Advantage Solutions Inc. (NASDAQ: ADV) (“Advantage,” the “Company,”
“we” or “our”), the leading provider of outsourced sales and
marketing services to consumer goods manufacturers and retailers,
today reported financial results for its fiscal fourth quarter and
full fiscal year ended December 31, 2020.
“2020 was a test for us all. And it was a difficult one –
characterized by high uncertainty, rapid change and a challenging
operating environment brought on by the COVID-19 pandemic,” said
Tanya Domier, Chief Executive Officer of Advantage. “But we passed
this challenging test with flying colors – no doubt finishing near
the top of the grading curve. I couldn’t be more proud of the way
our associates were able to quickly pivot and adapt to help our
clients with the unique challenges brought about by the pandemic,
managing the urgent needs of the present while continuing to make
progress in building the business to support the important needs of
tomorrow,” Domier added.
“Despite a 17% decline in revenues that resulted from large
portions of our business being temporarily suspended or otherwise
impacted by the pandemic, we were able to navigate to an Adjusted
EBITDA decline of only 3% in 2020, delivering $487 million of
Adjusted EBITDA for the year. This exceeded the top end of the 2020
outlook we provided on our Q3 earnings call of $480 to $485
million, which we had already revised upwards from the $475 million
estimate we communicated as part of our merger with Conyers Park
II. The resiliency of our nimble business model and the quality of
our team’s ability to manage the business prudently in challenging
times – quickly re-aligning resources and expenses in response to
the new operating reality brought about by the pandemic – was on
full display in 2020.”
“We are proud of the progress we made in the fourth quarter.
While the impact from COVID-19 remains a significant short-term
headwind for portions our business, we continue to see sequential
revenue improvement across our portfolio and are making
considerable progress in our recovery from COVID-19 lows,” Domier
commented.
“As we look forward, we’re pleased with the progress we continue
to make in returning COVID-impacted operations to normal and are
excited about the opportunities our platform allows us to pursue to
help brands and retailers win and solve new problems as we all
emerge from the worst of the pandemic. We’ve never been more
important and valuable partners to our brands and retailers than we
are today. As a result, we are raising our 2021 Adjusted EBITDA
outlook from the $515 million we shared last year as part of the
Conyers Park II merger to $515 to $525 million,” Domier noted.
“Importantly, I’d like to thank our associates. Our team has
worked tirelessly in stores and at home to serve our clients,
customers and communities with best-in-class service. We are
grateful that we’re able to support communities in need during
these trying times by making sure food and essential products from
our brand and retailer partners are available to consumers in-store
and online,” Domier added.
Fourth Quarter 2020 Highlights
- Revenues were $850.4 million for the fourth quarter of 2020,
representing a decline of $162.5 million, or 16.0%, from the fourth
quarter of 2019 revenues of $1,012.9 million, but sequential growth
of $66.0 million, or 8.4%, from the third quarter of 2020.
- Operating loss was $53.0 million for the fourth quarter of
2020, representing a decline of $127.0 million from the fourth
quarter of 2019 operating income of $74.0 million.
- Net loss was $138.9 million for the fourth quarter of 2020,
representing a decline of $153.7 million from the fourth quarter of
2019 net income of $14.8 million.
- Adjusted EBITDA was $132.5 million for the fourth quarter of
2020, representing a decline of $11.8 million, or 8.2%, from the
fourth quarter of 2019 Adjusted EBITDA of $144.3 million.
- Adjusted Net Income was $51.7 million for the fourth quarter of
2020, representing a decline of $8.9 million, or 14.7%, from the
fourth quarter of 2019 Adjusted Net Income of $60.6 million.
Fourth quarter 2020 revenues declined $162.5 million, or 16.0%,
to $850.4 million compared to $1,012.9 million for the fourth
quarter of 2019. The year-over-year decline in revenues was driven
by a $193.1 million decline in the marketing segment, partially
offset by $30.7 million of growth in the sales segment. The fourth
quarter’s decline in the marketing segment was primarily the result
of the Company’s in-store sampling business which remains limited
in operations due to the COVID-19 pandemic. While in-store sampling
programs began to return to stores in the third quarter of 2020,
the business is still early in its return to full operation and
remains materially below 2019 levels. The growth in the sales
segment was primarily the result of strength in the traditional
channel and e-commerce services which continue to benefit from
elevated at-home consumption and adoption of high growth e-commerce
services.
Importantly, however, fourth quarter revenues of $850.4 million
represented a sequential improvement of $66.0 million, or 8.4%,
over the third quarter of 2020. This improvement was primarily
driven by the continued recovery in services experiencing temporary
headwinds from the COVID-19 pandemic, including the international
joint venture in the sales segment and the in-store sampling
operations in the marketing segment. Our strong sequential growth
was also supported by continued strength in the traditional channel
and e-commerce services in the sales segment and digital
marketing.
Fourth quarter 2020 Adjusted EBITDA declined $11.8 million, or
8.2%, to $132.5 million compared to $144.3 million for the fourth
quarter of 2019. The year-over-year decline in Adjusted EBITDA was
primarily driven by the declines in revenues in the marketing
segment related to the temporary suspension of in-store sampling
programs during the pandemic and increased recruiting and
personnel-related expense incurred to stand up operations for new
services, partially offset by contribution from growth in revenues
in the sales segment.
Fourth quarter 2020 operating income declined $127.0 million to
a loss of $53.0 million compared to operating income of $74.0
million for the fourth quarter of 2019. The year-over-year decline
in operating income was driven primarily by the decline in revenues
in the marketing segment and certain non-recurring expenses
associated with our merger with Conyers Park II.
Fourth quarter 2020 net income declined $153.7 million to a loss
of $138.9 million compared to net income of $14.8 million for the
fourth quarter of 2019. The year-over-year decline in net income
was primarily driven by lower operating income as described above
and higher interest expense, which was impacted by non-recurring
debt extinguishment costs primarily associated with our merger with
Conyers Park II.
Fourth quarter 2020 Adjusted Net Income declined $8.9 million,
or 14.7%, to $51.7 million compared to $60.6 million for the fourth
quarter of 2019. The year-over-year decline in Adjusted Net Income
was primarily driven by the decline in revenues in the marketing
segment, and is adjusted for non-recurring items incurred as part
of our merger with Conyers Park II.
Fiscal Year 2020 Highlights
- Revenues were $3.2 billion for fiscal 2020, representing a
decline of $629.4 million, or 16.6%, from fiscal 2019 revenues of
$3.8 billion.
- Operating income was $67.0 million for fiscal 2020,
representing a decline of $146.7 million, or 68.6%, from fiscal
2019 operating income of $213.7 million.
- Net loss was $161.7 million for fiscal 2020, representing an
increase of $141.9 million from fiscal 2019 net loss of $19.8
million.
- Adjusted EBITDA was $487.2 million for fiscal 2020,
representing a decline of $16.9 million, or 3.3%, from fiscal 2019
Adjusted EBITDA of $504.0 million.
- Adjusted Net Income was $183.0 million for fiscal 2020,
representing growth of $13.9 million, or 8.2%, from fiscal 2019
Adjusted Net Income of $169.1 million.
Fiscal 2020 revenues declined $629.4 million, or 16.6%, to $3.2
billion compared to $3.8 billion for fiscal 2019. The
year-over-year decline in revenues was driven by a $735.3 million
decline in the marketing segment, partially offset by $105.9
million of growth in the sales segment. The fiscal 2020 decline in
the marketing segment was primarily the result of the temporary
suspension of the Company’s in-store sampling services in response
to the COVID-19 pandemic. The fiscal 2020 growth in the sales
segment was primarily the result of strength in headquarter sales
and retail merchandising activities in traditional and e-commerce
channels as a result of incremental at-home consumption during the
COVID-19 pandemic and increased adoption of new services.
Fiscal 2020 Adjusted EBITDA declined $16.9 million, or 3.3%, to
$487.2 million compared to $504.0 million for fiscal 2019. The
year-over-year decline in Adjusted EBITDA was primarily driven by
the declines in the marketing segment related to the temporary
suspension of in-store sampling programs during the pandemic,
partially offset by growth in the sales segment.
Fiscal 2020 operating income declined $146.7 million, or 68.6%,
to $67.0 million compared to $213.7 million for fiscal 2019. The
year-over-year decline in operating income was driven by a decline
in revenues in the marketing segment and non-recurring expenses
primarily associated with our merger with Conyers Park II and the
exit of certain lease obligations, partially offset by the growth
in revenues in the sales segment.
Fiscal 2020 net loss increased $141.9 million to a loss of
$161.7 million compared to a loss of $19.8 million for fiscal 2019.
The year-over-year decline in net income was primarily driven by
lower operating income and higher interest expense which were
impacted by non-recurring expenses primarily associated with our
merger with Conyers Park II, partially offset by favorability
associated with a benefit from income taxes.
Fiscal 2020 Adjusted Net Income grew $13.9 million, or 8.2%, to
$183.0 million compared to $169.1 million for fiscal 2019. The
year-over-year growth in Adjusted Net Income was primarily driven
by the decrease in interest expense after adjusting for
non-recurring costs incurred as part of our merger with Conyers
Park II offset by the decline in the marketing segment and increase
in provision for income taxes after adjusting for non-recurring
costs incurred as part of our merger with Conyers Park II.
Successful Business Combination and Balance Sheet
Highlights
Advantage Solutions and Conyers Park II Acquisition Corp.
(“Conyers Park II”), a publicly traded special purpose acquisition
company, successfully completed their merger on October 28, 2020.
Proceeds from the merger and the related equity raise and debt
refinancing transactions were primarily used to repay the existing
borrowings of the Company. In connection with the closing of the
merger with Conyers Park II, the Company completed its previously
announced debt refinancing. Net Debt outstanding was reduced to
approximately $2 billion. The post-combination debt capitalization
of the Company consists primarily of a $400 million revolving
credit facility, a $1,325 million first lien term loan facility,
and $775 million of senior secured notes.
As of December 31, 2020, the Company’s cash and cash equivalents
balance was $204 million, total debt was $2,154 million and Net
Debt was $1,949 million. This represents a fiscal 2020 Net Debt to
Adjusted EBITDA ratio of 4.0x.
COVID-19 Update
Advantage continues to monitor the impact of the COVID-19
pandemic on its business and remains focused on: ensuring its
ability to safeguard the health of its employees, maintaining high
service levels for brand and retailer clients so that essential
products are available to consumers in-store and online, and
preserving financial liquidity to mitigate the uncertainty caused
by the pandemic.
The COVID-19 pandemic continues to benefit the Company’s sales
segment.
The Company’s headquarter sales and retail merchandising
services in traditional and e-commerce channels have generally
continued to experience an uplift in the fourth quarter of 2020,
driven by increased at-home consumption. This offsets softness in
the Company’s foodservice and international joint venture
operations. The Company’s foodservice operations continue to be
negatively impacted by lower away-from-home demand resulting from
the impact of the COVID-19 pandemic on various channels, including
restaurants, education and travel and lodging. The Company’s
international joint venture continues to be negatively impacted by
activity restrictions implemented in the European geographies in
which it operates.
The COVID-19 pandemic continues to be a material temporary
headwind in the marketing segment.
The Company’s in-store sampling business, the largest division
in the marketing segment, continues to be negatively impacted by
activity restrictions implemented in partnership with retailer
clients in order to protect the health and safety of associates and
consumers during the pandemic. In-store sampling event activity
resumed in a safe and limited manner in the third quarter of 2020
and has continued its measured recovery towards pre-COVID levels
throughout the fourth quarter of 2020.
The Company expects the COVID-19 pandemic will continue to
impact its various businesses through at least the first half of
2021. This is based on the belief that a certain degree of
restrictions on mobility and activities are likely to remain in
place until such time as vaccines can be broadly distributed and
administered.
Fiscal Year 2021 Outlook
The Company expects Adjusted EBITDA for fiscal year 2021 to be
between $515 and $525 million, an increase from the $515 million it
previously provided as part of the merger with Conyers Park II. The
increase to forecasted Adjusted EBITDA reflects the expectation
that the current COVID-19 related impacts to the business continue
through the first half of 2021, with a return towards normal
operations in the second half of the year based on expected easing
of COVID-19 related restrictions and a gradual reopening of the
economy. As such, the Company expects the COVID-19 related
operating headwinds in the in-store sampling, foodservice and
international businesses to continue through the first half of
2021, partially offset by continued strength in the sales segment’s
services in traditional and e-commerce channels.
Conference Call Details
Advantage will host a conference call at 5:00 p.m. ET on March
16, 2021 to discuss the Company’s fourth quarter and fiscal year
2020 financial performance and business outlook. To participate,
please dial (877) 407-4018 within the United States or (201)
689-8471 outside the United States approximately 10 minutes before
the scheduled start of the call. The conference call will also be
accessible, live via audio broadcast, on the Investor Relations
section of the Advantage website at
https://ir.advantagesolutions.net/. A replay of the conference call
will be available online at https://ir.advantagesolutions.net/. In
addition, an audio replay of the call will be available for one
week following the call and can be accessed by dialing (844)
512-2921 within the United States or (412) 317-6671 outside the
United States. The replay ID is 13715926.
About Advantage Solutions
Advantage Solutions is a leading business solutions provider
committed to driving growth for consumer goods manufacturers and
retailers through winning insights and execution. Advantage’s data
and technology-enabled omnichannel solutions — including sales,
retail merchandising, business intelligence, digital commerce and a
full suite of marketing services — help brands and retailers across
a broad range of channels drive consumer demand, increase sales and
achieve operating efficiencies. Headquartered in Irvine,
California, Advantage has offices throughout North America and
strategic investments in select markets throughout Africa, Asia,
Australia and Europe through which it services the global needs of
multinational, regional and local manufacturers. For more
information, please visit advantagesolutions.net.
Forward-Looking Statements
Certain statements in this press release may be considered
forward-looking statements within the meaning of the federal
securities laws, including statements regarding the expected future
performance of Advantage's business. Forward-looking statements
generally relate to future events or Advantage’s future financial
or operating performance. These forward-looking statements
generally are identified by the words “may,” “should,” “expect,”
“intend,” “will,” “would,” “estimate,” “anticipate,” “believe,”
“predict,” “potential” or “continue,” or the negatives of these
terms or variations of them or similar terminology. Such
forward-looking statements are predictions, projections and other
statements about future events that are based on current
expectations and assumptions and, as a result, are subject to
risks, uncertainties, and other factors which could cause actual
results to differ materially from those expressed or implied by
such forward looking statements.
Factors that may cause actual results to differ materially from
current expectations include, but are not limited to, the COVID-19
pandemic and the measures taken in response thereto; the
availability, acceptance, administration and effectiveness of any
COVID-19 vaccine; changes to labor laws or wage or job
classification regulations, including minimum wage, or other
market-driven wage changes; Advantage’s ability to continue to
generate significant operating cash flow; client procurement
strategies and consolidation of Advantage’s clients’ industries
creating pressure on the nature and pricing of its services;
consumer goods manufacturers and retailers reviewing and changing
their sales, retail, marketing, and technology programs and
relationships; Advantage’s ability to successfully develop and
maintain relevant omni-channel services for our clients in an
evolving industry and to otherwise adapt to significant
technological change; Advantage’s ability to effectively remediate
material weaknesses and maintain proper and effective internal
controls in the future; potential and actual harms to Advantage’s
business arising from the Take 5 Matter; Advantage’s substantial
indebtedness and our ability to refinance at favorable rates; and
other risks and uncertainties set forth in the section titled “Risk
Factors” in the Annual Report on Form 10-K filed by the Company
with the Securities and Exchange Commission (the “SEC”) on March
16, 2021 and in its other filings made from time to time with the
SEC. These filings identify and address other important risks and
uncertainties that could cause actual events and results to differ
materially from those contained in the forward-looking statements.
Forward-looking statements speak only as of the date they are made.
Readers are cautioned not to put undue reliance on forward-looking
statements, and Advantage assumes no obligation and does not intend
to update or revise these forward-looking statements, whether as a
result of new information, future events, or otherwise, except as
required by law.
Non-GAAP Financial Measures and Related
Information
This press release includes certain financial measures not
presented in accordance with generally accepted accounting
principles (“GAAP”), including Adjusted EBITDA, Adjusted Net Income
and Net Debt. These are not measures of financial performance
calculated in accordance with GAAP and may exclude items that are
significant in understanding and assessing Advantage’s financial
results. Therefore, these measures are in addition to, and not a
substitute for or superior to, measures of financial performance
prepared in accordance with GAAP, and should not be considered in
isolation or as an alternative to net income, cash flows from
operations or other measures of profitability, liquidity or
performance under GAAP. You should be aware that Advantage’s
presentation of these measures may not be comparable to
similarly-titled measures used by other companies. Reconciliations
of historical non-GAAP measures to their most directly comparable
GAAP counterparts are included below.
Advantage believes these non-GAAP measures provide useful
information to management and investors regarding certain financial
and business trends relating to Advantage’s financial condition and
results of operations. Advantage believes that the use of Adjusted
EBITDA, Adjusted Net Income and Net Debt provides an additional
tool for investors to use in evaluating ongoing operating results
and trends and in comparing Advantage’s financial measures with
other similar companies, many of which present similar non-GAAP
financial measures to investors. Non-GAAP financial measures are
subject to inherent limitations as they reflect the exercise of
judgments by management about which expense and income are excluded
or included in determining these non-GAAP financial measures.
Additionally, other companies may calculate non-GAAP measures
differently, or may use other measures to calculate their financial
performance, and therefore Advantage’s non-GAAP measures may not be
directly comparable to similarly titled measures of other
companies.
Adjusted EBITDA means net income (loss) before (i) interest
expense, net, (ii) (benefit from) provision for income taxes, (iii)
depreciation, (iv) impairment of goodwill and indefinite-lived
assets, (v) amortization of intangible assets, (vi) private equity
sponsors’ management fees and equity-based compensation expense,
(vii) fair value adjustments of contingent consideration related to
acquisitions, (viii) acquisition-related expenses, (ix) costs
associated with COVID-19, net of benefits received, (x) EBITDA for
economic interests in investments, (xi) restructuring expenses,
(xii) litigation expenses, (xiii) (Recovery from) loss on Take 5,
(xiv) costs associated with the Take 5 Matter and (xv) other
adjustments that management believes are helpful in evaluating our
operating performance.
Adjusted Net Income means net (loss) income before (i)
impairment of goodwill and indefinite-lived assets, (ii)
amortization of intangible assets, (iii) private equity sponsors’
management fees and equity-based compensation expense, (iv) fair
value adjustments of contingent consideration related to
acquisitions, (v) acquisition-related expenses, (vi) costs
associated with COVID-19, net of benefits received, (vii) EBITDA
for economic interests in investments, (viii) restructuring
expenses, (ix) litigation expenses, (x) (Recovery from) loss on
Take 5, (xi) deferred financing fees, (xii) costs associated with
the Take 5 Matter, (xiii) other adjustments that management
believes are helpful in evaluating our operating performance, and
(xiv) related tax adjustments.
Net Debt represents the sum of current portion of long-term debt
and long-term debt, less cash and cash equivalents and debt
issuance costs. With respect to Net Debt, cash and cash equivalents
are subtracted from the GAAP measure, total debt, because they
could be used to reduce the debt obligations.
This press release also includes certain estimates and
projections of Adjusted EBITDA, including with respect to expected
fiscal 2021 results. Due to the high variability and difficulty in
making accurate estimates and projections of some of the
information excluded from Adjusted EBITDA, together with some of
the excluded information not being ascertainable or accessible,
Advantage is unable to quantify certain amounts that would be
required to be included in the most directly comparable GAAP
financial measures without unreasonable effort. Consequently, no
disclosure of estimated or projected comparable GAAP measures is
included and no reconciliation of such forward-looking non-GAAP
financial measures is included.
Reconciliation of GAAP to Non-GAAP Historical Financial
Measures
Results of Operations for the Three and Twelve Months
Ended December 31, 2020 and 2019
|
|
Three Months Ended December 31, |
|
(amounts in
thousands) |
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
850,387 |
|
|
|
100.0 |
% |
|
$ |
1,012,876 |
|
|
|
100.0 |
% |
Cost of revenues |
|
|
669,506 |
|
|
|
78.7 |
% |
|
|
840,102 |
|
|
|
82.9 |
% |
Selling, general, and
administrative expenses |
|
|
172,802 |
|
|
|
20.3 |
% |
|
|
40,587 |
|
|
|
4.0 |
% |
Recovery from Take 5 |
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
Depreciation and
amortization |
|
|
61,085 |
|
|
|
7.2 |
% |
|
|
58,149 |
|
|
|
5.7 |
% |
Total expenses |
|
|
903,393 |
|
|
|
106.2 |
% |
|
|
938,838 |
|
|
|
92.7 |
% |
Operating (loss) income |
|
|
(53,006 |
) |
|
|
(6.2 |
)% |
|
|
74,038 |
|
|
|
7.3 |
% |
Interest expense, net |
|
|
82,486 |
|
|
|
9.7 |
% |
|
|
53,606 |
|
|
|
5.3 |
% |
(Loss) income before income
taxes |
|
|
(135,492 |
) |
|
|
(15.9 |
)% |
|
|
20,432 |
|
|
|
2.0 |
% |
Provision for income taxes |
|
|
3,383 |
|
|
|
0.4 |
% |
|
|
5,630 |
|
|
|
0.6 |
% |
Net (loss) income |
|
$ |
(138,875 |
) |
|
|
(16.3 |
)% |
|
$ |
14,802 |
|
|
|
1.5 |
% |
Other Financial
Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income(1) |
|
$ |
51,711 |
|
|
|
6.1 |
% |
|
$ |
60,614 |
|
|
|
6.0 |
% |
Adjusted EBITDA(2) |
|
$ |
132,527 |
|
|
|
15.6 |
% |
|
$ |
144,298 |
|
|
|
14.2 |
% |
|
|
Year Ended December 31, |
|
(amounts in
thousands) |
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
3,155,671 |
|
|
|
100.0 |
% |
|
$ |
3,785,063 |
|
|
|
100.0 |
% |
Cost of revenues |
|
|
2,551,485 |
|
|
|
80.9 |
% |
|
|
3,163,443 |
|
|
|
83.6 |
% |
Selling, general, and
administrative expenses |
|
|
306,282 |
|
|
|
9.7 |
% |
|
|
175,373 |
|
|
|
4.6 |
% |
Recovery from Take 5 |
|
|
(7,700 |
) |
|
|
(0.2 |
)% |
|
|
— |
|
|
|
0.0 |
% |
Depreciation and
amortization |
|
|
238,598 |
|
|
|
7.6 |
% |
|
|
232,573 |
|
|
|
6.1 |
% |
Total expenses |
|
|
3,088,665 |
|
|
|
97.9 |
% |
|
|
3,571,389 |
|
|
|
94.4 |
% |
Operating income |
|
|
67,006 |
|
|
|
2.1 |
% |
|
|
213,674 |
|
|
|
5.6 |
% |
Interest expense, net |
|
|
234,044 |
|
|
|
7.4 |
% |
|
|
232,077 |
|
|
|
6.1 |
% |
Loss before income taxes |
|
|
(167,038 |
) |
|
|
(5.3 |
)% |
|
|
(18,403 |
) |
|
|
(0.5 |
)% |
(Benefit from) provision for income taxes |
|
|
(5,331 |
) |
|
|
(0.2 |
)% |
|
|
1,353 |
|
|
|
0.0 |
% |
Net loss |
|
$ |
(161,707 |
) |
|
|
(5.1 |
)% |
|
$ |
(19,756 |
) |
|
|
(0.5 |
)% |
Other Financial
Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income(1) |
|
$ |
182,969 |
|
|
|
5.8 |
% |
|
$ |
169,109 |
|
|
|
4.5 |
% |
Adjusted EBITDA(2) |
|
$ |
487,175 |
|
|
|
15.4 |
% |
|
$ |
504,031 |
|
|
|
13.3 |
% |
(1) |
We
present Adjusted Net Income because we use it as a supplemental
measure to evaluate the performance of our business in a way that
also considers our ability to generate profit without the impact of
items that we do not believe are indicative of our operating
performance or are unusual or infrequent in nature and aid in the
comparability of our performance from period to period. Adjusted
Net Income should not be considered as an alternative for our most
directly comparable measure presented on a GAAP basis. |
|
|
(2) |
We present Adjusted EBITDA
because it is a key operating measure used by us to assess our
financial performance. This measure adjusts for items that we
believe do not reflect the ongoing operating performance of our
business, such as certain noncash items, unusual or infrequent
items or items that change from period to period without any
material relevance to our operating performance. We evaluate this
measure in conjunction with our results according to GAAP because
we believe it provides 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. Adjusted EBITDA should not be considered as an
alternative for our most directly comparable measure presented on a
GAAP basis. |
A reconciliation of net (loss) income to Adjusted Net Income is
provided in the following table:
|
|
Three Months Ended December 31, |
|
|
|
2020 |
|
|
2019 |
|
(in thousands) |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(138,875 |
) |
|
$ |
14,802 |
|
Less: Net income attributable
to noncontrolling interest |
|
|
405 |
|
|
|
767 |
|
Add: |
|
|
|
|
|
|
|
|
Sponsors’ management fee and
equity-based compensation expense(a) |
|
|
88,630 |
|
|
|
2,894 |
|
Fair value adjustments related
to contingent consideration related to acquisitions(b) |
|
|
11,328 |
|
|
|
(3,156 |
) |
Acquisition-related
expenses(c) |
|
|
36,750 |
|
|
|
8,714 |
|
Restructuring expenses(d) |
|
|
(258 |
) |
|
|
2,112 |
|
Litigation expenses(e) |
|
|
(593 |
) |
|
|
3,500 |
|
Amortization of intangible
assets(f) |
|
|
50,264 |
|
|
|
47,030 |
|
Costs associated with
COVID-19, net of benefits received(g) |
|
|
(10,546 |
) |
|
|
— |
|
Deferred financing
fees(h) |
|
|
41,428 |
|
|
|
— |
|
Costs associated with the Take
5 Matter(i) |
|
|
809 |
|
|
|
1,376 |
|
Tax adjustments related to
non-GAAP adjustments(j) |
|
|
(26,821 |
) |
|
|
(15,891 |
) |
Adjusted Net Income |
|
$ |
51,711 |
|
|
$ |
60,614 |
|
|
|
Year Ended December 31, |
|
|
|
2020 |
|
|
2019 |
|
(in thousands) |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(161,707 |
) |
|
$ |
(19,756 |
) |
Less: Net income attributable
to noncontrolling interest |
|
|
736 |
|
|
|
1,416 |
|
Add: |
|
|
|
|
|
|
|
|
Impairment of goodwill and
indefinite-lived assets |
|
|
— |
|
|
|
— |
|
Sponsors’ management fee and
equity-based compensation expense(a) |
|
|
98,119 |
|
|
|
7,960 |
|
Fair value adjustments related
to contingent consideration related to acquisitions(b) |
|
|
13,367 |
|
|
|
1,516 |
|
Acquisition-related
expenses(c) |
|
|
50,823 |
|
|
|
31,476 |
|
Restructuring expenses(d) |
|
|
39,770 |
|
|
|
5,385 |
|
Litigation expenses(e) |
|
|
1,980 |
|
|
|
3,500 |
|
Amortization of intangible
assets(f) |
|
|
193,543 |
|
|
|
189,881 |
|
Costs associated with
COVID-19, net of benefits received(g) |
|
|
(11,954 |
) |
|
|
— |
|
Deferred financing
fees(h) |
|
|
41,428 |
|
|
|
— |
|
(Recovery from) loss on Take
5 |
|
|
(7,700 |
) |
|
|
— |
|
Costs associated with the Take
5 Matter(i) |
|
|
3,628 |
|
|
|
16,368 |
|
Tax adjustments related to
non-GAAP adjustments(j) |
|
|
(77,592 |
) |
|
|
(65,805 |
) |
Adjusted Net Income |
|
$ |
182,969 |
|
|
$ |
169,109 |
|
A reconciliation of net (loss) income to Adjusted EBITDA is
provided in the following table:
|
|
Three Months Ended December 31, |
|
|
|
2020 |
|
|
2019 |
|
(in thousands) |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(138,875 |
) |
|
$ |
14,802 |
|
Add: |
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
82,486 |
|
|
|
53,606 |
|
(Benefit from) provision for
income taxes |
|
|
3,383 |
|
|
|
5,630 |
|
Depreciation and
amortization |
|
|
61,085 |
|
|
|
58,149 |
|
Sponsors’ management fee and
equity-based compensation expense(a) |
|
|
88,630 |
|
|
|
2,894 |
|
Fair value adjustments related
to contingent consideration related to acquisitions(b) |
|
|
11,328 |
|
|
|
(3,156 |
) |
Acquisition-related
expenses(c) |
|
|
36,750 |
|
|
|
8,714 |
|
EBITDA for economic interests
in investments(k) |
|
|
(1,672 |
) |
|
|
(3,329 |
) |
Restructuring expenses(d) |
|
|
(258 |
) |
|
|
2,112 |
|
Litigation expenses(e) |
|
|
(593 |
) |
|
|
3,500 |
|
Costs associated with
COVID-19, net of benefits received(g) |
|
|
(10,546 |
) |
|
|
— |
|
Costs associated with the Take
5 Matter(i) |
|
|
809 |
|
|
|
1,376 |
|
Adjusted EBITDA |
|
$ |
132,527 |
|
|
$ |
144,298 |
|
|
|
Year Ended December 31, |
|
|
|
2020 |
|
|
2019 |
|
(in thousands) |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(161,707 |
) |
|
$ |
(19,756 |
) |
Add: |
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
234,044 |
|
|
|
232,077 |
|
(Benefit from) provision for
income taxes |
|
|
(5,331 |
) |
|
|
1,353 |
|
Depreciation and
amortization |
|
|
238,598 |
|
|
|
232,573 |
|
Impairment of goodwill and
indefinite-lived assets |
|
|
— |
|
|
|
— |
|
Sponsors’ management fee and
equity-based compensation expense(a) |
|
|
98,119 |
|
|
|
7,960 |
|
Fair value adjustments related
to contingent consideration related to acquisitions(b) |
|
|
13,367 |
|
|
|
1,516 |
|
Acquisition-related
expenses(c) |
|
|
50,823 |
|
|
|
31,476 |
|
EBITDA for economic interests
in investments(k) |
|
|
(6,462 |
) |
|
|
(8,421 |
) |
Restructuring expenses(d) |
|
|
39,770 |
|
|
|
5,385 |
|
Litigation expenses(e) |
|
|
1,980 |
|
|
|
3,500 |
|
Costs associated with
COVID-19, net of benefits received(g) |
|
|
(11,954 |
) |
|
|
— |
|
(Recovery from) loss on Take
5 |
|
|
(7,700 |
) |
|
|
— |
|
Costs associated with the Take
5 Matter(i) |
|
|
3,628 |
|
|
|
16,368 |
|
Adjusted EBITDA |
|
$ |
487,175 |
|
|
$ |
504,031 |
|
(a) |
Represents the management fees and reimbursements for expenses paid
to certain of our private equity sponsors (or certain of the
management companies associated with them or their advisors)
pursuant to management services agreements. Also represents
expenses related to (i) equity-based compensation expense
associated with grants of Common Series D Units of Karman Topco
L.P. made to one of our private equity sponsors, (ii) equity-based
compensation expense associated with the Common Series C Units of
Karman Topco L.P. as a result of the merger with Conyers Park II,
(iii) compensation amounts associated with our Management Incentive
Plan originally scheduled for potential payment in March 2022 that
were accelerated and terminated as part of the merger with Conyers
Park II, and (iv) compensation amounts associated with the
anniversary payments to Tanya Domier. Ms. Domier’s anniversary
payments were accelerated as part of the Transactions. |
(b) |
Represents adjustments to the
estimated fair value of our contingent consideration liabilities
related to our acquisitions, excluding the present value accretion
recorded in interest expense, net, for the applicable periods. See
Note 6 to our audited consolidated financial statements for the
year ended December 31, 2020 and 2019. |
(c) |
Represents fees and costs
associated with activities related to our acquisitions and
restructuring activities related to our equity ownership, including
professional fees, due diligence and integration activities. |
(d) |
Represents fees and costs
associated with various internal reorganization activities among
our consolidated entities. The decrease for the three months ended
December 31, 2020 relates primarily to the non-cash settlement of
lease liabilities. |
(e) |
Represents legal settlements that
are unusual or infrequent costs associated with our operating
activities. |
(f) |
Represents the amortization of
intangible assets recorded in connection with Karman Topco L.P.’s
acquisition of our business in 2014 and our other
acquisitions. |
(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. |
(h) |
Represents fees associated with
our revolving credit facility, first lien term loan facility and
senior secured notes. For additional information, refer to Note 7 –
Debt of our audited consolidated financial statements for the year
ended December 31, 2020. |
(i) |
Represents costs associated with
investigation and remediation activities related to the Take 5
Matter, primarily, professional fees and other related costs. |
(j) |
Represents the tax provision or
benefit associated with the adjustments above, taking into account
our applicable tax rates, after excluding adjustments related to
items that do not have a related tax impact. |
(k) |
Represents additions to reflect
our proportional share of Adjusted EBITDA related to our equity
method investments and reductions to remove the Adjusted EBITDA
related to the minority ownership percentage of the entities that
we fully consolidate in our financial statements. |
A reconciliation of total debt to Net Debt is provided in the
following table:
(in
millions) |
|
December 31, 2020 |
|
Current portion of long-term debt |
|
$ |
63.7 |
|
Long-term debt, net of current
portion |
|
|
2,029.3 |
|
Total Debt |
|
|
2,093.0 |
|
Less: |
|
|
|
|
Debt issuance costs |
|
|
(60.5 |
) |
Cash and cash equivalents |
|
|
204.3 |
|
Total Net Debt (a) |
|
$ |
1,949.2 |
|
(a) |
We
present Net Debt because we believe the non-GAAP measure provides
useful information to management and investors regarding certain
financial and business trends relating to our financial condition
and to evaluate changes to our capital structure and credit quality
assessment. |
Contacts:
Dan RiffChief Investor Relations & Strategy OfficerAdvantage
Solutions
Dan MorrisonSenior Vice President, Finance &
OperationsAdvantage Solutions
Kevin Doherty Solebury TroutManaging Director
Investorrelations@advantagesolutions.net
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