Advantage Solutions (ADV) risk factors, FY2024 10-K

Other

1. 01Summary of Principal Risks Associated with Our Business

Risks Related to the Company’s Business and Industry

1. 02Market-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
2. 03An inability to hire, timely train and retain talented individuals for our workforce could adversely impact our ability to operate our business
3. 04Future pandemics may have an adverse effect on our business, results of operations, financial condition and liquidity
4. 05Our business and results of operations are affected by developments with and policies of retailers that are out of our control
5. 06Consolidation in the industries we serve could put pressure on the pricing of our services, which could adversely affect our business, financial condition or results of operations
6. 07Consumer goods manufacturers and retailers may periodically review and change their sales, retail, marketing and technology programs and relationships to our detriment
7. 08Our largest clients generate a significant portion of our revenues
8. 09The retail industry is evolving, and if we do not successfully develop and maintain relevant omni-channel services for our clients, our business, financial condition or results of operations could be adversely impacted
9. 10Interruption of supply chains and tariffs, retaliations or other governmental restrictions could adversely affect our business and our profitability
10. 11We may be unable to adapt to significant technological change, which could adversely affect our business, financial condition or results of operations
11. 12Our ability to maintain our competitive position depends on our ability to attract and retain talented executives
12. 13Client procurement practices could put additional operational and financial pressure on our services or negatively impact our relationships, business, financial condition or results of operations
13. 14If we fail to offer high-quality customer service, our business and reputation may suffer
14. 15We may be adversely affected if clients reduce their outsourcing of sales and marketing functions
15. 16Divestitures or other dispositions could negatively impact our business, financial condition or results of operations
16. 17Divestitures or other dispositions could have significant accounting and tax implications that could negatively impact our business, financial condition or results of operations
17. 18Our corporate culture is a significant factor to our long-term success and, if we are unable to promote the key aspects of our culture across our organization as we transform, our business, operating results and financial condition could be harmed
18. 19Acquiring new clients and retaining existing clients depends on our ability to avoid or manage business conflicts among competing brands
19. 20Limitations, restrictions and business decisions involving our joint ventures and minority investments may adversely affect our growth and results of operations
20. 21Our 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
21. 22the 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
22. 23If we are unable to identify attractive acquisition targets, acquire them at attractive prices or successfully integrate the acquired businesses, we may be unsuccessful in growing our business
23. 24We may encounter significant difficulties integrating acquired businesses
24. 25Many 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
25. 26Complications with the implementation of our new enterprise resource planning system could adversely impact our business and operations
26. 27We may be subject to unionization, work stoppages, slowdowns or increased labor costs
27. 28If goodwill or other intangible assets in connection with our acquisitions become impaired, we could take significant charges against earnings
28. 29Moreover, during the year ended December 31, 2023, we recognized an intangible asset impairment charge of $43.5 million related to our indefinite-lived trade name, in connection with our deconsolidation of the European joint venture and planned disposition of the foodservice businesses
29. 30Failures in, data breaches of, or incidents involving, our technology infrastructure could damage our business, reputation and brand and substantially harm our business and results of operations
30. 31regarding its data sharing practices. Additionally, demand letters related to the deployment of cookies and related technologies on organizations’ websites has garnered the attention of regulators and plaintiffs’ attorneys, and likely will continue to do so
31. 32Our business is seasonal in nature and quarterly operating results can fluctuate
32. 33Our business is competitive, and increased competition could adversely affect our business and results of operations
33. 34Our business is subject to risks associated with climate change
34. 35Failure to meet environmental, social and governance (“ESG”) expectations or standards could adversely affect our business, results of operations, financial condition, or stock price
35. 36Damage to our reputation could negatively impact our business, financial condition and results of operations
36. 37We rely on third parties to provide certain data and services in connection with the provision of our services
37. 38We may be unable to timely and effectively respond to changes in digital practices and policies, which could adversely affect our business, financial condition or results of operations
38. 39We may not be able to adequately protect our intellectual property, which, in turn, could harm the value of our brands and adversely affect our business
39. 40We are dependent on technology licensed from others. If we lose our licenses, we may not be able to continue developing our products
40. 41Consumer 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
41. 42We may be subject to claims for products for which we are the vendor of record or may otherwise be in the chain of title
42. 43We 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
43. 44Fluctuations in our tax obligations and effective tax rate and realization of our deferred tax assets may result in volatility of our operating results
44. 45future 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
45. 46We may face potential and actual harms and uncertainties arising from the matter related to our 2018 acquisition of the Take 5 Media Group (the “Take 5 Matter”), including litigation and governmental investigations

Risks Related to Ownership of Our Common Stock

1. 47We are controlled by Topco, the Advantage Sponsors, and the CP Sponsor, whose economic and other interests in our business may be different from yours
2. 48The anti-takeover provisions of our certificate of incorporation and bylaws could prevent or delay a change in control of us, even if such change in control would be beneficial to our stockholders
3. 49establishing 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
4. 50Subject to certain exceptions, an “interested stockholder” is a person who, together with that person’s affiliates and associates, owns, or within the previous three years owned, 15% or more of our outstanding voting stock
5. 51The provisions of our certificate of incorporation and bylaws requiring exclusive venue in the Court of Chancery in the State of Delaware or the federal district courts of the United States of America for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers
6. 52Because we have no current plans to pay cash dividends on our Class A common stock, you may not receive any return on investment unless you sell your Class A common stock for a price greater than that which you paid for it
7. 53An active, liquid trading market for our Class A common stock may not be available
8. 54The trading price of our Class A common stock may be volatile or may decline regardless of our operating performance
9. 55the realization of any risks described in this Annual Report under “Risk Factors.”
10. 56We cannot provide any guaranty that we will continue to repurchase our common stock pursuant to our stock repurchase program
11. 57The valuation of our private placement warrants could increase the volatility in our net (loss) income in our consolidated statements of (loss) earnings

Risks Related to Indebtedness

1. 58We need to continue to generate significant operating cash flow in order to fund our internal investments and acquisitions and to service our debt
2. 59Our substantial indebtedness could adversely affect our financial health, restrict our activities, and affect our ability to meet our obligations
3. 60Despite current indebtedness levels, we and our subsidiaries may still be able to incur additional indebtedness, which could increase the risks associated with our indebtedness
4. 61Failure to maintain our credit ratings could adversely affect our liquidity, capital position, ability to hedge certain financial risks, borrowing costs, and access to capital markets
5. 62Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly
6. 63Our business and financial results may be affected by various litigation and regulatory proceedings
7. 64We are subject to many federal, state, local and international laws with which compliance is both costly and complex
8. 65Our insurance may not provide adequate levels of coverage against claims
9. 66We have incurred and will continue to incur increased costs as a public company
10. 67If 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
11. 68Substantial future sales of our Class A common stock, or the perception in the public markets that these sales may occur, may depress our stock price