Advantage Solutions Inc. Class A Common Stock 2026 Q2 Earnings Call

Good morning, and thank you for joining us. First, I want to acknowledge our teammates. We have over 60,000 people who spend the majority of their days in service of our clients and customers. From our retail merchandising reps moving between stores to ensure our clients' products are on shelf, to samplers delighting our retail partners' customers with a pleasant experience and great products, to our key account managers calling on retailers in an effort to add a little more push behind the great brands that we represent. These and thousands of others work in pursuit of exceeding client expectations, and I appreciate the energy and effort they bring each day. Second quarter net revenues of $757 million were up 3% year-over-year, and 4% excluding the effect of divestitures.

While Adjusted EBITDA of $76 million declined 12% and declined 9% excluding divestitures, reflecting several one-time factors and mixed performance across our segments. Experiential Services delivered another very strong quarter, and both demand signals and execution continued to improve across this business, giving us confidence in second half growth. Retailer Services revenues increased 3% year-over-year, but Adjusted EBITDA was down approximately 25% year-over-year, reflecting project timing and costs associated with early-stage project work that we do not anticipate repeating. We expect growth in the second half of the year. In Branded Services, revenue declined 13% year-over-year and was down 11% excluding divestitures, as the recovery is taking longer than expected, and we are impacted by the same persistent challenges as our CPG clients.

Cash generation remains solid, with $19 million in Adjusted Unlevered Free Cash Flow, despite an incremental working capital impact from our SAP final phase implementation. We ended the quarter with $102 million in cash. Turning to our growth initiatives, clients continue to prioritize programs that can demonstrate clear ROI, support trial and discovery, and convert demand into purchases. That trend aligns directly with the capabilities we have built across Advantage. Experiential Services is the clearest proof point. Demand for product demonstrations continues to exceed our expectations, with meaningful opportunities to expand event volume across existing customers and support growth with new customers. We are adding capacity where demand signals are strongest and remain confident in our ability to recruit and staff as needed.

We have seen strong growth across the spectrum of customers we serve, both in the U.S. and internationally, with even higher daily event volumes in our international regions. We believe this provides a useful blueprint for what can be achieved in the U.S. as programs mature and as we continue to improve labor readiness and execution. In our CPG-facing work, Branded Services merchandising projects were a relative bright spot. We are focused on scalable, high-return opportunities that can become durable, long-term relationships as we deploy a highly trained and experienced team against what we see as recurring issues in out-of-stocks at retail. In addition, our Pulse selling system is improving visibility into on-shelf availability, item velocity, and distribution gaps, allowing our teams to target resources more precisely and helping clients connect spending to measurable returns.

Finally, we continue to develop our alert-based execution model, allowing Advantage to see out of stocks, distribution voids, and missing displays in almost real time. Turning to our productivity initiatives, our productivity agenda spans labor planning, process standardization, technology, and operating visibility. Together, these initiatives are designed to manage costs prudently, improve execution quality, and create capacity to support growth. Our centralized labor model continues to enhance labor planning and execution, which is critical as Experiential Services demand and Retailer Services project activity increase. Experiential execution rates of approximately 95% in the quarter demonstrate the efficacy of this model. We are also in the final stages of our enterprise technology transformation, and these new systems will help us support improved data integrity, process discipline, and operating visibility.

We plan to complete the heavy lifting of this transformation this year, and in 2027, we expect to fully leverage these platforms and realize the benefits of the investments we've made to drive better decision-making and efficiency. While many companies are grappling with the existential risks from AI, we are focused on the opportunities to enhance our physical network that was built over decades. We continue to prioritize integrating AI across Advantage in pursuit of better service levels, a better teammate experience, and greater efficiency. We have established a governance structure, including a newly created Chief AI Officer role that is tightly aligned with our tech and data teams. We are prioritizing training and fluency across our organization and the deployment of the right tools to our teammates.

We remain focused on empowering our people to opportunistically employ a wide variety of AI tools that best fit their respective use cases and to find efficiencies in everything they do. We are making sure our teams are educated on the potential of these AI models, how to use them effectively, and encouraging them to find opportunities for efficiency, speed, or enhanced service quality. Our priorities range from personal productivity to enterprise-wide initiatives that deliver faster insights and more precise resource deployment. We have several pilots we have developed across our workforce operations that we expect to increase efficiency, including a new event manager compliance tool, photo verification tool, cart list automation, and a supervisor intelligence dashboard. We continue to develop new AI-led opportunities to bring both efficiency and operational excellence to our business.

Turning to the macro environment, the core consumer themes and K-shaped economy we discussed last quarter have persisted. Lower and middle-income households remain highly focused on value, with purchases increasingly planned around promotions and price points. Higher income consumers continue to shift portions of their baskets toward healthier and better for you options, but they are also becoming more deliberate about the value they receive. Emerging brands continue to also gain share of the industry in many categories as consumers seek variety and gravitate to product discovery. Value-seeking behavior is broadening across income groups. We are also seeing greater price competition among large retailers seeking market share gains and traffic. These trends reinforce the need for highly measurable, cost-effective programs that can drive trial, discovery, and conversion.

Advantage is well-positioned to help clients navigate this volatile operating environment by supporting their growth plans and helping them gain market share in as efficient a manner as possible. We have adapted our business accordingly by emphasizing execution quality, disciplined staffing, and measurable ROI. As a scaled outsourced labor provider, we are well-positioned to support clients seeking flexible capacity and greater efficiency. We continue to monitor energy prices, tariffs, and geopolitical developments, which are affecting consumer behavior. Our outlook does not incorporate a major change in underlying consumer health. Now, turning to our segment results. Experiential Services delivered another very strong quarter. Event volumes increased 18%, with strong incremental margins supported by healthy demand across existing customer relationships and new vendor activity. With revenue growing at a healthy rate, improving profitability remains a priority even as we invest in infrastructure to support higher long-term demand.

We are focused on labor efficiency, stronger training and safety protocols, consistent execution, and a shift toward higher return demos. We expect continued momentum in the second half of the year. In Branded Services, the recovery is taking longer given constrained CPG spending, procurement-driven dynamics, client insourcing, and select client losses. Our focus is on stabilizing the revenue base while protecting profitability. That means strengthening client retention and executive engagement, improving pipeline conversion, hiring and retaining the right talent, and demonstrating measurable ROI through our data, analytics, and execution capabilities. CPG merchandising projects performed well this quarter, and we are hopeful this is a leading indicator for the rest of the business. While we are not assuming a near-term inflection, we do expect modest improvement in the second half of 2026.

Retailer Services had a softer quarter, primarily due to project timing, a difficult comparison with an unusually strong prior year period, and higher execution costs on merchandising projects. We view these factors as temporary and largely specific to the second quarter. We expect performance to improve sequentially through the second half as larger projects ramp up. The pipeline remains encouraging, and we expect project-related earnings volatility to moderate in the second half. Our priorities in Retailer Services are clear: align staffing with demand, improve execution discipline and operating consistency, and better match costs with associated revenue streams. Cash generation remains a structural strength of our business and a core priority. We saw unlevered free cash flow of $19 million, or 25% of Adjusted EBITDA in the quarter. For the first half, unlevered free cash flow was 79% of Adjusted EBITDA.

We have seen some expected pressure on cash flow from working capital, which we believe will improve in the second half as we have moved past our final SAP implementation phase. Our capital allocation priorities remain unchanged. We intend to direct free cash flow primarily toward debt reduction while maintaining the liquidity and strategic flexibility required to operate the business. Turning to our outlook, we are taking a balanced view of the remainder of the year. That view reflects three dynamics: continued strength in Experiential Services, improving Retailer Services performance with a more normalized earnings cadence in the second half, and a more gradual recovery timeline in Branded Services. We are reiterating our full year 2026 revenue and Adjusted EBITDA guidance ranges, reflecting the successful execution of our growth initiatives and in consideration of the investments we are making into our business and our teammates.

We are also reiterating full-year guidance of Adjusted Unlevered Free Cash Flow of $250 million-$275 million and net free cash flow conversion of 25%, excluding debt refinancing costs. We are encouraged by the strength of our Experiential Services demand and the progress across our growth agenda. At the same time, we are clear-eyed about the work required to stabilize Branded Services and reduce margin pressure driven by business mix. We remain focused on delivering for clients, generating cash, and building a more durable and profitable Advantage. I'll now turn it over to Chris for more detail on our financial performance.

Thank you, Dave, and welcome to everyone joining us today. I will review our second quarter performance by segment, discuss our cash flow and capital structure, and provide additional detail on our outlook. I will outline our business results on a reported basis and also on an adjusted basis for divestitures, which weighed on our year-over-year performance. In the second quarter, businesses we have divested represented a year-over-year headwind of approximately $5 million to revenues and approximately $3 million to Adjusted EBITDA. For 2026, we still expect divestitures to represent a year-over-year headwind of approximately $20 million to revenues and over $10 million to Adjusted EBITDA. Turning to our divisional performance and starting with Branded Services. In the second quarter, we generated $224 million of revenues and $22 million of Adjusted EBITDA, down 13% and 36% year-over-year respectively.