Advantage Solutions Inc. Fair Value Disclosure
The Company measures fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value.
As of December 31, 2024, and 2023, the Company’s interest rate derivatives and forward contracts are Level 2 assets and liabilities with the related fair values based on third-party pricing service models. These models use discounted cash flows that utilize market-based forward swap curves commensurate with the terms of the underlying instruments.
As of December 31, 2023, the contingent consideration liabilities are Level 3 liabilities with the related fair values based on significant unobservable inputs and probability weightings in using the income approach.
The following table sets forth the Company’s financial assets and liabilities measured on a recurring basis at fair value, categorized by input level within the fair value hierarchy. The carrying amounts of “Cash and cash equivalents”, “Accounts receivable”, and “Accounts payable” approximate fair value due to the short-term maturities of these financial instruments in the Consolidated Balance Sheets.
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December 31, 2024 |
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(in thousands) |
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Fair Value |
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Level 1 |
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Level 2 |
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Level 3 |
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Assets measured at fair value |
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|
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|
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Derivative financial instruments |
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$ |
796 |
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|
$ |
— |
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|
$ |
796 |
|
|
$ |
— |
|
Total assets measured at fair value |
|
$ |
796 |
|
|
$ |
— |
|
|
$ |
796 |
|
|
$ |
— |
|
Liabilities measured at fair value |
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|
|
|
|
|
|
|
|
|
|
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Warrant liability |
|
$ |
82 |
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|
$ |
— |
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|
$ |
82 |
|
|
$ |
— |
|
Total liabilities measured at fair value |
|
$ |
82 |
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|
$ |
— |
|
|
$ |
82 |
|
|
$ |
— |
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|
|
December 31, 2023 |
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(in thousands) |
|
Fair Value |
|
|
Level 1 |
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Level 2 |
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Level 3 |
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Assets measured at fair value |
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|
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Derivative financial instruments |
|
$ |
26,344 |
|
|
$ |
— |
|
|
$ |
26,344 |
|
|
$ |
— |
|
Total assets measured at fair value |
|
$ |
26,344 |
|
|
$ |
— |
|
|
$ |
26,344 |
|
|
$ |
— |
|
Liabilities measured at fair value |
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|
|
|
|
|
|
|
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Warrant liability |
|
$ |
667 |
|
|
$ |
— |
|
|
$ |
667 |
|
|
$ |
— |
|
Contingent consideration liabilities |
|
|
18,355 |
|
|
|
— |
|
|
|
— |
|
|
|
18,355 |
|
Total liabilities measured at fair value |
|
$ |
19,022 |
|
|
$ |
— |
|
|
$ |
667 |
|
|
$ |
18,355 |
|
Interest Rate Collar and Agreements
The Company had interest rate collar and cap contracts with an aggregate notional value of principals of $850.0 million and $950.0 million as of December 31, 2024 and 2023, respectively, from various financial institutions to manage the Company’s exposure to interest rate movements on variable rate credit facilities. In July 2024, the Company entered into two interest rate collar contracts with a notional value of principal of $200.0 million each to manage the Company's exposure to potential interest rate increases that may result from fluctuation in SOFR. The interest rate collar contracts were effective December 16, 2024 and will mature on April 5, 2027 and 2028. In April 2023, the Company entered into two interest rate collar contracts in an aggregate notional amount of $300.0 million with a maturity date of April 5, 2026 to manage the Company's exposure to potential interest rate increases that may result from fluctuation in SOFR.
The fair value of the Company's outstanding interest rate collars and caps of $0.8 million and $26.3 million were included in “Prepaid expenses and other current assets” and “Other assets” in the Consolidated Balance Sheets as of December 31, 2024 and 2023, respectively, with changes in fair value recognized as a component of “Interest expense, net” in the Consolidated Statements of Operations and Comprehensive Loss.
During the years ended December 31, 2024, 2023, and 2022, the Company recognized interest income of $5.3 million, $7.7 million and $43.8 million, respectively, related to changes in the fair value of its derivative instruments.
Warrant Liability
The warrant liability is stated at fair value at each reporting period with the change in fair value recorded on the Consolidated Statement of Operations and Comprehensive Loss until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument. The private placement warrants are classified as Level 2 based on the availability of sufficient observable information using the price of the public warrants as an indirectly observable quoted price in active markets to measure the fair value of the private placement warrants, which is inherently less subjective and judgmental given it is based on observable inputs.
On October 28, 2020, the Company recorded the initial warrant liability of the private placement warrants of $7.9 million. Subsequently, the warrant liability was remeasured to fair value resulting in gains of $0.6 million, $0.3 million and $21.2 million
reflected in “Change in fair value of warrant liabilities” in the Consolidated Statements of Operations and Comprehensive Loss during the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, and 2023, 7,333,333 private placement warrants remained outstanding at a fair value of $0.1 million and $0.7 million, respectively.
Long-term Debt
The following table sets forth the carrying values and fair values of the Company’s financial liabilities measured on a non-recurring basis, categorized by input level within the fair value hierarchy:
(in thousands) |
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Carrying Value |
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Fair Value |
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Balance at December 31, 2024 |
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Term Loan Facility |
|
$ |
1,105,995 |
|
|
$ |
1,153,346 |
|
Senior Secured Notes |
|
|
615,087 |
|
|
|
612,533 |
|
Total long-term debt |
|
$ |
1,721,082 |
|
|
$ |
1,765,879 |
|
(in thousands) |
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Carrying Value |
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Fair Value |
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Balance at December 31, 2023 |
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|
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Term Loan Facility |
|
$ |
1,149,057 |
|
|
$ |
1,221,012 |
|
Senior Secured Notes |
|
|
743,000 |
|
|
|
745,223 |
|
Other notes |
|
|
426 |
|
|
|
100 |
|
Total long-term debt |
|
$ |
1,892,483 |
|
|
$ |
1,966,335 |
|
The fair value of debt reported in the table above is based on adjusted price quotations on the debt instruments in an active market. The Company believes that the carrying value of its other borrowings, including amounts outstanding, if any, for the Revolving Credit Facility, approximate fair market value based on maturities for debt of similar terms.
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About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.