings, and any additional, actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under further review for a downgrade, may have a negative impact on our liquidity, capital position, ability to hedge certain financial risks, and access to capital markets.
These include: • authorizing the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt; • provision for a classified board of directors so that not all members of our board of directors are elected at one time; • not permitting the use of cumulative voting for the election of directors; • permitting the removal of directors only for cause; 23 • limiting the ability of stockholders to call special meetings; • requiring all stockholder actions to be taken at a meeting of our stockholders; • requiring approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend, or repeal the proposed bylaws or repeal the provisions of the third amended and restated certificate of incorporation regarding the election and removal of directors; and • establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
These include: • authorizing the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt; • provision for a classified board of directors so that not all members of our board of directors are elected at one time; • not permitting the use of cumulative voting for the election of directors; • permitting the removal of directors only for cause; • limiting the ability of stockholders to call special meetings; • requiring all stockholder actions to be taken at a meeting of our stockholders; • requiring approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend, or repeal the proposed bylaws or repeal the provisions of the third amended and restated certificate of incorporation regarding the election and removal of directors; and 22 • establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
As another example, website owners and operators saw a wave of putative class actions filed against them in 2022 under the California Invasion of Privacy Act (“CIPA”) and similar federal and state surveillance and wiretapping laws, with claims centering on websites’ deployment of session monitoring, keylogging, chatbots, and other tracking and monitoring technologies.
As another example, website owners and operators saw a wave of putative class actions filed against them in 2022 under the California Invasion of Privacy Act and similar federal and state surveillance and wiretapping laws, with claims centering on websites’ deployment of session monitoring, keylogging, chatbots, and other tracking and monitoring technologies.
Nevertheless, these laws and procedures may not be adequate to prevent unauthorized parties from attempting to copy or otherwise obtain our processes and technology or deter our 20 competitors from developing similar business solutions and concepts, and adequate remedies may not be available in the event of an unauthorized use or disclosure of our trade secrets and other intellectual property.
Nevertheless, these laws and procedures may not be adequate to prevent unauthorized parties from attempting to copy or otherwise obtain our processes and technology or deter our competitors from developing similar business solutions and concepts, and adequate remedies may not be available in the event of an unauthorized use or disclosure of our trade secrets and other intellectual property.
The payment of cash dividends is also restricted under the terms of the agreements governing our debt and our ability to pay dividend may also be restricted by the terms of any future credit agreement or any securities we or our subsidiaries may issue. 24 An active, liquid trading market for our Class A common stock may not be available.
The payment of cash dividends is also restricted under the terms of the agreements governing our debt and our ability to pay dividend may also be restricted by the terms of any future credit agreement or any securities we or our subsidiaries may issue. An active, liquid trading market for our Class A common stock may not be available.
The sale of equity to finance any such acquisition could result in dilution to our stockholders. 12 We may encounter significant difficulties integrating acquired businesses. The integration of any businesses is a complex, costly and time-consuming process. As a result, we have devoted, and will continue to devote, significant management attention and resources to integrating acquired businesses.
The sale of equity to finance any such acquisition could result in dilution to our stockholders. We may encounter significant difficulties integrating acquired businesses. The integration of any businesses is a complex, costly and time-consuming process. As a result, we have devoted, and will continue to devote, significant management attention and resources to integrating acquired businesses.
Standard contractual clauses approved by the European Commission to permit transfers from the EU to third countries currently remain as a basis on which to transfer personal data from the EEA to other countries. 17 However, the standard contractual clauses are also subject to legal challenge, and in November 2020, the European Commission published a draft of updated standard contractual clauses.
Standard contractual clauses approved by the European Commission to permit transfers from the EU to third countries currently remain as a basis on which to transfer personal data from the EEA to other countries. However, the standard contractual clauses are also subject to legal challenge, and in November 2020, the European Commission published a draft of updated standard contractual clauses.
We cannot be certain that the industry trend to outsource will continue or not be reversed or that clients that have historically outsourced functions will not decide to perform these functions themselves. Unfavorable developments with respect to outsourcing could adversely affect on our business, financial conditions and results of operations.
We cannot be certain that the industry trend to outsource will continue or not be reversed or that clients that have historically outsourced functions will not decide to perform these functions themselves. Unfavorable developments with respect to outsourcing could adversely affect our business, financial conditions and results of operations.
If our data and network infrastructure were to fail, or if we were to suffer a data security breach, or an interruption or degradation of services in our data center, third-party cloud, and other infrastructure environments, we could lose important data, which could harm our business and reputation, and cause us to incur significant liabilities.
If our data and network infrastructure were to fail, 14 or if we were to suffer a data security breach, or an interruption or degradation of services in our data center, third-party cloud, and other infrastructure environments, we could lose important data, which could harm our business and reputation, and cause us to incur significant liabilities.
These requirements may not be harmonized, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices. As a result, our practices may not have complied or may not 16 comply in the future with all such laws, regulations, requirements and obligations.
These requirements may not be harmonized, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices. As a result, our practices may not have complied or may not comply in the future with all such laws, regulations, requirements and obligations.
These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
Laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
While we attempt to mitigate negative implications to client relationships and the revenue impact of any pricing pressure by aligning our revenues opportunity with satisfactory client outcomes, there can be no assurance as to the degree to which we will be able to do so successfully.
While we attempt to mitigate negative 10 implications to client relationships and the revenue impact of any pricing pressure by aligning our revenues opportunity with satisfactory client outcomes, there can be no assurance as to the degree to which we will be able to do so successfully.
The failure to maintain the key aspects of our culture as our organization evolves could result in decreased employee satisfaction, increased difficulty in attracting top talent, increased turnover and compromised the quality of our client service, all of which are important to our success and to the effective execution of our business strategy.
The failure to maintain 11 the key aspects of our culture as our organization evolves could result in decreased employee satisfaction, increased difficulty in attracting top talent, increased turnover and compromised the quality of our client service, all of which are important to our success and to the effective execution of our business strategy.
We may also experience hesitancy, reluctance, or refusal by European or multi-national customers to continue to use some of our services due to the potential risk exposure of personal data transfers and the current data protection obligations imposed on them by certain data protection authorities.
We may also experience hesitancy, 16 reluctance, or refusal by European or multi-national customers to continue to use some of our services due to the potential risk exposure of personal data transfers and the current data protection obligations imposed on them by certain data protection authorities.
Also, there has been a marked increase in the use of social media platforms and similar devices, including blogs, social media websites, Twitter and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons.
Also, there has been a marked increase in the use of social media platforms and similar devices, including blogs, social media websites, and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons.
However, as our company evolves, including through acquisitions and the impacts of the COVID-19 pandemic, such as working remotely and reductions in workforce, it may be difficult to maintain our culture, which could reduce our ability to innovate and operate effectively.
However, as our company evolves, including through acquisitions, divestitures and the impacts of the COVID-19 pandemic, such as working remotely and reductions in workforce, it may be difficult to maintain our culture, which could reduce our ability to innovate and operate effectively.
A significant reduction in spending on our services by our largest clients, or the loss of one or more of our largest clients, if not replaced by new clients or an 10 increase in business from existing clients, would adversely affect our business and results of operations.
A significant reduction in spending on our services by our largest clients, or the loss of one or more of our largest clients, if not replaced by new clients or an increase in business from existing clients, would adversely affect our business and results of operations.
Should the impact of climate change be severe or occur for lengthy periods of time, climate change could further 19 adversely impact business continuity for ourselves and our clients, which, in turn, could similarly adversely affect our financial condition or results of operations.
Should the impact of climate change be severe or occur for lengthy periods of time, climate change could further adversely impact business continuity for ourselves and our clients, which, in turn, could similarly adversely affect our financial condition or results of operations.
However, the steps we have taken to protect our intellectual property in the United States and in foreign countries may not be adequate, and third parties may misappropriate, dilute, infringe upon or otherwise harm the value of our intellectual property.
However, the steps we have taken to protect 19 our intellectual property in the United States and in foreign countries may not be adequate, and third parties may misappropriate, dilute, infringe upon or otherwise harm the value of our intellectual property.
We will assess each divestiture or other disposition from a tax perspective and such assessment will rely on certain facts, assumptions, representations and undertakings regarding the past and future conduct of our 13 businesses and other matters.
We will assess each divestiture or other disposition from a tax perspective and such assessment will rely on certain facts, assumptions, representations and undertakings regarding the past and future conduct of our businesses and other matters.
In addition, our costs of compliance may increase if existing laws and regulations are revised or reinterpreted or if new 27 laws and regulations become applicable to our operations. These costs could have an adverse impact on our business or results of operations.
In addition, our costs of compliance may increase if existing laws and regulations are revised or reinterpreted or if new laws and regulations become applicable to our operations. These costs could have an adverse impact on our business or results of operations.
For example, cases filed under Illinois’ Biometric Information Privacy Act (“BIPA”) have resulted in large settlement amounts and damages awards against other companies due to the presence of statutory damages under that law.
For example, cases filed under Illinois’ Biometric Information Privacy Act have resulted in large settlement amounts and damages awards against other companies due to the presence of statutory damages under that law.
Our international operations expose us to risks that could impede growth in the future, and our attempts to grow our business internationally may not be successful. We continue to explore opportunities in major international markets.
Our international operations and investments expose us to risks that could impede growth in the future, and our attempts to grow our business internationally may not be successful. We continue to explore opportunities in major international markets.
Any such issuance could result in ownership dilution to you as a stockholder and cause the trading price of our common stock to decline. 28 Item 1B. Unresolved Staff Comments. None
Any such issuance could result in ownership dilution to you as a stockholder and cause the trading price of our common stock to decline. Item 1B. Unresolved Staff Comments. None
The CCPA regulates the collection, use and processing of personal information relating to California residents, and which grants certain privacy rights to California residents, including rights to request access to and to request deletion of personal information relating to such individuals under certain circumstances.
The CCPA regulates the collection, use and processing of personal information relating to California residents, and which grants certain 15 privacy rights to California residents, including rights to request access to and to request deletion of personal information relating to such individuals under certain circumstances.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. Borrowings under our credit facilities are at variable rates of interest and expose us to interest rate risk.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. 25 Borrowings under our credit facilities are at variable rates of interest and expose us to interest rate risk.
Our certificate of incorporation and bylaws require, to the fullest extent permitted by law, that (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws, or (iv) any action asserting a claim against us governed by the internal affairs doctrine will have to be brought only in the Court of Chancery in the State of Delaware (or the federal district court for the District of Delaware or other state courts of the State of Delaware if the Court of Chancery in the State of Delaware does not have jurisdiction).
Our certificate of incorporation and bylaws require, to the fullest extent permitted by law, that (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws, or (iv) any action asserting a claim against us governed by the internal affairs doctrine will have to be brought only in the Court of Chancery in the State of Delaware (or the federal district court for the District of Delaware or other state courts of the State of Delaware if the Court of Chancery in the State of Delaware does not have jurisdiction).
The limitations and restrictions tied to our joint venture and minority investments limit our potential business opportunities and reduce the economic opportunity for certain prospective international investments and operations. Additionally, though we control our joint ventures, we may rely upon our equity partners or local management for operational and compliance matters associated with our joint ventures or minority investments.
The limitations and restrictions tied to our joint venture and minority investments limit our potential business opportunities and reduce the economic opportunity for certain prospective international investments and operations. Additionally, we may rely upon our equity partners or local management for operational and compliance matters associated with our joint ventures or minority investments.
For example, as part of our joint venture with, and investments in Smollan, we are restricted under certain circumstances from making direct acquisitions and otherwise expanding our service offerings into markets outside of North America and Europe.
For example, as part of our joint venture with, and investments in Smollan, we are restricted under certain circumstances from making direct acquisitions and otherwise expanding many of our service offerings into markets outside of North America.
In addition, although we have opted out of Section 203 of the Delaware General Corporation Law (“DGCL”), our certificate of incorporation contain similar provisions providing that we may not engage in certain “business combinations” with any “interested stockholder” for a three-year period following the time that the stockholder became an interested stockholder, subject to certain exceptions.
In addition, although we have opted out of Section 203 of the Delaware General Corporation Law, our certificate of incorporation contains similar provisions providing that we may not engage in certain “business combinations” with any “interested stockholder” for a three-year period following the time that the stockholder became an interested stockholder, subject to certain exceptions.
The COVID-19 pandemic and the measures taken to mitigate its spread have had, and may continue to have, an adverse effect on our business, results of operations, financial condition and liquidity. The COVID-19 pandemic, including the measures taken to mitigate its spread, have had, and may continue to have, adverse effects on our business and operations.
Future pandemics may have an adverse effect on our business, results of operations, financial condition and liquidity. The COVID-19 pandemic, including the measures taken to mitigate its spread, had, and may continue to have, adverse effects on our business and operations.
Risks Related to Indebtedness We need to continue to generate significant operating cash flow in order to fund acquisitions and to service our debt. Our business currently generates operating cash flow, which we use to fund acquisitions to grow our business and to service our substantial indebtedness.
Risks Related to Indebtedness We need to continue to generate significant operating cash flow in order to fund our internal investments and acquisitions and to service our debt. Our business currently generates operating cash flow, which we use to fund our internal investments and acquisitions to grow our business and to service our substantial indebtedness.
For example, during the year ended December 31, 2022, and in connection with our annual impairment assessment of goodwill and intangible assets, we recognized non-cash goodwill and non-cash intangible asset impairment charges of $1,367.5 million and $205.0 million, respectively, in our reporting units and indefinite-lived trade names.
Additionally, during the year ended December 31, 2022, and in connection with our annual impairment assessment of goodwill and indefinite-lived intangible assets, we recognized non-cash goodwill and non-cash intangible asset impairment charges of $1,367.5 million and $205.0 million, respectively, in our reporting units and indefinite-lived trade names.
Moreover, the proliferation of supply chain-based cyberattacks and vendor security incidents increases these potential risks and costs even in cases where the attack did not target us, occur on our systems, or result from any action or inaction by us.
Moreover, the proliferation of supply chain-based cyber-attacks and vendor security incidents increases these potential risks and costs even in cases where the attack did not target us, occur on our systems, or result from any action or inaction by us.
In each of November 2019 and March 2021, we filed a registration statement on Form S-1 under which certain of our shareholders may sell, from time to time, 50,000,000 shares and 255,465,000 shares of our Class A common stock, respectively, that, if sold, will be freely tradable without restriction under the Securities Act.
In each of November 2020 and March 2021, we filed a registration statement on Form S-1 under which certain of our stockholders may sell, from time to time, 50,000,000 shares and 255,465,000 shares of our Class A common stock, respectively, that, if sold, will be freely tradable without restriction under the Securities Act.
(“Topco”), we have goodwill and intangible assets recorded on our balance sheet of $0.9 billion and $1.9 billion, respectively, as of December 31, 2022, as further described in Note 3, Goodwill and Intangible Assets to our consolidated financial statements for the year ended December 31, 2022.
(“Topco”), we have goodwill and intangible assets recorded on our balance sheet of $0.9 billion and $1.6 billion, respectively, as of December 31, 2023, as further described in Note 3, Goodwill and Intangible Assets to our consolidated financial statements for the year ended December 31, 2023.
As of December 31, 2022, we employed approximately 75,000 associates, many of whom are paid above, but near, applicable minimum wages, and their wages may be affected by changes in minimum wage laws. Additionally, many of our salaried associates are paid at rates that could be impacted by changes to minimum pay levels for exempt roles.
As of December 31, 2023, we employed approximately 70,000 associates, many of whom are paid above, but near, applicable minimum wages, and their wages may be affected by changes in minimum wage laws. Additionally, many of our salaried associates are paid at rates that could be impacted by changes to minimum pay levels for exempt roles.
Under accounting guidelines, we must assess, at least annually, whether the value of goodwill and other intangible assets has been impaired.
Under accounting guidelines, we must assess, at least annually, whether the value of goodwill and other indefinite-lived intangible assets has been impaired.
In particular, beginning in March 2020, our marketing segment experienced a significant decline in revenues, primarily due to the temporary suspension or reduction of certain in-store demonstration services and decreased demand in our digital marketing services, both of which we believe were caused by the COVID-19 pandemic and the various governmental and private responses to the pandemic.
In particular, our marketing segment experienced a significant decline in revenues, primarily due to the temporary suspension or reduction of certain in-store demonstration services and decreased demand in our digital marketing 8 services, both of which we believe were caused by the COVID-19 pandemic and the various governmental and private responses to the pandemic.
On a pro forma basis, assuming no other prepayments of the credit facility and that our revolving credit facility is fully drawn (and to the extent that SOFR or LIBOR, respectively, is in excess of the 0.00% and 0.75% floors applicable to our revolving credit facility and our term loan credit facility, respectively), each one-eighth percentage point change in interest rates would result in an approximately $1.4 million change in annual interest expense on the indebtedness under our credit facilities.
On a pro forma basis, assuming no other prepayments of the credit facility and that our revolving credit facility is fully drawn (and to the extent that SOFR, is in excess of the 0.00% and 0.75% floors applicable to our revolving credit facility and our term loan credit facility, respectively), each one-eighth percentage point change in interest rates would result in an approximately $0.9 million change in annual interest expense on the indebtedness under our credit facilities.
We have incurred and will continue to incur additional substantial defense and investigation costs regardless of the outcome of any such litigation or governmental investigation.
We have incurred and will continue to incur additional costs regardless of the outcome of any such litigation or governmental investigation.
We may not be aware of whether our products or services do or will infringe existing or future patents or the intellectual property rights of others.
We may not be aware of whether our products or services do or will infringe existing or future intellectual property rights of others.
We have made acquisitions to complement and expand the services we offer and intend to continue to do so when attractive acquisition opportunities exist in the market. As a result of prior acquisitions, including the acquisition of our business in 2014 by our current parent entity, Karman Topco L.P.
We have made acquisitions to complement and expand the services we offer and intend to continue to do so when attractive acquisition opportunities exist in the market. As a result of prior acquisitions, including the acquisition of our business in 2014 by our current majority stockholder, Karman Topco L.P.
In addition, if we do not prevail in any litigation or governmental investigation related to these matters, we could be subject to costs related to such litigation or governmental investigation, including equitable relief, civil monetary damages, treble damages, repayment or criminal penalties, which may not be covered by insurance or may materially increase our insurance costs.
In addition, if we do not prevail in any such litigation related to these matters, we could be subject to costs related to such litigation, including equitable relief, civil monetary damages, treble damages, or repayment, which may not be covered by insurance or may materially increase our insurance costs.
Consumer goods manufacturers and retailers, including some of our clients, are subject to a broad range of federal, state, local and international laws and regulations governing, among other things, the research, development, manufacture, distribution, marketing and post-market reporting of consumer products. These include laws administered by the U.S. Food and Drug Administration (the “FDA”), the U.S.
Consumer goods manufacturers and retailers are subject to a broad range of federal, state, local and international laws and regulations governing, among other things, the research, development, manufacture, distribution, marketing and post-market reporting of consumer products. These include laws administered by the U.S. Food and Drug Administration (the “FDA”), the U.S. Drug Enforcement Administration, the U.S.
In addition, there can be no assurance that one or more of our competitors who have developed competing technologies or our other competitors will not be granted patents for their technology and allege that we have infringed on such patents.
In addition, there can be no assurance that one or more of our competitors who have developed competing technologies or our other competitors will not be granted intellectual property rights for their technology and allege that we have infringed on such rights.
Because of the voting power over our company held by Topco, the Advantage Sponsors, and the CP Sponsor and the voting arrangement between such parties, we are considered a controlled company for the purposes of the Nasdaq Stock Market LLC (“Nasdaq”) listing requirements.
Because of the voting power over our company held by Topco, the Advantage Sponsors, and the CP Sponsor and the voting arrangement between such parties, we are considered a controlled company for the purposes of the Nasdaq Global Select Market (“Nasdaq”) listing requirements.
Subject to covenant compliance and certain conditions, as of December 31, 2022, the agreements governing our indebtedness would have permitted us to borrow up to an additional $455.5 million under our revolving credit facility.
Subject to covenant compliance and certain conditions, as of December 31, 2023, the agreements governing our indebtedness would have permitted us to borrow up to an additional $455.9 million under our revolving credit facility.
Foreign Corrupt Practices Act and sanctions regimes; • being subject to foreign anti-bribery laws in the jurisdictions in which we operate, such as the UK Bribery Act; • reduced protection for intellectual property rights; • increased financial accounting and reporting complexity; 14 • additional legal compliance requirements, including custom and import requirements with respect to products imported to and exported across international borders; • exposure to foreign currency exchange rate fluctuations; • exposure to local economic conditions; • limitations on the repatriation of funds or profits from foreign operations; • exposure to local political conditions, including adverse tax policies, civil unrest and war; • the risks of a natural disaster, public health crisis (including the occurrence of a contagious disease or illness, such as the coronavirus), an outbreak of war, the escalation of hostilities and acts of terrorism in the jurisdictions in which we operate; and • the disparate impact of the COVID-19 pandemic, including the measures taken to mitigate its spread, across various jurisdictions.
Foreign Corrupt Practices Act and sanctions regimes; • being subject to foreign anti-bribery laws in the jurisdictions in which we operate, such as the UK Bribery Act; • reduced protection for intellectual property rights; • increased financial accounting and reporting complexity; • additional legal compliance requirements, including custom and import requirements with respect to products imported to and exported across international borders; • exposure to foreign currency exchange rate fluctuations; • exposure to local economic conditions; • limitations on the repatriation of funds or profits from foreign operations; • exposure to local political conditions, including adverse tax policies, civil unrest and war; and 12 • the risks of a natural disaster, public health crisis (including the occurrence of a contagious disease or illness, such as the coronavirus), an outbreak of war, the escalation of hostilities and acts of terrorism in the jurisdictions in which we operate.
We generate revenues and incur expenses throughout the world that are subject to exchange rate fluctuations, and our results of operations may suffer due to currency translations. Our U.S. operations earn revenues and incur expenses primarily in U.S. dollars, while our international operations earn revenues and incur expenses primarily in Canadian dollars, British pounds or euros.
We generate revenues and incur expenses throughout the world that are subject to exchange rate fluctuations, and our results of operations may suffer due to currency translations. Our U.S. operations earn revenues and incur expenses primarily in U.S. dollars, while our international operations earn revenues and incur expenses in the local currency, including Canadian dollars, Mexican pesos or euros.
In November 2021, our board of directors authorized a share repurchase program, under which we may repurchase up to $100 million of our outstanding Class A common stock (the “2021 Share Repurchase Program”). As of December 31, 2022, the remaining amount available for repurchase pursuant to the 2021 Share Repurchase Program is $87.4 million.
In November 2021, our board of directors authorized a share repurchase program, under which we may repurchase up to $100 million of our outstanding Class A common stock (the “2021 Share Repurchase Program”). As of December 31, 2023, the remaining amount available for repurchase pursuant to the 2021 Share Repurchase Program is $81.1 million.
See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Take 5 Matter ” and “ Legal Proceedings .” As a result of these matters, we may be subject to a number of additional harms, risks and uncertainties, including substantial costs for accounting and legal fees in connection with or related to the restatement, potential lawsuits by clients or other interested parties who claim to have been harmed by the misconduct at Take 5, other costs and fees related to the Take 5 Matter (in excess of the amounts already being offered as refunds), potential governmental investigations arising from the Take 5 Matter, a reduction in our current and anticipated revenue and a potential deterioration in our associate and client relationships or our reputation.
See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Take 5 Matter ” and “ Legal Proceedings .” As a result of these matters, we may be subject to a number of additional harms, risks and uncertainties, including substantial costs for legal fees in connection with or related to the potential lawsuits by clients or other interested parties who claim to have been harmed by the misconduct at Take 5, other costs and fees related to the Take 5 Matter (in excess of the amounts already being offered as refunds), potential governmental investigations arising from the Take 5 Matter.
On January 27, 2023, the California Attorney General announced another CCPA enforcement sweep targeted at businesses with mobile apps, including popular apps in the retail, travel, and food service industries. Four other states –Virginia, Colorado, Connecticut, and Utah – have passed their own comprehensive privacy laws to go into effect throughout 2023.
On January 27, 2023, the California Attorney General announced another CCPA enforcement sweep targeted at businesses with mobile apps, including popular apps in the retail, travel, and foodservice industries. Four other states –Virginia, Colorado, Connecticut, and Utah – passed their own comprehensive privacy laws that went into effect throughout 2023.
As of December 31, 2022, we had total indebtedness of $2.1 billion, excluding debt issuance costs, with an additional $44.5 million of letters of credit outstanding under our revolving credit facility.
As of December 31, 2023, we had total indebtedness of $1.9 billion, excluding debt issuance costs, with an additional $44.1 million of letters of credit outstanding under our revolving credit facility.
If, because of loss of revenue, pressure on pricing from customers, increases in our costs (including increases in costs related to servicing our indebtedness or labor costs), general economic, financial, competitive, legislative, regulatory conditions or other factors, including any acceleration of the foregoing as a result of the COVID-19 pandemic, many of which are outside of our control our business generates less operating cash flow, we may not have sufficient funds to grow our business or to service our indebtedness.
If, because of loss of revenue, pressure on pricing from customers, increases in our costs (including increases in costs related to servicing our indebtedness or labor costs), general economic, financial, competitive, legislative, regulatory conditions or other factors, many of which are outside of our control our business generates less operating cash flow, we may not have sufficient funds to grow our business or to service our indebtedness.
While there was no single determinative event or factor, the consideration of the weight of evidence of several factors included: (a) sustained decline in our share price; (b) challenges in the labor market and continued inflationary pressures; and (c) an increase to the discount rate as a result of the recent increases in the interest rates which adversely affected the results of the quantitative impairment tests. 15 We can make no assurances that we will not record any additional impairment charges in the future.
While there was no single determinative event or factor, the consideration of the weight of evidence of several factors included: (a) sustained decline in our share price; (b) challenges in the labor market and continued inflationary pressures; and (c) an increase to the discount rate as a result of the recent increases in the interest rates which adversely affected the results of the quantitative impairment tests.
Even with analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our Class A common stock could decline.
If few analysts commence coverage of us, the trading price of our stock could be negatively affected. Even with analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our Class A common stock could decline.
Because of currency exchange rate fluctuations, including possible devaluations, we are subject to currency translation exposure on the results of our operations, in addition to economic exposure.
Because of currency exchange rate fluctuations, including possible devaluations, we are subject to currency translation exposure on the results of our operations, in addition to economic exposure. These risks could adversely impact our business or results of operations.
To date, the COVID-19 pandemic and measures taken to mitigate the spread of COVID-19, including restrictions on large gatherings, closures of face-to-face events and indoor dining facilities, “shelter in place” health orders and travel restrictions, have had far-reaching direct and indirect impacts on many aspects of our operations, including temporary termination of certain in-store demonstration services and other services, as well as on consumer behavior and purchasing patterns, in particular with respect to the foodservice industries, and declines in consumer demand for restaurant, school and hotel dining, where we promote our clients’ products.
For example, the COVID-19 pandemic and measures taken to mitigate the spread of COVID-19, including restrictions on large gatherings, closures of face-to-face events and indoor dining facilities, “shelter in place” health orders and travel restrictions, had far-reaching direct and indirect impacts on many aspects of our operations, including temporary termination of certain in-store demonstration services and other services, as well as on consumer behavior and purchasing patterns.
If this continues to occur and these clients are unable to improve distribution for their products at other retailers, our business or results of operations could be adversely affected. These trends may be accelerated as a result of the COVID-19 pandemic.
If this continues to occur and these clients are unable to improve distribution for their products at other retailers, our business or results of operations could be adversely affected.
However, we are not obligated to make any further purchases under the 2021 Share Repurchase Program and we may suspend or permanently discontinue this program at any time or significantly reduce the amount of repurchases under the program.
However, we are not obligated to make any further purchases under the 2021 Share Repurchase Program and we may suspend or permanently discontinue this program at any time or significantly reduce the amount of repurchases under the program. Any announcement of a suspension, discontinuance or reduction of this program may negatively impact our reputation and investor confidence.
The resolution of any such disputes could adversely affect for our business, financial condition or results of operations. Divestitures or other dispositions could have significant accounting and tax implications that could negatively impact our business, financial condition or results of operations.
Divestitures or other dispositions could have significant accounting and tax implications that could negatively impact our business, financial condition or results of operations.
In recent years, there has been an increased focus from stakeholders, regulators and the public in general on ESG matters, including greenhouse gas emissions and climate-related risks, renewable energy, water stewardship, waste management, diversity, equality and inclusion, responsible sourcing and supply chain, human rights, and social responsibility, including changes in laws and regulations related to compliance and disclosure obligations related thereto.
Failure to meet environmental, social and governance (“ESG”) expectations or standards could adversely affect our business, results of operations, financial condition, or stock price. 18 In recent years, there has been an increased focus from stakeholders, regulators and the public in general on ESG matters, including greenhouse gas emissions and climate-related risks, renewable energy, water stewardship, waste management, diversity, equality and inclusion, responsible sourcing and supply chain, human rights, and social responsibility, including changes in laws and regulations related to compliance and disclosure obligations related thereto.
We may be subject to unionization, work stoppages, slowdowns or increased labor costs. Currently, none of our associates in the United States are represented by a union. However, our associates have the right under the National Labor Relations Act to choose union representation.
Currently, none of our associates in the United States are represented by a union. However, our associates have the right under the National Labor Relations Act to choose union representation.
Our three largest clients generated approximately 13% of our revenues in the fiscal year ended December 31, 2022. These clients are generally able to reduce or cancel spending on our services on short notice for any reason.
Our five largest clients generated approximately 18.8% of our revenues, none of which individually generated more than 5%, in the fiscal year ended December 31, 2023. These clients are generally able to reduce or cancel spending on our services on short notice 9 for any reason.
The trading market for our Class A common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. If few analysts commence coverage of us, the trading price of our stock could be negatively affected.
If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our common stock, the price of our Class A common stock could decline. 26 The trading market for our Class A common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business.
As of February 28, 2023, the equity holders of Topco that participated in the PIPE Investment (as defined below) (collectively, the “Advantage Sponsors”, Topco and Conyers Park II Sponsor LLC, an affiliate of Centerview Capital Management, LLC and Conyers Park’s sponsor prior to the Merger (the “CP Sponsor”) collectively own 254,310,000 shares, or 78.94% (including 64.80% held by Topco), of our outstanding common stock.
As of February 29, 2024, the equity holders of Topco that participated in the PIPE Investment (as defined below) (collectively, the “Advantage Sponsors”, Topco and Conyers Park II Sponsor LLC, an affiliate of Centerview Capital Management, LLC and Conyers Park’s sponsor (the “CP Sponsor”) collectively own 232,361,313 shares, or 72.5% (including 58.3% held by Topco), of our outstanding common stock.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the valuation of our deferred tax assets and liabilities; 22 • expected timing and amount of the release of any tax valuation allowance; • tax effects of equity-based compensation; • changes in tax laws, regulations or interpretations thereof; or • future earnings being lower than anticipated in jurisdictions where we have lower statutory tax rates and higher than anticipated earnings in jurisdictions where we have higher statutory tax rates.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the valuation of our deferred tax assets and liabilities; • expected timing and amount of the release of any tax valuation allowance; • tax effects of equity-based compensation; • changes in tax laws, regulations or interpretations thereof; or • future earnings being lower than anticipated in jurisdictions where we have lower statutory tax rates and higher than anticipated earnings in jurisdictions where we have higher statutory tax rates. 21 In addition, our effective tax rate in a given financial statement period may be materially impacted by a variety of factors including but not limited to changes in the mix and level of earnings, varying tax rates in the different jurisdictions in which we operate, fluctuations in the valuation allowance, deductibility of certain items or changes to existing accounting rules or regulations.
However, the pandemic has had, and may continue to have, an adverse effect on our results of operations, including our revenues, our financial condition and liquidity. 9 We cannot predict the full extent to which the COVID-19 pandemic may affect our business, financial condition, results of operations and liquidity, and the degree to which it may impact other risk factors described in this Annual Report.
We cannot predict the full extent to which a resurgence of the COVID-19 pandemic, or any future pandemic or health epidemic, may have similar or other adverse effects on our business, financial condition, results of operations and liquidity, and the degree to which it may impact other risk factors described in this Annual Report.
Our business is highly dependent on our ability to manage operations and process a large number of transactions on a daily basis. We rely heavily on our operating, payroll, financial, accounting and other data processing systems which require substantial support and maintenance, and may be subject to disabilities, errors, or other harms.
We rely heavily on our operating, payroll, financial, accounting and other data processing systems which require substantial support and maintenance, and may be subject to disabilities, errors, or other harms.
If we are not able to successfully integrate an acquisition, if we incur significantly greater costs to achieve the expected synergies than we anticipate or if activities related to the expected synergies have unintended consequences, our business, financial condition or results of operations could be adversely affected.
Many of these factors are outside of our control, and any one of them could result in increased costs, decreased expected revenues and diversion of management time and energy, all of which could adversely impact our business and results of operations. 13 If we are not able to successfully integrate an acquisition, if we incur significantly greater costs to achieve the expected synergies than we anticipate or if activities related to the expected synergies have unintended consequences, our business, financial condition or results of operations could be adversely affected.
Depending on the nature of the information compromised, we may also have obligations to notify users, law enforcement, regulators, business partners or payment 18 companies about the incident and provide some form of remedy, such as refunds or identity theft monitoring services, for the individuals affected by the incident.
Depending on the nature of the information compromised, we may also have obligations to notify users, law enforcement, regulators, business partners or payment companies about the incident and provide some form of remedy, such as refunds or identity theft monitoring services, for the individuals affected by the incident. 17 The Take 5 Matter may lead to additional harms, risks and uncertainties for us, including litigation and governmental investigations, a reduction in revenue, a potential deterioration in our relationships or reputation and a loss in investor confidence.
Drug Enforcement Administration, the U.S. Federal Trade Commission, the U.S. Department of Agriculture and other federal, state, local and international regulatory authorities. For example, certain of our clients market and sell products containing cannabidiol (“CBD”).
Federal Trade Commission, the U.S. Department of Agriculture and other federal, state, local 20 and international regulatory authorities. For example, certain of our clients market and sell products containing cannabidiol (“CBD”). CBD products are subject to a number of federal, state, local and international laws and regulations restricting their use in certain categories of products and in certain jurisdictions.
In addition, any claims brought against us by our licensors could be costly, time-consuming and divert the attention of our management and key personnel from our business operations. 21 Consumer goods manufacturers and retailers, including some of our clients, are subject to extensive governmental regulation and we and they may be subject to enforcement in the event of noncompliance with applicable requirements.
Consumer goods manufacturers and retailers, including some of our clients, are subject to extensive governmental regulation and we and they may be subject to enforcement in the event of noncompliance with applicable requirements.
In addition, divestitures or other dispositions could decrease our Adjusted EBITDA or have other adverse financial, tax and accounting impacts and distract management, and disputes can arise with buyers. Such transactions may result in disputes with buyers that could be difficult or costly to resolve.
In addition, divestitures or other dispositions could decrease our Adjusted EBITDA or have other adverse financial, tax and accounting impacts and distract management, and disputes can arise with buyers. The resolution of any such disputes could adversely affect for our business, financial condition or results of operations.
We will be required to continue to adapt to changing technologies, either by developing and marketing new services or by enhancing our existing services, to meet client demand. Moreover, the introduction of new services embodying new technologies, including automation of certain of our in-store services, and the emergence of new industry standards could render existing services obsolete.
Moreover, the introduction of new services embodying new technologies, including automation of certain of our in-store services, and the emergence of new industry standards could render existing services obsolete.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease all of our properties, except for a property in Connecticut that we own. Leases on these offices expire at various dates from 2023 to 2036, excluding any options for renewal. We typically seek office space in proximity to retailers’ headquarters or buying offices, to aid our associates in acting as sales representatives for our manufacturer clients.
Biggest changeAs of December 31, 2023, we operated more than 70 offices, including in the United States and internationally. We lease all of our properties, except for a property in Connecticut that we own. Leases on these offices expire at various dates from 2024 to 2034, excluding any options for renewal.
Item 2. Properties Our corporate headquarters are located in Irvine, California, where we rent approximately 22,000 square feet pursuant to a lease agreement that is scheduled to expire in May 2026. As of December 31, 2022, we operated more than 100 offices, including in the United States and internationally.
Item 2. Properties Our corporate headquarters are located in Irvine, California, where we rent approximately 22,000 square feet pursuant to a lease agreement that is scheduled to expire in May 2026. We anticipate that we will complete the relocation of our corporate headquarters to Clayton, Missouri, in the St. Louis-metropolitan area in 2024.
Added
We typically seek office space in proximity to retailers’ headquarters or buying offices, to aid our associates in acting as sales representatives for our manufacturer clients.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe have filed our response to the Take 5 Sellers’ claims and asserted indemnification, fraud and other claims against the Take 5 Sellers as counterclaims and cross-claims in the arbitration proceedings. In October 2022, the arbitrator made a final award in our favor. We are actively pursuing the collection of this award in state court in Florida.
Biggest changeWe and the Take 5 Sellers engaged in arbitration proceedings. In October 2022, the arbitrator made a final award in our favor. We are actively pursuing the collection of this award in state court in Florida. We are currently unable to estimate if or when we will be able to collect any amounts associated with this arbitration.
Other Legal Matters Related to Take 5 The Take 5 Matter may result in additional litigation against us, including lawsuits from clients, or governmental investigations, which may expose us to potential liability in excess of the amounts being offered by us as refunds to Take 5 clients.
The Take 5 Matter may result in additional litigation against us, including lawsuits from clients, or governmental investigations, which may expose us to potential liability in excess of the amounts being offered by us as refunds to Take 5 clients.
USAO and FBI Voluntary Disclosure and Investigation Related to Take 5 In connection with the Take 5 Matter, we voluntarily disclosed to the United States Attorney’s Office and the Federal Bureau of Investigation certain misconduct occurring at Take 5. We intend to cooperate in this and any other governmental investigation that may arise in connection with the Take 5 Matter.
In connection with the Take 5 Matter, we voluntarily disclosed to the United States Attorney’s Office and the Federal Bureau of Investigation certain misconduct occurring at Take 5. We intend to cooperate in this and any other governmental investigation that may arise in connection with the Take 5 Matter.
Arbitration Proceedings Related to Take 5 In August 2019, as a result of the Take 5 Matter, we provided a written indemnification claim notice to the sellers of Take 5, or the Take 5 Sellers, seeking monetary damages (including interest, fees and costs) based on allegations of breach of the asset purchase agreement, or Take 5 APA, as well as fraud.
In August 2019, as a result of the Take 5 Matter, we provided a written indemnification claim notice to the sellers of Take 5, or the Take 5 Sellers, seeking monetary damages (including interest, fees and costs) based on allegations of breach of the asset purchase agreement (the “Take 5 APA”), as well as fraud.
Employment-Related Matters We have also been involved in various litigation, including purported class or representative actions with respect to matters arising under the U.S. Fair Labor Standards Act, California Labor Code and Private Attorneys General Act (“PAGA”).
We have retained outside counsel to represent us in these matters and we are vigorously defending our interests. Employment-Related Matters We have also been involved in various litigation, including purported class or representative actions with respect to matters arising under the U.S. Fair Labor Standards Act, California Labor Code and Private Attorneys General Act (“PAGA”).
There can be no assurance, however, that the above matters and other legal matters will not result in us having to make payments in excess of such accruals or that the above matters or other legal matters will not materially or adversely affect our business, financial position, results of operations, or cash flows.
There can be no assurance, however, that the above matters and other legal matters will not result in us having to make payments in excess of such accruals or that the above matters or other legal matters will not materially or adversely affect our business, financial position, results of operations, or cash flows. 28 Commercial Matters We have been involved in various litigation matters and arbitrations with respect to commercial matters arising with clients, vendors and third-party sellers of businesses.
Removed
Commercial Matters We have been involved in various litigation matters and arbitrations with respect to commercial matters arising with clients, vendors and third-party sellers of businesses. We have retained outside counsel to represent us in these matters and we are vigorously defending our interests.
Removed
A former employee filed a complaint in California Superior Court, Santa Clara County in July 2017, which seeks civil damages and penalties on behalf of the plaintiff and similarly situated persons for various alleged wage and hour violations under the Labor Code, including failure to pay wages and/or overtime, failure to provide meal and rest breaks, failure to pay reporting time pay, waiting time penalties and penalties pursuant to PAGA.
Removed
We filed a motion for summary judgment. The court granted our motion for summary judgment in March 2020. The plaintiff filed an appeal of the court’s ruling, and in December 2022, the Court of Appeals reversed the court’s grant of summary judgment and directed the matter back to the superior court for further proceedings.
Removed
We have retained outside counsel to represent us and intend to vigorously defend our interests in this matter.
Removed
In September 2019, the Take 5 Sellers initiated arbitration proceedings in the state of Delaware against us, alleging breach of the Take 5 APA as a result of our decision to terminate the operations of the Take 5 business 29 and seeking monetary damages equal to all unpaid earn-out payments under the Take 5 APA (plus interest fees and costs).
Removed
In 2020, the Take 5 Sellers amended their statement of claim to allege defamation, relating to statements we made to customers in connection with terminating the operations of the Take 5 business, and seeking monetary damages for the alleged injury to their reputation.
Removed
The Take 5 Sellers have attempted to have the award vacated in the district court in Washington, D.C., and in the state court in Florida. We have asked the Washington, D.C. court to dismiss the petition or, in the alternative, abstain until the Florida case is resolved.
Removed
We are currently unable to estimate if or when we will be able to collect any amounts associated with this arbitration.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePrior to the consummation of the Transactions (as herein defined), our Class A common stock and our Warrants were listed on the Nasdaq Capital Market under the symbols “CPAA” and “CPAAW,” respectively. As of December 31, 2022, there were 28 holders of record of our Class A common stock and 2 holders of record of our Warrants.
Biggest changeAs of December 31, 2023, there were 30 holders of record of our Class A common stock and 2 holders of record of our Warrants. Dividend Policy We have not paid any cash dividends on our Class A common stock to date.
Any decision to declare and pay dividends in the future will be made at the discretion of the Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem relevant.
Any decision to declare and pay dividends in the future will be made at the discretion of the Board of Directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem relevant.
In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our 30 subsidiaries incur. We do not anticipate declaring any cash dividends to holders of the Class A common stock in the foreseeable future.
In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding 29 indebtedness we or our subsidiaries incur. We do not anticipate declaring any cash dividends to holders of the Class A common stock in the foreseeable future.
Dividend Policy We have not paid any cash dividends on our Class A common stock to date. We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay cash dividends for the foreseeable future.
We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay cash dividends for the foreseeable future.
The timing and amount of any share repurchase is subject to prevailing market conditions, relevant securities laws and other considerations, and we are under no obligation to repurchase any specific number of shares. During the year ended December 31, 2022, we did not utilize the 2021 Share Repurchase Program.
The timing and amount of any share repurchase is subject to prevailing market conditions, relevant securities laws and other considerations, and we are under no obligation to repurchase any specific number of shares. 30 During the year ended December 31, 2023, we executed open market purchases of $6.4 million of our Class A common stock under the 2021 Share Repurchase Program.
There remains $87.4 million of share repurchase availability under the 2021 Share Repurchase Program as of December 31, 2022. Recent Sales of Unregistered Equity Securities None.
As of December 31, 2023, there remained $81.1 million of share repurchase availability under the 2021 Share Repurchase Program as of December 31, 2023.
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The following tables sets forth repurchases of our Class A common stock during the year ended December 31, 2023: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced program Approximate dollar value of shares that may yet to be purchased under the program (in thousands) November 21, 2023 to November 30, 2023 (1) 378,382 $ 2.71 1,988,396 $ 86,407 December 1, 2023 to December 31, 2023 (1) 1,611,679 $ 3.32 3,600,075 $ 81,051 Total 1,990,061 (1) Open market and privately negotiated purchases In December 2023, the Company entered into a trading plan under Rule 10b5-1 of the Exchange Act authorizing the repurchase of shares of our Class A common stock.
Added
From January 2, 2024 to February 29, 2024, we purchased 3.0 million shares of our Class A common stock. No stock repurchases were made pursuant to this plan for the year ended December 31, 2023. Recent Sales of Unregistered Equity Securities None. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations for the Years Ended December 31, 2022 and 2021 Year Ended December 31, (amounts in thousands) 2022 2021 Revenues $ 4,049,742 100.0 % $ 3,602,298 100.0 % Cost of revenues 3,493,183 86.3 % 2,964,123 82.3 % Selling, general, and administrative expenses 190,367 4.7 % 168,086 4.7 % Impairment of goodwill and indefinite-lived assets 1,572,523 38.8 % — 0.0 % Depreciation and amortization 233,075 5.8 % 240,041 6.7 % Total expenses 5,489,148 135.5 % 3,372,250 93.6 % Operating (loss) income (1,439,406 ) (35.5 )% 230,048 6.4 % Other (income) expenses: Change in fair value of warrant liability (21,236 ) (0.5 )% 955 0.0 % Interest expense, net 104,459 2.6 % 137,927 3.8 % Total other expenses 83,223 2.1 % 138,882 3.9 % (Loss) income before income taxes (1,522,629 ) (37.6 )% 91,166 2.5 % (Benefit from) provision for income taxes (145,337 ) (3.6 )% 33,617 0.9 % Net (loss) income $ (1,377,292 ) (34.0 )% $ 57,549 1.6 % Other Financial Data Adjusted Net Income (1) $ 206,599 5.1 % $ 223,793 6.2 % Adjusted EBITDA (1) $ 435,995 10.8 % $ 521,178 14.5 % (1) Adjusted Net Income and Adjusted EBITDA are financial measures that are not calculated in accordance with GAAP.
Biggest changeResults of Operations for the Years Ended December 31, 2023 and 2022 Year Ended December 31, (amounts in thousands) 2023 2022 Revenues $ 4,224,846 100.0 % $ 4,049,742 100.0 % Cost of revenues 3,660,464 86.6 % 3,493,183 86.3 % Selling, general, and administrative expenses 265,091 6.3 % 187,504 4.6 % Impairment of goodwill and indefinite-lived assets 43,500 1.0 % 1,572,523 38.8 % Depreciation and amortization 224,697 5.3 % 233,075 5.8 % Gain on deconsolidation of subsidiaries (58,891 ) (1.4 )% — 0.0 % Loss on divestitures 19,068 0.5 % 2,863 0.1 % Income from unconsolidated investments (5,273 ) (0.1 )% — 0.0 % Total expenses 4,148,656 98.2 % 5,489,148 135.5 % Operating income (loss) 76,190 1.8 % (1,439,406 ) (35.5 )% Other (income) expenses: Change in fair value of warrant liability (286 ) 0.0 % (21,236 ) (0.5 )% Interest expense, net 165,802 3.9 % 104,459 2.6 % Total other expenses 165,516 3.9 % 83,223 2.1 % Loss before income taxes (89,326 ) (2.1 )% (1,522,629 ) (37.6 )% Benefit from income taxes (29,008 ) (0.7 )% (145,337 ) (3.6 )% Net loss $ (60,318 ) (1.4 )% $ (1,377,292 ) (34.0 )% Other Financial Data Adjusted Net Income (1) $ 123,834 2.9 % $ 206,599 5.1 % Adjusted EBITDA (1) $ 424,347 10.0 % $ 435,995 10.8 % (1) Adjusted Net Income and Adjusted EBITDA are financial measures that are not calculated in accordance with GAAP.
For a reconciliation of Adjusted EBITDA to net (loss) income and Adjusted EBITDA by segment to operating (loss) income, see “ —Non-GAAP Financial Measures. ” Take 5 Matter On April 1, 2018, we acquired certain assets and assumed certain liabilities of Take 5 Media Group.
For a reconciliation of Adjusted EBITDA to net loss and Adjusted EBITDA by segment to operating income (loss), see “ —Non-GAAP Financial Measures. ” Take 5 Matter On April 1, 2018, we acquired certain assets and assumed certain liabilities of Take 5 Media Group.
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.
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.
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.
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.
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.
The Term Loan Facility contains certain customary negative covenants, including, but not limited to, restrictions on the Borrower’s ability and that of our restricted subsidiaries to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, pay dividends or make other restricted payments, sell or otherwise transfer assets or enter into transactions with affiliates.
The Term Loan Facility contains certain customary negative covenants, including, but not limited to, restrictions on the Borrower’s ability and that of our restricted subsidiaries to merge and consolidate with other companies, incur indebtedness, grant 45 liens or security interests on assets, pay dividends or make other restricted payments, sell or otherwise transfer assets or enter into transactions with affiliates.
See “ —Liquidity and Capital Resources. ” Our principal sources of liquidity are cash flows from operations, borrowings under the Revolving Credit Facility (as defined below), 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.
See “ —Liquidity and Capital Resources. ” 35 Our principal sources of liquidity are cash flows from operations, borrowings under the Revolving Credit Facility (as defined below), 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.
The Borrower’s ability to draw under the Revolving Credit Facility or issue letters of credit thereunder will be conditioned upon, among other things, the Borrower’s delivery of prior written notice of a borrowing or issuance, as applicable, the Borrower’s ability to reaffirm the representations and warranties 44 contained in the credit agreement governing the Revolving Credit Facility and the absence of any default or event of default thereunder.
The Borrower’s ability to draw under the Revolving Credit Facility or issue letters of credit thereunder will be conditioned upon, among other things, the Borrower’s delivery of prior written notice of a borrowing or issuance, as applicable, the Borrower’s ability to reaffirm the representations and warranties contained in the credit agreement governing the Revolving Credit Facility and the absence of any default or event of default thereunder.
See “ —Liquidity and Capital Resources. ” 35 Depreciation and Amortization Amortization Expense 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.
See “ —Liquidity and Capital Resources. ” Depreciation and Amortization Amortization Expense 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.
The income approach utilizes estimates of discounted cash flows of the reporting units, which requires assumptions for, the reporting units’ revenue growth rates, earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins, terminal growth rates, discount rates, and incremental net working capital, all of which require significant management judgment.
The income approach utilizes estimates of discounted cash flows of the reporting units, which requires assumptions for, the reporting units’ revenue growth rates, earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins, terminal growth rate, discount rate, and incremental net working capital, all of which require significant management judgment.
Loans under the Revolving Credit Facility may be denominated in either U.S. dollars or Canadian dollars. Bank of America, N.A. (“Bank of America”), will act as administrative agent and ABL Collateral Agent. The Revolving Credit Facility matures five years after the date we enter into the Revolving Credit Facility.
Loans under the Revolving Credit Facility may be denominated in either U.S. dollars or Canadian dollars. Bank of America, N.A. (“Bank of America”), will act as administrative agent and collateral agent. The Revolving Credit Facility matures five years after the date we enter into the Revolving Credit Facility.
Additionally, if actual results are not consistent with the estimates and 50 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.
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.
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 services, category and space management, headquarter relationship management, technology solutions and administrative services.
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 services, category and space management, headquarter relationship management and technology solutions.
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.
We analyze our financial performance, in part, by measuring revenue growth in two ways—revenue growth attributable to organic activities and revenue growth and declines 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.
The portion of the cash payment up to the acquisition date fair value of the contingent consideration liability are classified as financing outflows, and amounts paid in excess of the acquisition date fair value of that liability are classified as operating outflows.
The portion of the cash payment up to the acquisition date fair 43 value of the contingent consideration liability are classified as financing outflows, and amounts paid in excess of the acquisition date fair value of that liability are classified as operating outflows.
Recently Issued Accounting Pronouncements Refer to Note 1, Organization and Significant Accounting Policies – Recent Accounting Pronouncements , to our audited consolidated financial statements included elsewhere in this Annual Report. 53
Recently Issued Accounting Pronouncements Refer to Note 1, Organization and Significant Accounting Policies – Recent Accounting Pronouncements , to our audited consolidated financial statements included elsewhere in this Annual Report.
Timing of our clients’ marketing expenses, associated with marketing campaigns and new product launches, can also result in fluctuations from one quarter to another.
The timing of our clients’ marketing expenses, associated with marketing campaigns and new product launches, can also result in fluctuations from one quarter to another.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 1, 2022.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 1, 2023.
On October 28, 2021 (the “First Lien Amendment Effective Date”), the Borrower, Holdings, and certain of the Borrower’s subsidiaries, entered into Amendment No. 1 to the First Lien Credit Agreement (the “First Lien Amendment”), which amended the First Lien Credit Agreement, dated October 28, 2020, by and among the Borrower, Holdings, Bank of America, as administrative agent and collateral agent, each lender party from time to time thereto, and the other parties thereto.
On October 28, 2021, the Borrower, Holdings, and certain of the Borrower’s subsidiaries, entered into Amendment No. 1 to the First Lien Credit Agreement (the “First Lien Amendment”), which amended the First Lien Credit Agreement, dated October 28, 2020, by and among the Borrower, Holdings, Bank of America, as administrative agent and collateral agent, each lender party from time-to-time thereto, and the other parties thereto.
For example, if we completed an acquisition on July 1, 2021 for a business that did not include a contingent consideration arrangement, we would consider the amount of revenues from the acquired business from July 1, 2020 to June 30, 2021 to be acquired revenues during the period from July 1, 2021 to June 30, 2022, with any differences from that amount actually generated during the latter period to be organic revenues.
For example, if we completed an acquisition on July 1, 2022 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, 2021 to June 30, 2022 to be acquired revenues during the period from July 1, 2022 to June 30, 2023, with any differences from that amount actually generated during the latter period to be organic revenues.
(h) Represents (i) costs related to implementation of strategies for workplace safety in response to COVID-19, including employee-relief fund, additional sick pay for front-line associates, medical benefit payments for furloughed associates, and personal protective equipment; and (ii) benefits received from government grants for COVID-19 relief.
(g) Represents (i) costs related to implementation of strategies for workplace safety in response to COVID-19, including employee-relief fund, additional sick pay for front-line associates, medical benefit payments for furloughed associates, and personal protective equipment; and (ii) benefits received from government grants for COVID-19 relief.
The Borrower’s obligations under the Revolving Credit Facility are guaranteed by Karman Intermediate Corp. (“Holdings”) and all of the Borrower’s direct and indirect wholly owned material U.S. subsidiaries (subject to certain permitted exceptions) and Canadian subsidiaries (subject to certain permitted exceptions, including exceptions based on immateriality thresholders of aggregate assets and revenues of Canadian subsidiaries) (the “Guarantors”).
The Borrower’s obligations under the Revolving Credit Facility are guaranteed by Karman Intermediate Corp. (“Holdings”) and all of the Borrower’s direct and indirect wholly owned material U.S. subsidiaries (subject to certain permitted exceptions) and Canadian subsidiaries (subject to certain permitted exceptions, including exceptions based on immateriality thresholds of aggregate assets and revenues of Canadian subsidiaries) (the “Guarantors”).
The fair value of PSU grants was equal to the closing price of our stock on the date of the applicable grant. Restricted stock units (“RSUs”) are subject to the recipient’s continued service to the Company. The RSUs are generally scheduled to vest over three years and are subject to the provisions of the RSU agreement under the Advantage Solutions.
The fair value of PSU grants was equal to the closing price of our stock on the date of the applicable grant. Restricted stock units (“RSUs”) are subject to the recipient’s continued service to us. The RSUs are generally scheduled to vest over three years and are subject to the provisions of the RSU agreement under the Advantage Solutions.
It is difficult to predict with any precision the amount of expense we may record relating to future acquired intangible assets. Depreciation Expense Depreciation expense relates to the property and equipment that we own, which represented less than 1% of our total assets at December 31, 2022.
It is difficult to predict with any precision the amount of expense we may record relating to future acquired intangible assets. Depreciation Expense Depreciation expense relates to the property and equipment that we own, which represented less than 1% of our total assets at December 31, 2023.
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 intangible assets, such as client relationships and trade names, that comprise the majority of the finite-lived intangible assets that create our amortization expense.
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 intangible assets, such as client relationships and trade names, that comprise the majority of the finite-lived intangible assets that create our amortization expense. • Impairment of Goodwill and Indefinite-Lived Assets.
On October 28, 2021, the Borrower and Holdings entered into the First Amendment to ABL Revolving Credit Agreement (the “First Amendment”), which amended the ABL Revolving Credit Agreement, dated October 28, 2020, by and among the Borrower, Holdings, the lenders from time to time party thereto and Bank of America, as administrative agent (the “Prior Revolving Credit Facility”).
On October 28, 2021, the Borrower and Holdings entered into the First Amendment to ABL Revolving Credit Agreement, which amended the ABL Revolving Credit Agreement, dated October 28, 2020, by and among the Borrower, Holdings, the lenders from time to time party thereto and Bank of America, as administrative agent (the “Prior Revolving Credit Facility”).
Refer to Note 7 — Debt of our audited consolidated financial statements for the year ended December 31, 2022 for additional information regarding the maturities of debt principal. Total debt excluding deferred issuance costs does not include the obligation of future interest payments.
Refer to Note 7 — Debt of our audited consolidated financial statements for the year ended December 31, 2023 for additional information regarding the maturities of debt principal. Total debt excluding deferred issuance costs does not include the obligation of future interest payments.
These estimates and assumptions include revenue growth rates, terminal growth rates, discount rates and royalty rates. which requires significant management judgment. The assumptions are 51 based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy.
These estimates and assumptions include revenue growth rates, terminal growth rate, discount rates and royalty rate. which requires significant management judgment. The assumptions are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy.
The ABL Amendment was entered into by the Borrower to amend certain terms and provisions, including (i) reducing the interest rate floor for Eurocurrency rate loans from 0.50% to 0.00% and base rate loans from 1.50% to 1.00%, and (ii) updating the provisions by which U.S.
This amendment was entered into by the Borrower to amend certain terms and provisions, including (i) reducing the interest rate floor for Eurocurrency rate loans from 0.50% to 0.00% and base rate loans from 1.50% to 1.00%, and (ii) updating the provisions by which U.S.
These costs were recorded in “Selling, general, and administrative expenses” in the Consolidated Statements of Operations and Comprehensive (Loss) Income for such years. Restructuring Charges Restructuring 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.
These costs were recorded in “Selling, general, and administrative expenses” in the Consolidated Statements of Operations and Comprehensive (Loss) Income for such years. 36 Reorganization Charges 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.
Term Loan Facility The Term Loan Facility consists of a term loan credit facility denominated in U.S. dollars in an aggregate principal amount of $1.299 billion. Borrowings under the Term Loan Facility amortize in equal quarterly installments in an amount equal to 1.00% per annum of the principal amount.
Term Loan Facility The Term Loan Facility consists of a term loan credit facility denominated in U.S. dollars in an aggregate principal amount of $1.149 billion. Borrowings under the Term Loan Facility amortize in equal quarterly installments in an amount equal to 1.00% per annum of the principal amount.
For example, if we completed an acquisition on July 1, 2021 for a business that included a contingent consideration arrangement, we would consider revenues from the acquired business from July 1, 2021 to June 30, 2022 to be acquired revenues.
For example, if we completed an acquisition on July 1, 2022 for a business that included a contingent consideration arrangement, we would consider revenues from the acquired business from July 1, 2022 to June 30, 2023 to be acquired revenues.
Guarantees The Notes are guaranteed by Holdings and each of the Issuer’s direct and indirect wholly owned material U.S. subsidiaries (subject to certain permitted exceptions) and Canadian subsidiaries (subject to certain permitted exceptions, including exceptions 46 based on immateriality thresholders of aggregate assets and revenues of Canadian subsidiaries) that is a borrower or guarantor under the Term Loan Facility.
Guarantees The Notes are guaranteed by Holdings and each of the Issuer’s direct and indirect wholly owned material U.S. subsidiaries (subject to certain permitted exceptions) and Canadian subsidiaries (subject to certain permitted exceptions, including exceptions based on immateriality thresholds of aggregate assets and revenues of Canadian subsidiaries) that is a borrower or guarantor under the Term Loan Facility.
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 38.1% of our total revenues in the year ended December 31, 2022, we help brands and retailers reach consumers through two main categories within the marketing segment.
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 42.1% of our total revenues in the year ended December 31, 2023, we help brands and retailers reach consumers through two main categories within the marketing segment.
Cash flows used in financing activities during the twelve months ended December 31, 2022 were primarily related to payments of contingent consideration and holdback payments of $34.2 million, repayment of principal on our Term Loan Facility of $13.4 million, partially offset by $3.3 million related to our Employee Stock Purchase Plan and $5.2 million of contribution from noncontrolling interest.
Cash flows used in financing activities during the year ended December 31, 2022 were primarily related to payments of contingent consideration and holdback payments of $34.2 million, repayment of principal on our Term Loan Facility of $13.4 million, partially offset by $3.3 million related to our 2020 Employee Stock Purchase Plan and $5.2 million of contribution from noncontrolling interest.
Through our sales segment, which generated approximately 61.9% of our total revenues in the year ended December 31, 2022, 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.
Through our sales segment, which generated approximately 57.9% of our total revenues in the year ended December 31, 2023, 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.
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 actually generated during the 12 months after its acquisition to be organic.
If an 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 actually generated during the 12 months after its acquisition to be organic.
Our principal uses of cash are operating expenses, working capital requirements, acquisitions, interest on debt and repayment of debt. Share Repurchase Program On November 9, 2021, we announced that our board of directors authorized a new share repurchase program (the “2021 Share Repurchase Program”) pursuant to which we may repurchase up to $100 million of our Class A common stock.
Our principal uses of cash are operating expenses, working capital requirements, acquisitions, interest on debt and repayment of debt. 42 Share Repurchase Program On November 9, 2021, we announced that our board of directors authorized the 2021 Share Repurchase Program pursuant to which we may repurchase up to $100 million of our Class A common stock.
For example, if we completed a 34 divestiture on July 1, 2021 for a business, we would consider the amount of revenues from the divested business from July 1, 2020 to June 30, 2021 to be subtracted from acquired revenues during the period from July 1, 2021 to June 30, 2022.
For example, if we completed a divestiture on July 1, 2022 for a business, we would consider the amount of revenues from the divested business from July 1, 2021 to June 30, 2022 to be subtracted from acquired revenues during the period from July 1, 2022 to June 30, 2023.
(3) We have an aggregate principal amount of $1.299 billion borrowing on the Term Loan Facility, which bears the applicable interest rate of 5.25% per annum, and $775.0 million in Senior Secured Notes, which is subject to a fixed interest rate of 6.5%.
(3) We have an aggregate principal amount of $1.149 billion borrowing on the Term Loan Facility, which bears the applicable interest rate of 5.25% per annum, and $743.0 million in Senior Secured Notes, which is subject to a fixed interest rate of 6.5%.
For the years ended December 31, 2022, 2021 and 2020, we incurred $2.5 million, $4.9 million, and $3.6 million, respectively, of costs associated with the investigation and remediation activities in connection with the Take 5 Matter, primarily professional fees and other related costs.
For the years ended December 31, 2023, 2022 and 2021, we incurred $0.3 million, $2.5 million, and $4.9 million, respectively, of costs associated with the investigation and remediation activities in connection with the Take 5 Matter, primarily professional fees and other related costs.
We recorded severance expenses of $3.2 million, $1.0 million, and $4.6 million included in “Selling, general, and administrative expenses” in the Consolidated Statements of Operations and Comprehensive (Loss) Income for the years ended December 31, 2022, 2021, and 2020, respectively.
We recorded severance expenses of $15.4 million, $3.2 million, and $1.0 million included in “Selling, general, and administrative expenses” in the Consolidated Statements of Operations and Comprehensive (Loss) Income for the years ended December 31, 2023, 2022, and 2021, respectively.
(i) Represents fees associated with the issuance of the indebtedness associated with our material debt agreements and the amendment of our term loan credit facility. For additional information, refer to Note 7— Debt of our audited consolidated financial statements for the year ended December 31, 2022.
(h) Represents fees associated with the issuance of the indebtedness associated with our material debt agreements and the amendment of our term loan credit facility. For additional information, refer to Note 7— Debt of our audited consolidated financial statements for the year ended December 31, 2023.
This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
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.
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 acquisition or divestiture 34 transactions. These transaction-related costs are comprised of fees related to change of equity ownership, professional fees, due diligence and integration or divestiture activities.
The Notes were resold to certain non-U.S. persons pursuant to Regulation S under the Securities Act , and to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act at a purchase price equal to 100% of their principal amount.
The Notes were sold to certain financial institutions that then resold the Notes to certain non-U.S. persons pursuant to Regulation S under the Securities Act, and to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act at a purchase price equal to 100% of their principal amount.
Description of Credit Facilities Senior Secured Credit Facilities In connection with the consummation of the Transaction, Advantage Sales & Marketing Inc., an indirect wholly-owned subsidiary of the Company (the “Borrower”) entered into the Senior Secured Credit Facilities consisting of (i) the Revolving Credit Facility, which is a senior secured asset-based revolving credit facility in an aggregate principal amount of up to $400.0 million, subject to borrowing base capacity and (ii) the Term Loan Facility, which is a secured first lien term loan credit facility in an aggregate principal amount of $1.325 billion.
Description of Credit Facilities Senior Secured Credit Facilities Effective October 28, 2020, Advantage Sales & Marketing Inc., an indirect wholly-owned subsidiary of the Company (the “Borrower”), entered into the Senior Secured Credit Facilities consisting of (i) the Revolving Credit Facility, which is a senior secured asset-based revolving credit facility in an aggregate principal amount of up to $400.0 million, subject to borrowing base capacity and (ii) the Term Loan Facility, which is a secured first lien term loan credit facility in an aggregate principal amount of $1.325 billion.
The impairment charges were due to the confluence of sustained decline in our share price, challenges in the labor market and continued inflationary pressures, and an increase to the discount rate as a result of the recent increases in interest rates in the macroeconomic environment.
The impairment charges were due to the confluence of sustained decline in our share price, challenges in the labor market and continued inflationary pressures, and an increase to the discount rate as a result of the increases in interest rates during 2022.
We assessed our determination as to our indefinite reinvestment intent for certain of our foreign subsidiaries and recorded a deferred tax liability of approximately $2.8 million of withholding tax as of December 31, 2022 for unremitted earnings in Canada with respect to which we do not have an indefinite reinvestment assertion.
We assessed our determination as to our indefinite reinvestment intent for certain of our foreign subsidiaries and recorded a deferred tax liability of approximately $0.4 million of withholding tax as of December 31, 2023 for unremitted earnings in Canada with respect to which we do not have an indefinite reinvestment assertion.
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.
We recognize the incentive portion of revenues under these arrangements when the related services are transferred to the customer. 33 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.
We consider the majority of the undistributed earnings of our foreign subsidiaries, as of December 31, 2022, to be indefinitely reinvested and, accordingly, no provision has been made for taxes in excess of the $2.8 million noted above.
We consider the majority of the undistributed earnings of our foreign subsidiaries, as of December 31, 2023, to be indefinitely reinvested and, accordingly, no provision has been made for taxes in excess of the $0.4 million noted above.
Factors Affecting Our Business and Financial Reporting There are a number of factors, in addition to the impact of the ongoing COVID-19 pandemic and inflationary pressures, that affect the performance of our business and the comparability of our results from period to period including: • Organic Growth.
Factors Affecting Our Business and Financial Reporting There are a number of factors, in addition to the deconsolidation of ASL, the impact of the COVID-19 pandemic and, inflation, that affect the performance of our business and the comparability of our results from period to period including: • Organic Growth.
Neither Adjusted EBITDA nor Adjusted EBITDA by segment should be considered as an alternative for our net (loss) income, our most directly comparable measure presented on a GAAP basis.
Neither Adjusted EBITDA nor Adjusted EBITDA by segment should be considered as an alternative for net loss or operating income (loss), respectively, our most directly comparable measures presented on a GAAP basis.
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 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.
Additional terms and provisions amended include (i) resetting the period for six months following the First Lien Amendment Effective Date in which a 1.00% prepayment premium shall apply to any prepayment of the term loan in connection with certain repricing events, and (ii) updating the provisions by which U.S.
Additional terms and provisions amended include (i) resetting the period for six months following October 28, 2021 in which a 1.00% prepayment premium shall apply to any prepayment of the term loan in connection with certain repricing events, and (ii) updating the provisions by which U.S.
As a result, we recognized non-cash intangible asset impairment charges of $146.0 million and $59.0 million related to our indefinite-lived sales and marketing trade names, respectively, during the year ended December 31, 2022, which has been reflected in “Impairment of goodwill and indefinite-lived assets” in the Consolidated Statements of Comprehensive (Loss) Income.
We recognized non-cash intangible asset impairment charges of $146.0 million and $59.0 million related to our indefinite-lived sales and marketing trade names, respectively, during the year ended December 31, 2022. The impairment charges have been reflected in “Impairment of goodwill and indefinite-lived assets” in our Consolidated Statements of Comprehensive (Loss) Income. • Foreign Exchange Fluctuations.
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.
Part of our strategy is to generate organic growth by expanding our existing client relationships, continuing to win new clients, pursuing channel expansion, enhancing our service offerings, developing our international platform, delivering operational efficiencies and expanding into logical adjacencies.
The Notes and related guarantees rank (i) equally in right of payment with all of the Issuer’s and the Guarantors’ senior indebtedness, without giving effect to collateral arrangements (including the Senior Secured Credit Facilities) and effectively equal to all of the Issuer’s and the Guarantors’ senior indebtedness secured on the same priority basis as the Notes, including the Term Loan Facility, (ii) effectively subordinated to any of the Issuer’s and the Guarantors’ indebtedness that is secured by assets that do not constitute collateral for the Notes to the extent of the value of the assets securing such indebtedness and to indebtedness that is secured by a senior-priority lien, including the Revolving Credit Facility to the extent of the value of the current asset collateral and (iii) structurally subordinated to the liabilities of the Issuer’s non-Guarantor subsidiaries.
The Notes and related guarantees rank (i) equally in right of payment with all of the Issuer’s and the Guarantors’ senior indebtedness, without giving effect to collateral arrangements (including the Senior Secured Credit Facilities) and effectively equal to all of the Issuer’s and the Guarantors’ senior indebtedness secured on the same priority basis as the Notes, including the Term Loan Facility, (ii) effectively subordinated to any of the Issuer’s and the Guarantors’ indebtedness that is secured by assets that do not constitute collateral for the Notes to the extent of the value of the assets securing such indebtedness and to indebtedness that is secured by a senior-priority lien, including the Revolving Credit Facility to the extent of the value of the current asset collateral and (iii) structurally subordinated to the liabilities of the Issuer’s non-Guarantor subsidiaries. 46 Optional redemption for the Notes The Notes are redeemable at the applicable redemption prices specified in the Indenture plus accrued and unpaid interest.
Adjusted Net Income means net loss before (i) impairment of goodwill and indefinite-lived assets, (ii) amortization of intangible assets, (iii) equity-based compensation of Karman Topco L.P., (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) net income attributable to noncontrolling interest, (ix) restructuring expenses, (x) litigation expenses, (xi) Recovery from 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.
Adjusted Net Income means net loss before (i) impairment of goodwill and indefinite-lived assets, (ii) gain on deconsolidation of subsidiaries, (iii) loss on divestitures, (iv) amortization of intangible assets, (v) 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 divestiture 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 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.
Change in Fair Value of Warrant Liability Change in fair value of warrant liability represents $21.2 million of non-cash gain resulting from a fair value adjustment to warrant liability for the private placement warrants for the year ended December 31, 2022.
Change in Fair Value of Warrant Liability Change in fair value of warrant liability represents $0.3 million of non-cash gain resulting from a fair value adjustment to the warrant liability for the private placement warrants for the year ended December 31, 2023.
Adjusted Net Income means net (loss) income before (i) amortization of intangible assets, (ii) impairment of goodwill and indefinite-lived assets (iii) equity-based compensation of Karman Topco L.P., (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) net income attributable to noncontrolling interest, (ix) restructuring expenses, (x) litigation expenses, (xi) Recovery from 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.
Adjusted Net Income means net (loss) income before (i) amortization of intangible assets, (ii) impairment of goodwill and indefinite-lived assets (iii) gain on deconsolidation of subsidiaries, (iv) loss on divestitures (v) 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 divestiture related expenses, (iv) costs associated with COVID-19, net of benefits received, (x) net income attributable to noncontrolling interest, (xi) reorganization expenses, (xii) litigation expenses, (xiii) gain on repurchases of Term Loan Facility and Senior Secured Notes debt, (xiv) deferred financing fees, (xv) recovery from 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.
Adjusted EBITDA means net (loss) income 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 Karman Topco L.P., (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 Take 5, (xvi) costs associated with the Take 5 Matter and (xvii) other adjustments that management believes are helpful in evaluating our operating performance. 36 We present Adjusted EBITDA and Adjusted EBITDA by segment because they are key operating measures used by us to assess our financial performance.
Adjusted EBITDA means net 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) gain on deconsolidation of subsidiaries, (vii) loss on divestitures, (viii) equity-based compensation of Karman Topco L.P., (ix) changes in fair value of warrant liability, (x) stock-based compensation expense, (xi) fair value adjustments of contingent consideration related to acquisitions, (xii) acquisition and divestiture related expenses, (xiii) costs associated with COVID-19, net of benefits received, (xiv) EBITDA for economic interests in investments, (xv) reorganization expenses, (xvi) litigation expenses, (xvii) recovery from and costs associated with the Take 5 Matter and (xviii) other adjustments that management believes are helpful in evaluating our operating performance.
(e) Represents fees and costs associated with various internal reorganization activities among our consolidated entities. (f) Represents legal settlements, reserves, and expenses that are unusual or infrequent costs associated with our operating activities. (g) Represents the amortization of intangible assets recorded in connection with the 2014 Topco Acquisition and our other acquisitions.
(e) Represents legal settlements, reserves, and expenses that are unusual or infrequent costs associated with our operating activities. (f) Represents the amortization of intangible assets recorded in connection with the 2014 Topco Acquisition and our other acquisitions.
Our annual goodwill impairment assessment for the year ended December 31, 2022 was performed effective as of October 1, 2022. We utilize a combination of income and market approaches to estimate the fair value of our reporting units.
Our annual goodwill impairment assessment for each year is performed effective as of October 1. We utilize a combination of income and market approaches to estimate the fair value of our reporting units.
Adjusted Net Income The decrease in Adjusted Net Income for the year ended December 31, 2022 was attributable to the decrease in Adjusted EBITDA as described below, partially offset by the decrease in interest expense. For a reconciliation of Adjusted Net Income to Net loss, see “ —Non-GAAP Financial Measures ”.
Adjusted Net Income The decrease in Adjusted Net Income for the year ended December 31, 2023 was attributable to the decrease in Adjusted EBITDA as described below coupled with the increase in interest expense. For a reconciliation of Adjusted Net Income to Net loss, see “ —Non-GAAP Financial Measures ”.
Adjusted EBITDA means net (loss) income before (i) interest expense, net, (ii) (benefit from) provision for income taxes, (iii) depreciation, (iv) amortization of intangible assets, (v) impairment of goodwill and indefinite-lived assets (vi) equity-based compensation of Karman Topco L.P., (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 Take 5, (xvi) costs associated with the Take 5 Matter and (xvii) other adjustments that management believes are helpful in evaluating our operating performance. 40 We present Adjusted EBITDA and Adjusted EBITDA by segment because they are key operating measures used by us to assess our financial performance.
Adjusted EBITDA means net 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) gain on deconsolidation of subsidiaries, (vii) loss on divestitures, (viii) equity-based compensation of Karman Topco L.P., (ix) changes in fair value of warrant liability, (x) stock-based compensation expense, (xi) fair value adjustments of contingent consideration related to acquisitions, (xii) acquisition and divestiture related expenses, (xiii) costs associated with COVID-19, net of benefits received, (xiv) EBITDA for economic interests in investments, (xv) reorganization expenses, (xvi) litigation expenses, (xviii) recovery from and costs associated with the Take 5 Matter and (xix) other adjustments that management believes are helpful in evaluating our operating performance.
Inc. 2020 Incentive Award Plan (the “Plan”). Topco, the parent company of the Company, has a long-term equity incentive plan that allows for the grant of time- and performance-based profit interests, or Common Series C Units, in Topco to certain of its and its subsidiaries’ directors and employees in exchange for services provided to us.
Topco, our current majority stockholder, has a long-term equity incentive plan that allows for the grant of time-and performance-based profit interests, or Common Series C Units, in Topco to certain of its and its subsidiaries’ directors and employees in exchange for services provided to us.
We generally combine components that have similar economic characteristics, nature of services, types of client, distribution methods and regulatory environment. We have two reporting units, sales and marketing, which are also our operating segments.
We generally combine components that have similar economic characteristics, nature of services, types of clients, distribution methods and regulatory environment. For 2023 and 2022 we had two reporting units, sales and marketing, which were also our operating segments.
Neither Adjusted EBITDA nor Adjusted EBITDA by segment should be considered as an alternative for net loss, for our most directly comparable measure presented on a GAAP basis.
Neither Adjusted EBITDA nor Adjusted EBITDA by segment should be considered as an alternative for our net 40 (loss) income or operating (loss) income, respectively, our most directly comparable measures presented on a GAAP basis.
We recognized $1,275.7 million and $91.8 million impairment charges in the sales and marketing reporting units, respectively, for the year ended December 31, 2022. We recognized non-cash intangible asset impairment charges of $146.0 million and $59.0 million related to our indefinite-lived sales and 33 marketing trade names, respectively, during the year ended December 31, 2022.
We recognized a non-cash intangible asset impairment charge of $43.5 million related to our indefinite-lived sales trade name during the year ended December 31, 2023. We recognized $1,275.7 million and $91.8 million impairment charges in the sales and marketing reporting units, respectively, for the year ended December 31, 2022.
We test our goodwill for impairment at the beginning of the fourth quarter of a given fiscal year, and whenever events or changes in circumstances indicate that the carrying value of a reporting unit may exceed its fair value.
We have two reporting units, sales and marketing, which are also our operating segments. 49 We test our goodwill for impairment at the beginning of the fourth quarter of a given fiscal year, and whenever events or changes in circumstances indicate that the carrying value of a reporting unit may exceed its fair value.
For contracts with a fee per project, revenue is recognized over time using an input method such as hours worked that reasonably depicts our performance in transferring control of the services to the client. We determined that the input method represents a reasonable method to measure the satisfaction of the performance obligation to the client.
We have contracts that include fixed consideration such as a fee per project or a fixed monthly fee. For contracts with a fee per project, revenue is recognized over time using an input method such as hours worked that reasonably depicts our performance in transferring control of the services to the client.
In July 2019, as a result of our investigation, we terminated all operations of Take 5, including the use of its associated trade names and the offering of its services to its clients and offered refunds to Take 5 clients of collected revenues attributable to Take 5 since our acquisition of Take 5.
In July 2019, as a result of our investigation, we terminated all operations of Take 5 and offered refunds to Take 5 clients of collected revenues attributable to Take 5 since our acquisition of Take 5.
Borrowings will bear interest at a floating rate, which can be either an adjusted Eurodollar rate plus an applicable margin or, at the Borrower’s option, a base rate plus an applicable margin.
Borrowings will bear interest at a floating rate, which can be either an adjusted Term SOFR or Alternative Currency Spread rate plus an applicable margin or, at the Borrower’s option, a base rate or Canadian Prime Rate plus an applicable margin.
Additionally, we do not have an interest in, or relationships with, any special-purpose entities. 48 Critical Accounting Policies and Estimates The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions about future events that affect amounts reported in our consolidated financial statements and related notes, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements.
Critical Accounting Policies and Estimates The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions about future events that affect amounts reported in our consolidated financial statements and related notes, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements.
The applicable margins for the Revolving Credit Facility are 2.00%, 2.25% or 2.50%, with respect to Eurodollar rate borrowings and 1.00%, 1.25% or 1.50%, with respect to base rate borrowings, in each case depending on average excess availability under the Revolving Credit Facility.
The applicable margins for the Revolving Credit Facility are 1.75%, 2.00% or 2.25%, with respect to Term SOFR or Alternative Currency Spread rate borrowings and 0.75%, 1.00%, or 1.25%, with respect to base rate or Canadian Prime Rate borrowings, in each case depending on average excess availability under the Revolving Credit Facility.
When we act as an agent, we report the revenues and their related costs on a net basis. Cost of revenues does not include depreciation charges for fixed assets. Goodwill Goodwill represents the excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired in an acquisition.
When we act as an agent, we report the revenues and their related costs on a net basis. Goodwill 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.
Impacts of the COVID-19 Pandemic Beginning in March 2020 and continuing through the first quarter of 2021, our services experienced the effects from reductions in client spending due to the economic impact of the COVID-19 pandemic. While mixed by services and geography, the spending reductions impacted all of our services and markets.
Impacts of the COVID-19 Pandemic Our services experienced the effects from reductions in client spending due to the economic impact related to the COVID-19 pandemic. While mixed by services and geography, the spending reductions impacted all of our services and markets, which particularly impacted our operations in 2021.
Net cash provided by operating activities during the year ended December 31, 2021, consisted of net income of $54.6 million adjusted for certain non-cash items, including depreciation and amortization of $240.0 million and effects of changes in working capital.
Net cash provided by operating activities during the year ended December 31, 2022, consisted of net loss of $1,377.3 million adjusted for certain non-cash items, including depreciation and amortization of $233.1 million and effects of changes in working capital.
(a) (3,721 ) (6,490 ) 71,124 Stock-based compensation expense (b) 24,025 18,357 — Fair value adjustments related to contingent consideration related to acquisitions (c) 550 (6,553 ) 8,371 Acquisition-related expenses (d) 14,542 13,945 36,722 EBITDA for economic interests in investments (l) (13,369 ) (14,058 ) (7,565 ) Restructuring expenses (e) 4,826 4,478 20,295 Litigation expenses (f) 6,057 (584 ) 1,658 Costs associated with COVID-19, net of benefits received (h) 1,412 1,511 (5,462 ) Sales Segment Adjusted EBITDA $ 294,234 $ 363,211 $ 360,017 41 Marketing Segment Year Ended December 31, 2022 2021 2020 (in thousands) Operating (loss) income $ (116,214 ) $ 47,519 $ 3,701 Add: Depreciation and amortization 71,690 69,965 67,029 Impairment of goodwill and indefinite-lived assets 150,804 — — Equity-based compensation of Karman Topco L.P.
(a) (1,270 ) (3,721 ) (6,490 ) Fair value adjustments related to contingent consideration related to acquisitions (b) 6,616 550 (6,553 ) Acquisition and divestiture related expenses (c) 4,887 11,679 13,945 Reorganization expenses (d) 36,853 4,826 4,478 Litigation expenses (recovery) (e) 6,860 6,057 (584 ) Costs associated with COVID-19, net of benefits received (g) 369 1,412 1,511 Stock-based compensation expense (l) 23,850 24,025 18,357 EBITDA for economic interests in investments (m) (5,764 ) (13,369 ) (14,058 ) Sales Segment Adjusted EBITDA $ 265,255 $ 294,234 $ 363,211 41 Marketing Segment Year Ended December 31, 2023 2022 2021 (in thousands) Operating (loss) income $ 37,747 $ (116,214 ) $ 47,519 Add: Depreciation and amortization 69,806 71,690 69,965 Impairment of goodwill and indefinite-lived assets — 150,804 — Loss on divestitures 4,157 — — Equity-based compensation of Karman Topco L.P.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe estimate that had the exchange rate in each country unfavorably changed by ten percent relative to the U.S. dollar, our consolidated loss before income taxes would have increased by approximately $4.3 million for the year ended December 31, 2022.
Biggest changeWe estimate that had the exchange rate in each country unfavorably changed by ten percent relative to the U.S. dollar, our consolidated loss before income taxes would have increased by approximately $11.9 million for the year ended December 31, 2023. 51 Interest Rate Risk Interest rate exposure relates primarily to the effect of interest rate changes on borrowings outstanding under the Term Loan Facility, Revolving Credit Facility and Notes.
In the future, in order to manage our interest rate risk, we may refinance our existing debt, enter into additional interest rate cap agreements or modify our existing interest rate cap agreement. However, we do not intend or expect to enter into derivative or interest rate cap transactions for speculative purposes. 54
In the future, in order to manage our interest rate risk, we may refinance our existing debt, enter into additional interest rate cap agreements or modify our existing interest rate cap agreement. However, we do not intend or expect to enter into derivative or interest rate cap transactions for speculative purposes. 52
Holding other variables constant, a change of one-eighth percentage point in the weighted average interest rate above the floor of 0.75% on the Term Loan Facility and 0.00% on Revolving Credit Facility would have resulted in an increase of $1.4 million in interest expense, net of gains from interest rate caps, for the year ended December 31, 2022.
Holding other variables constant, a change of one-eighth percentage point in the weighted average interest rate above the floor of 0.75% on the Term Loan Facility and 0.00% on Revolving Credit Facility would have resulted in an increase of $0.9 million in interest expense, net of gains from interest rate caps, for the year ended December 31, 2023.
As of December 31, 2022, we had interest rate cap contracts on $650.0 million of notional value of principal from various financial institutions, with a maturity dates of December 16, 2024 to manage our exposure to interest rate movements on variable rate credit facilities when one-months LIBOR on term loans exceeds cap of 0.75%.
As of December 31, 2023, we had interest rate cap contracts on $650.0 million of notional value of principal from various financial institutions, with a maturity date of December 16, 2024 to manage our exposure to interest rate movements on variable rate credit facilities when one-months SOFR on term loans exceeds cap of 0.75%.
Specifically, we have entered into interest rate cap agreements to manage our exposure to potential interest rate increases that may result from fluctuations in LIBOR.
We manage our interest rate risk through the use of derivative financial instruments. Specifically, we have entered into interest rate cap agreements to manage our exposure to potential interest rate increases that may result from fluctuations in SOFR.
The aggregate fair value of our interest rate caps represented an outstanding net asset of $47.5 million as of December 31, 2022.
We also had interest rate collar contracts with an aggregate notional value of principal of $300.0 million with a maturity date of April 5, 2026. The aggregate fair value of our interest rate caps represented an outstanding net asset of $26.3 million as of December 31, 2023.
Removed
Interest Rate Risk Interest rate exposure relates primarily to the effect of interest rate changes on borrowings outstanding under the Term Loan Facility, Revolving Credit Facility and Notes. We manage our interest rate risk through the use of derivative financial instruments.

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