Advantage Solutions Stock

Ladies and gentlemen, thank you for joining us, and welcome to the Advantage Solutions Third Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I will now hand the conference over to the Advantage Solutions team.

Welcome to Advantage Solutions Third Quarter Earnings Conference Call. Dave Peacock, Chief Executive Officer; and Chris Growe, Chief Financial Officer, are on the call today. Dave and Chris will provide their prepared remarks, after which we will open the call for a question-and-answer session.

During this call, management may make forward-looking statements within the meaning of the federal securities laws. Actual outcomes and results could differ materially due to several factors, including those described more fully in the company's annual report on Form 10-K filed with the SEC. All forward-looking statements are qualified in their entirety by such factors.

Our remarks today include certain non-GAAP financial measures, which are reconciled to the most comparable GAAP measure in our earnings release. As a reminder, unless otherwise stated, the financial results discussed today will be from continuing operations and revenues will exclude reimbursable expenses.

And now I would like to turn the call over to Chief Executive Officer, Dave Peacock.

Thanks, operator. Good morning, and thank you for joining us. I want to begin by thanking our teammates for their hard work over the past several years. Our people continue to adapt to a challenging environment, serve our clients and customers with dedication and drive strong execution. I'm grateful for their commitment. As a services business, our people are the engine that drives our company.

On a pro forma basis, excluding divestitures, third quarter net revenues of $782 million increased 1% year-over-year, representing our fourth consecutive quarter of growth. Adjusted EBITDA was $85 million, down 12%, reflecting continued planned investment in the business and ongoing headwinds in Branded Services.

Our third quarter included some encouraging developments in a dynamic market. Experiential Services delivered another strong quarter with revenue up over 11%, driven by strong execution and global growth. And Retailer Services returned to both revenue and adjusted EBITDA growth. While this was partially offset by a soft performance across Branded Services, we continue to see solid growth in our retail merchandising and supply chain businesses within this segment. Overall, our year-to-date performance is largely in line with the outlook we gave at the beginning of the year, with revenue up 3% and adjusted EBITDA down 3%.

Our segment results reflect a continuation of the trends we have seen so far this year, including a particularly strong performance in our labor-related businesses. Experiential Services delivered another strong quarter. Demand signals remain exceptionally healthy. We continue to see opportunities to expand event volumes, and our team sustained high levels of execution with over 13% growth in events per day.

Adjusted EBITDA growth was modest against a tough comparison and given our decision to invest in wages, recruiting and staffing to meet anticipated demand and sustain superior service levels. We expect this margin pressure to be temporary and believe these investments are critical to capturing the significant long-term opportunity in this segment. On that point, pricing actions began to take effect during the quarter and should increasingly offset our labor investments. Looking forward, we expect double-digit revenue and adjusted EBITDA growth along with margin expansion in both the fourth quarter and the full year.

Retailer Services delivered continued revenue growth given strong project demand. Our Daymon private brand business also outperformed expectations as our team helps retailers meet the trend toward value and strong private brand portfolios. Our merchandising teams executed well with in-stock performance progressing well along with other key operating measures. In addition, we continue to make progress pursuing non-grocery customers.

Results benefited from a small tariff refund in the quarter, but underlying trends were strong. Our priorities remain unchanged. Staffing alignment and consistency, superior execution and better operating discipline are all areas of focus as we invest in our capabilities.

In Branded Services, performance has not met our expectations, and we are taking action to change the trajectory of this business. While we are seeing strong growth in our business from our top clients, we continue to feel the effects of client losses and some ongoing pullback in smaller clients due to regional competition and in-sourcing. However, our project work in branded retail was a bright spot and grew during the quarter. We're optimistic about an improving project pipeline in this business.

In addition, we are seeing accelerating growth in our Supply Chain as a Service business, and we are optimistic about its prospects. CPG brands continue to cite growing complexity in the route their products take to market, and our offering is well positioned to help address that complexity. We have assembled a network of more than 100 omnichannel fulfillment centers and multiple freight partnerships that supports clients across business-to-business, direct-to-consumer and e-commerce channels and can provide end-to-end logistics services, including last-mile delivery.

This business continues to gain traction. With one client we recently onboarded, we are able to reduce retail chargebacks by 83% and time in transit by 32%. This business is on track to grow meaningfully in 2026, and we expect to continue growth in 2027. Looking ahead, we expect the Branded Services performance to improve sequentially in the fourth quarter, and we still expect the segment to move towards stabilization in 2027.

To better service our customers long term, today, we are announcing a new restructuring plan. Our technology and AI investments have given us better tools to deliver on customer expectations, simplify our organizational structure and operate more effectively and efficiently. While these changes are improving our service levels, they have also enabled us to streamline our cost structure to match the shape and trajectory of our business.

Our traditionally lower-margin labor services continue to show durable demand and growth as packaged goods producers and retailers find increasing value in our team's ability to both enable growth at retail and activate shoppers. Conversely, some of our formerly higher-margin network businesses where we serve as an intermediary between parties for sales or marketing services are seeing persistent cyclical declines. This mix shift is a result of a long-term change in demand and as such, the cost structure and processes that supported our historical mix are no longer properly aligned with the businesses we have today. As a result, we are undertaking a restructuring of the organization, which is a critical second phase of transformation of our business.

Leveraging previous investments, we are evolving our organization to better align with customer needs and improve our service levels. We have identified and begun implementing restructuring actions designed to reduce layers and bureaucracy and bring our cost structure in line with current business opportunities. The resulting structure is being set in motion in the fourth quarter, will continue into 2027 and is estimated to yield approximately $25 million of annualized savings, net of investment, with plans for over $5 million in additional net savings over time.

Importantly, the 2 layers of our organization closest to clients and customers are not affected by these actions, and we do not expect any disruption to how we serve them. In fact, we are growing our employee head count and enhancing our talent levels throughout 2026 across client-facing roles.

As an organization, we have been focused on transformation to improve our client service and employee experience, especially with our IT investments and AI use cases. As we move toward the end of our IT platform overhaul, we have remained disciplined in consistently evaluating the long-term return on each investment.

Every investment should accomplish 1 of 2 objectives. It should either enhance the level of service we can provide our customers or improve the experience our teammates have working at Advantage. Chris will discuss more about our specific technology platforms. Our current restructuring will create a more efficient organization that delivers better client service, reduces friction for our teammates and more effectively converts revenue growth into margin expansion, earnings growth and cash generation.

Our top 25 clients are collectively showing strong growth. However, we have opportunities to better support brands in local markets or regions. Our new structure addresses this by transitioning to 4 regions and implementing P&L ownership for our regional leaders. We are doing this while bolstering our teams serving larger national accounts, making us the only agency with both a strong national and regional footprint and the only true national sales and execution agency for fresh brands at retail. Fresh categories are growing, and we're positioned to capitalize on this with our tenured and talented team.

Turning to the macro environment. Our business is increasingly concentrated around leading food retailers that continue to grow and take market share. Our labor and execution services support growth for these best-in-class retailers, providing resilience in our revenue outlook. As we have done in the past, we conducted surveys of our customers in the third quarter to assess the operating environment. We leverage this critical data to help both our manufacturing clients and retail customers grow and take market share.

While affordability continues to dominate the narrative in the industry, our surveys show that the shopping experience is becoming a critical differentiator at retail. Ease of shopping ranks first as a determining factor of retailer choice, ahead of price and promotions. This supports our shelf space planning and reset business as retailers look to dynamically assort their shelves to reduce out of stocks and make the shopping experience easier.

Understanding the mission behind a shopper's trip and delivering the experience they expect is critical to becoming a retailer or brand of choice. Our Experiential Services, which range from sampling to assisted selling to brand activation, enable us to help retailers capitalize on this trend as shoppers look to discover new products when they shop in brick-and-mortar stores. The key takeaway from these surveys is that retailers and manufacturers are working to serve these discerning shoppers and are focusing more on the shopping experience than ever before and Advantage is there to serve them in this journey.

Consumers also continue to be value-seeking, and our Daymon private brand business leads representation of contract manufacturers in this segment of the market. We partner closely with retailers to help them tailor their private brand programs and can bring scale and speed to innovation with more than 35,000 global contract manufacturing relationships.

Turning to our outlook. We are reiterating our full year revenue and adjusted EBITDA guidance. The business is broadly performing in line with our prior expectations, but uncertainty has increased from the impact of rising energy prices and interest rates on consumer spending. We believe our diversified portfolio allows us to successfully navigate this challenging environment.

In conclusion, we are encouraged by trends in Experiential Services and Retailer Services, and we understand the work required in Branded Services to improve our service levels and performance. We believe the actions underway will create a more agile and more durable Advantage.

I will 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 third quarter performance by segment, discuss our cash flow and capital structure and provide additional detail on our outlook. Unless otherwise noted, the year-over-year comparisons I will discuss are on a pro forma basis, excluding divestitures.

In the third quarter, businesses we have divested represented a year-over-year headwind of approximately $5 million to revenues and approximately $3 million to adjusted EBITDA. And 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.

Starting with Experiential Services, we generated $306 million of revenue and $35 million of adjusted EBITDA, up 12% and 0.3% year-over-year, respectively. Results reflect continued strong demand, higher event volumes and solid execution. Profit growth was dampened due to a tough comparison and our proactive decision to invest in wages, recruiting and staffing to support higher demand and sustained execution. Pricing actions began to take effect during the quarter and should provide increasing margin support as we move forward. Looking ahead, we expect double-digit revenue and adjusted EBITDA growth and margin expansion for both the fourth quarter and the full year.

Turning to Branded Services, we generated $225 million of revenue and $18 million of adjusted EBITDA, down 11% and 55% year-over-year, respectively. Performance remained under pressure from client losses and unfavorable business mix. Declines in higher-margin headquarter sales and agencies were partially offset by strong growth in supply chain revenue. Encouragingly, new business wins improved during the quarter and project work in branded retail grew. As Dave discussed, we are taking meaningful action to align the cost structure with the current revenue base and mix, and we expect sequential margin improvement in the fourth quarter with a more meaningful path toward revenue and margin stabilization in 2027.

Finally, for our Retailer Services segment, we generated $251 million of revenue and $32 million of adjusted EBITDA, up 1% and 43% year-over-year, respectively. Results included a small benefit from tariff refunds related to goods we source for retail clients. Excluding the benefit of tariff refunds, adjusted EBITDA would have been up over 30%. Performance was supported by growth in SAS, including pricing, project activity and new business wins as well as solid results at our Daymon private label business. Staffing remains an important focus as we align labor with customer demand and become more agile in reacting to changes in the market. Looking forward, we note that we are going up against a more difficult comparison in the fourth quarter. Despite quarter-to-quarter volatility, we currently estimate roughly flat revenue and adjusted EBITDA growth for the year in this segment.

Our shared service costs were up modestly year-over-year in the third quarter, reversing some of the favorability we experienced during the first half, but those costs remain down year-to-date compared to last year. We have seen lower medical costs than anticipated this year after 2 years of increases well ahead of expectations, which is encouraging. At the same time, we continue to manage costs closely across the shared services and are taking advantage of AI and automation opportunities.

As part of our restructuring activity, we are also taking targeted action to reduce redundant shared service costs and other costs not providing the value originally anticipated. We are also being more discerning about IT projects, which should help lower our costs as well as support lower CapEx in the future.

Turning to Workday, as the project progressed, the cost of the rollout anticipated financial and operational benefits no longer delivered an adequate return. As Dave mentioned, every investment should either enhance the level of service we provide or improve the teammate experience. Starting the project revealed several opportunities to streamline boundary systems, improve processes and leverage new AI technology to enhance workflows without the cost and transition risk of a large system implementation. We have paused the Workday implementation while we reevaluate its scope, design and timing against current business needs.

In the interim, we will continue to operate on our existing human capital platform, pursue targeted upgrades and leverage AI to deliver comparable functionality at a lower cost with reduced transition risk. This approach also creates capacity to streamline, improve and reduce duplication across our other technology systems.

Importantly, this decision reduces our 2026 capital spending expectations, supporting our updated CapEx range of $40 million to $45 million. And this should result in lower future capital and operating costs relative to completing the implementation. We currently expect capital expenditures in 2027 to be in a range of $35 million to $40 million, and we will provide an update in early 2027 once we solidify our spending plans for the year.

Moving beyond Workday, we are beginning the second phase of our transformation, focused on simplifying the organization and resetting the cost structure. As Dave mentioned, the program represents approximately $25 million of annualized cost savings starting in the fourth quarter with plans for at least $5 million in additional savings over time. We continue to assess the opportunity for expanding those savings by addressing spending programs, IT projects and other areas.

The majority of the near-term actions associated with the restructuring will occur in the fourth quarter with the broader restructuring extending into 2027. Most of the operating cost actions are weighted to Branded Services and select support functions. The program extends beyond role reductions to include organizational delayering, consolidation of support structures, reductions in vendor and third-party spend, real estate optimization and lower discretionary costs. We are implementing these actions thoughtfully, recognizing the impact on colleagues while protecting and investing in the 2 layers of resources closest to our clients.

We expect to incur restructuring and reorganization costs related to this work starting in the fourth quarter. We estimate those costs will total $7 million to $10 million, with the majority incurred in the fourth quarter and some extending into 2027. We'll provide more detail as we progress with our plans. The financial objective of the restructuring is to align costs with the current revenue base and business mix and improve incremental margins on future growth.

We remain laser-focused on improving cash generation and managing working capital. DSOs were right at 60 days in the quarter, down from the second quarter, and we remain on a path to approximately 55 days by year-end. We continue to focus on collections and disciplined cash management to achieve this outlook. This diligent focus on working capital management helped support strong adjusted unlevered free cash flow in the quarter, which reached $99 million and a conversion rate of 116%.

Cash generation remains a core strength of the business, supported by disciplined cost and working capital management. Restructuring and Workday-related cash costs will affect reported cash flow, but they should be distinguished from the underlying operating cash generation of the business.

Moving to the balance sheet and capital allocation. We ended the quarter with approximately $131 million of cash on our balance sheet. Net leverage ended the quarter at approximately 4.6x. Our priorities remain maintaining appropriate liquidity and reducing debt. We do not anticipate share repurchases beyond activity intended to offset dilution, and both cash and free cash flow will continue to be directed primarily toward debt reduction.

Finally, turning to our outlook. We are reiterating our full year revenue and adjusted EBITDA guidance. We continue to expect revenue growth of flat to up low-single digits with adjusted EBITDA flat to down mid-single digits versus the prior year. We are also reiterating our adjusted unlevered free cash flow guidance of $250 million to $275 million and net free cash flow at 25% of EBITDA before related debt financing costs. We also expect lower interest expense and CapEx as noted. Key factors influencing our outlook include continued strength in experiential demand and execution, retail project timing and second-half project ramps and the pace of restructuring in Branded Services.

As Dave noted, uncertainty in the market has increased, and our guidance allows for a relatively wide range of outcomes in the fourth quarter. As we enter 2027, our focus is on completing the second phase of our transformation, realizing the associated savings and positioning the business for better earnings flow-through as revenue grows.

Thank you for your time. I will now turn it back over to Dave.

Thanks, Chris. The third quarter reinforced the strength of our growth initiatives and the benefits of our diversified offerings while also solidifying where we need to sharpen our focus and improve our execution. The restructuring we announced reflects our approach of always investing to improve our client service where returns are also compelling.

We will execute these actions thoughtfully in an effort to improve how we serve our customers and reduce friction for our teammates. We believe this work will position Advantage as the best service provider to consumer retail while converting growth into stronger margins and cash flow generation over time.

I want to thank everyone for joining us today. Operator, we are now ready for questions.

[Operator Instructions] Your first question comes from the line of Luke Morison with Canaccord Genuity.

So Dave, the restructuring obviously weighted towards Branded. I think you mentioned in the deck, new business wins improved during the quarter. Just help me think about like what does a healthier Branded business look like in the coming quarters and years as these actions flow through and are in place, both from a growth and margin -- sustainable margin perspective?

Yes. Thanks, Luke. I think a couple of things are important. We said in our prepared remarks, but our restructuring was first designed to improve the service level to our clients. It came with savings because one of the things that we have seen and experienced is we just had too many layers and frankly, bureaucracy was getting in our way to serving clients effectively. So we didn't touch the first 2 layers that touch customers and clients. We've actually invested in growth in client-facing roles, but we eliminated some management roles. That's going to come with savings. So there was -- there were reductions, but also reinvestment in the plan.

I think it's going to put us in a much better spot as a business overall because we now have dedicated focus with really strong leadership on national accounts, kind of large mass and grocery club retailers. And then you've got also our regional focus where we've got 4 regions now with general managers that have full P&L ownership and ownership of the functions from business development to sales execution to client service level. So in the past, we've had some of those functions centralized, and we've put some of that back into the regions so they can be more nimble and more accountable for the results.

When you look at Branded Services overall, we do see some green shoots. We talked about Supply Chain as a Service, which tends to be a lower-margin business, but highly in demand. As we listen to a lot of our clients and if you're listening to any of the CPG earnings calls, there's a lot of discussion around challenges in supply chain, and we can help our clients with that, especially because we have an understanding of the shelf dynamics as well and what's actually needed in store.

And then we're very optimistic about our retail merchandising business. This is a business that -- where we basically go out to stores and either improve the execution or even sell in incremental merchandising of products on behalf of our CPG clients. This helps the retailers who are seeing more challenges in getting labor in store. But this is a business that operates at a slightly higher margin than the overall average of the Branded Services segment, and it's where more and more of our pipeline and growth is coming from as it relates to new business opportunities.

So I think you start seeing stabilization as you get to '27. And then I think this retail merchandising business and I'd say, an improving regional, especially headquarter selling business gets this business back on track.

Super helpful. And then maybe, Chris, one for you. The Workday implementation has been paused, but now you have this phase 2 program running into 2027. Just how should we be thinking about the path to stronger free cash flow conversion from EBITDA as that transformation work matures from here?

Yes. They're obviously related in a way, let me say it that way, Luke, but I would just say that maybe taking each of the pieces here, when I think about Workday, for right now, it's paused. We're going to work through that program. That manifests itself and as we said, I think, in my prepared remarks, in less CapEx in the short term.

There is a charge we'll take this quarter as well. I still think that our charges -- kind of restructuring charges for the year will be around what we had said before, around that $35 million level, maybe a little bit above that. I think you're going to see about $7 million to $10 million related to restructuring actions overall to achieve this $30 million plus in savings. So given what we've realized to date in charges, given what we expect from the new program, it still puts us, I think, in line with what we had said to you before.

Do some actions kind of linger into next year? Certainly, that's possible. But I still think we're going to have a lower level of restructuring charges next year and the outcome of that would be better cash flow. At the same time, we talked about CapEx, and CapEx is a little lower this year, and we indicated that in that kind of $35-plus million level next year. So it's going to be down as well in 2027. That, too, will help cash flow. So I think there's still some -- even though we've got some changes going on here, if I could say it that way, I think you're still going to see the kind of support there for stronger free cash flow growth in 2027.

Your next question comes from the line of Greg Parrish with Morgan Stanley.

Congrats on the results. Just thinking about fourth quarter here, I mean, how should we think about the cadence relative to the results you just put up, revenue up 1%, EBITDA down 12% organically on year-over-year? Like how do we roll that forward to fourth quarter? Your guidance range sort of allows for a lot of flexibility?

It does, and it was deliberate, as you can imagine, we thought a lot about that. Just there's a number of moving parts that caused us to want to keep that a little bit wider range going into the fourth quarter. I think the wider range allows for varying outcomes, and we're in the middle of restructuring our Branded Services business. We did indicate that would get better in the fourth quarter. We also indicated that you'd see double-digit revenue and EBITDA growth in Experiential, and we said there would be margin expansion there. We also indicated that Retailer was going to be a little more challenged in the fourth quarter, just we've seen some volatility quarter-to-quarter in the project work, and we have a tough comp to the prior year. So we've given some of the elements, if you will, Greg, I think we would kind of leave it at that from that standpoint to give your indication there for the fourth quarter.

Yes. Greg, let me build on what Chris said. One thing to think about is, especially when he talks about Retailer, but it applies to some other spots in the business, it gets down to being awarded projects and then staffing and having that timing aligned. So sometimes your projects will span December through February or December through March. And so to the degree you can get staff up and running, you can realize some of that earlier or some of that may bleed into the following year and because a lot of retailers especially have different fiscal years than the calendar fiscal. So that's driving some of this as well.

Yes. Okay. I appreciate the color that you were able to give. So on this cost savings program, it seems that the savings are all operating, it seems like. And then I mean, will any of these savings be reinvested? Or do you expect most, if not all, to sort of flow through to the bottom line?

The savings that we report in both $25 million and greater than $5 million going in the future are net. So as it relates to how those are in the P&L, if you will, there are reinvestments that were already contemplated. They obviously don't include kind of onetime costs, but they were net because we did make some reinvestments in frontline roles and client-facing roles and just even in caliber of talent that -- in a handful of leadership roles.

Okay. That's helpful color. And then maybe just one last one for me. So this tariff refund, I mean, I think you can kind of back into it based on the color you gave. I don't remember seeing this before. I mean, is this the first quarter that you've seen this flow through? And is this -- is there any expected future flow-through of this? Or is this onetime?

Yes. I would just say that you've seen like every CPG company has had this as well. We have a smaller business within our Retailer Services segment that does, for -- I'll call it, for a short period of time, will hold inventory, but it purchases product for some retailers. And that business, therefore, experienced a negative effect of the tariffs last year. And then this year gets the -- obviously, the benefit from that. There's been some refunds coming through as a result of the changes in those programs. So that did come through. Yes, you can do the math on that, and it was not a huge contributor, but it did contribute to our profit in the third quarter.

Okay. So maybe a little bit more modest impact in fourth quarter and then limited next year.

Yes. Sorry, Greg, you asked about going forward. I would not expect much going forward. I think most of that's already been realized. So I think we're there for -- again, I would think we're always trying to look for more, of course, but I think there's -- most of our refunds that we've applied for have all been returned already, and they're here in the third quarter.

There are no further questions at this time. I will now turn the call back to David Peacock for closing remarks.

We want to thank everybody for joining, and we look forward to connecting with this group next quarter. Thank you.

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for participating.

Welcome to Advantage Solutions Second Quarter Earnings Conference Call. Dave Peacock, Chief Executive Officer; and Chris Growe, Chief Financial Officer, are on the call today. Dave and Chris will provide their prepared remarks, after which, we will open the call for a question-and-answer session.

During this call, management may make forward-looking statements within the meaning of the federal securities laws. Actual outcomes and results could differ materially due to several factors, including those described more fully in the company's annual report on Form 10-K filed with the SEC. All forward-looking statements are qualified in their entirety by such factors.

Our remarks today include certain non-GAAP financial measures, which are reconciled to the most comparable GAAP measure in our earnings release. As a reminder, unless otherwise stated, the financial results discussed today will be from continuing operations, and revenues will exclude reimbursable expenses.

And now I would like to turn the call over to Dave Peacock.

Thanks, operator. 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 onetime factors and mixed performance across our segments.

Experiential Services delivered another very strong quarter and both demand signals and execution continue 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 insight 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, cartless 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 efficiencies, 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 in-sourcing 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 as 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 3 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 time line 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 to $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. And 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.

So 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. Excluding divestitures, revenues were down 11% and adjusted EBITDA was down 30%. The segment continues to face pressure from ongoing client in-sourcing, softer CPG spending and client losses. However, we saw encouraging activity in CPG merchandising projects, which contributed positively to results in the quarter. Our focus remains on stabilizing the revenue base, improving pipeline conversion, client retention and maintaining disciplined cost management. We continue to expect gradual improvement through the balance of the year.

Turning to Experiential Services. We generated $296 million of revenues and $34 million of adjusted EBITDA, up 19% and 32% year-over-year, respectively. Results were driven by accelerating demand for product demonstrations, higher event volumes and strong operational execution. Demand remained healthy across both existing and new customers, and we continue to see opportunities to further increase event volumes in the second half of the year. We are confident in our ability to recruit and staff to meet this increased demand.

Finally, in Retailer Services, we generated $237 million of revenues and $20 million of adjusted EBITDA, up 3% and down approximately 25% year-over-year, respectively. Performance was impacted by project timing, a difficult comparison with unusually high project activity in the prior year and higher costs related to execution issues on a new project in the quarter. We view these as unique and temporary factors and expect sequential improvement in the second half versus the first half performance. We also have a stronger project pipeline in the second half and expect project-related earnings volatility to moderate as these programs ramp.

Offsetting some of these headwinds, our private label business delivered a solid quarter as the industry backdrop became more favorable and the channel mix drag eased again modestly. Our focus remains on execution, staffing alignment and operational discipline to better align costs with project activity and drive more consistent earnings growth. From a cost perspective, during the quarter, we saw more favorable health insurance cost trends, which have been a meaningful pressure point over the last year.

Moving to the balance sheet and liquidity. We ended the quarter with $102 million in cash, reflecting our continued focus on disciplined capital management and strong cash generation. Our net debt level stood at approximately 4.5x trailing EBITDA.

Turning to cash flow and working capital. Cash generation remains a core strength of the business, and we view it, along with working capital discipline, as important long-term shareholder value creation drivers. Our days sales outstanding, or DSO, remained elevated during the second quarter, primarily due to the impact of our final SAP implementation and customer payment timing, both of which we continue to view as temporary. We expect DSOs to improve steadily through the remainder of the year, including in the third quarter, supporting strong full year cash flow generation.

Adjusted unlevered free cash flow was $19 million in the second quarter, with a conversion rate of 25%. The performance this quarter was negatively affected by an increase in DSO, as expected. We expect strong working capital improvement in the second half, which will contribute to free cash flow generation and support our cash flow outlook.

Moving on to capital allocation. This year, we have focused on debt reduction, particularly during the first quarter around our refinancing. In the second quarter, we repurchased approximately $15 million of our shares. These repurchases were primarily intended to help offset dilution from stock grants and exercises. As we look ahead, free cash flow will primarily be directed toward debt reduction.

Finally, turning to our outlook. We are encouraged by our second quarter performance and continue to maintain a balanced outlook for the remainder of the year. We are reiterating our full year 2026 revenues and adjusted EBITDA guidance ranges given a solid first half of the year. However, we've updated our guidance for interest expense and capital expenditures, which are now slightly lower than previously forecasted. Our free cash flow outlook remains unchanged.

From a business perspective, we continue to see strength in Experiential Services, sequential improvement in growth in Retailer Services and a more gradual recovery in Branded Services on its path towards stabilization. Key factors influencing our outlook include Experiential Services demand and execution, Retailer Services project timing and second half project ramps and the pace of recovery in Branded Services. Overall, we've taken a prudent view of the second half of the year.

Regarding quarterly cadence, given a stronger first half performance, our guidance implies that second half adjusted EBITDA will represent approximately 53% of the full year total. We expect fourth quarter adjusted EBITDA to be higher than third quarter adjusted EBITDA. Our focus remains on improving execution, raising profitability and delivering consistent cash generation.

Thank you for your time. I'll now turn it back over to Dave.

Thanks, Chris. We remain encouraged by the momentum in the Experiential Services and the expected improvement in Retailer Services as larger projects are ramping up. At the same time, we continue to focus on stabilizing Branded Services while protecting profitability. We are also advancing our productivity initiatives across labor planning, process standardization, technology and operating visibility while integrating AI to support stronger service levels, a better teammate experience and greater efficiency. Together with our focus on disciplined capital allocation and strong cash generation, we believe these efforts position Advantage to build a more durable and profitable business over the long term.

I want to thank everybody for joining us today, and we look forward to speaking with you again next quarter.

Operator, we're now ready for questions.

[Operator Instructions] Your first question comes from the line of Greg Parrish with Morgan Stanley.

Maybe just on Branded, I know you called out maybe a more gradual recovery in second half. But thinking ahead to 2027 and beyond, in your view, what's the catalyst that really gets this business stabilized?

I think if you think about it, Greg, we're coming off a few kind of larger client losses, and there's various reasons for those. But as we move into '27 -- and let's talk about Branded Services first, we're seeing parts of that business demonstrate growth, which is kind of giving us some optimism.

And then you're lapping, like I said, if you go back in 3 years, we had some resignations we talked about and then a couple of key client losses, which has actually put us in a position to have a more kind of balanced, and I'll call it, more fragmented client base. And if I look at our top 25, 30 clients, year-over-year, they're growing. And so all these things are signs to us that things are moving towards stabilization. It's just in a long lead contracted business. You have to get through kind of these quarterly cycles until you can realize that shift or that pivot.

And then you just heard our results in Retailer, which really are driven primarily by a tough comp. We had a pretty large, what I'll call, onetime project in the second quarter of last year that did not repeat this year, but the underlying business remains strong. And we're never going to turn away significant project work and we get it from time to time. But that business has been kind of a consistent low -- slower grower than Experiential, but consistent growing business for us. And we see opportunity with new lines of service that we can bring to our retail partners to give us optimism.

And then Experiential, the demand signals continue to be very strong, both from large clients, but also new business acquisition that we've been working on and we've realized as recently as the second quarter. So all of those things give us optimism as we look at '27.

Great. That's helpful. And then maybe just on the other side of the coin, just Experiential. Obviously, a lot of strength, 3 quarters in a row here, 20% growth. I feel like we sort of talked about this a lot, but there's new demand, you had some new clients come on board, better labor availability. I'm not sure if I missed anything there. But maybe zooming out, thinking about next year beyond, I mean, how durable is this outsized strength that you've been seeing in Experiential?

I think it's very durable. Like I mentioned, that the demand signals are very strong from our clients, but also -- and think of it too, from a macro standpoint. I mean the growth of emerging brands in the industry and the growth of innovation and new products, even from more established or larger brands, is not slowing down. And so that stimulates the need for sampling and trial. And I think retailers, justifiably so, are realizing that sampling and experiential and in-store demo and retail payment, all those things are really important for the customer as they come into the store. And so they compete on that level and that works to support that business.

And I want to give our team a shout out because they've done a really good job on the execution front. And if I think about when we are deploying AI, and I know it's a buzzy term and everybody wants to talk about it, we only really do so when we think there's real tangible benefits and where we see AI as an enabler to the business. I'd say Experiential is a good example of that, where we're really speeding up our time between application and when they actually are working at a [ cart ]. We're compressing that. So we're getting people through the funnel much quicker. Photo verification, which is important in this business. We found ways to really streamline that process. I rattled off with you in the prepared remarks. Those are just a few of the things that we're doing that -- where AI is bringing real advantage. And when you put it all together, it's just driving better execution rates and efficiency.

Greg, I would just add to that, that we talked about this really at the start of the year and after last quarter as well, just the investments we're making in that business to sustain the growth. So you're seeing that here in Q2, you'll see it in the second half of the year. Really proud of the team to be able to put up nearly 20% revenue growth and that degree of incremental margin improvement.

But I think -- I will make sure we just reiterate that we're preparing and getting the business in a place where we can continue to sustain this rate of growth, do it in a very high-quality way. And as you saw this quarter, we hit that 95% execution. So it puts us in a great place to be able to really grow in the second half of the year and into 2027.

Yes. Okay. Great. Congrats on the quarter. I'll pass it on.

Your next question comes from the line of Luke Morison with Canaccord.

So I think you called out CPG merchandising projects as a relative bright spot, possibly a leading indicator for the rest of Branded. Can you just help me understand sort of like the underlying mix there? Is client spend rotating within that segment? Are you seeing mix shift? Like help me understand what's happening with that comment?

So if you think about that business, 2 of the big drivers within Branded Services are kind of headquarter selling or where we represent a client at headquarters and then retail merchandising, where we are sending folks in to execute in-store. And you're seeing persistent challenges with in-stock in a lot of category, not every category, but probably a majority of categories across the store, and there's a lot of reasons for that at retail.

And you're not going to sell them if it's not on the shelf, and I think our clients understand that. So you're seeing an increase in project work so that you've got contracted continuity work. And if you look back maybe a year ago, projects were, call it, maybe 15% of our total work in this space in the first half. Now they're close to a little under 25%. And so we saw a pretty nice lift in project work of a little over 20% year-over-year, which is telling us that sort of unplanned need and/or opportunity to either get more the display space on the floor or remediate out of stocks.

And we see -- as we look forward and have conversations with clients in both current and prospective, we see an opportunity to lean into this business. And it's a syndicated business. We have some direct teams, but obviously, we can see realized pretty decent margins when you're utilizing an existing force out there against multiple clients to solve problems.

And then we've also put some investment into this area in becoming more alert-based and more, how do I say, just bring more efficacy to the work. These folks were typically allocated by time. So going into stores every week, every 2 weeks, every 4 weeks on behalf of clients. We're starting to pilot and realize great results in making it more alert based, where we get a scan or a read from a store and we actually just go and address whatever that issue is, a drawn-down display, out of stocks, whatever that might be. So that's allowing us to deploy resources more efficiently as well. And it's a great labor force. I mean it's a team of roughly 5,000 folks, average tenure with the organization over 9 years, a lot of dedicated folks that both sell and remediate problems for our clients in stores.

Yes. Yes. Okay. Super helpful. And maybe just a follow-up. You've said reducing mix-driven margin pressure is obviously a priority here. As I look at Experiential, it's both your fastest grower and your lowest margin segment. So help me just think through like what closes that gap? Is it labor efficiency? Is it event mix? Is it pricing? Is it -- is there something else there?

Yes. Luke, it's Chris. Just to kind of address that in a couple of different ways. Overall, when you have this, call it, mix modeling that's occurring this year, with Branded Services down and Experiential up, you're going to have that kind of weight on the margin profile of the business. We couldn't help but reinvest back in the business this year as well. So you're seeing a little less incremental margin in Experiential this quarter, but it's all deliberate. And I would just say, again, puts us in a great place to be able to sustain the growth going forward.

As I look ahead, we talk about a path towards stabilization for Branded Services. So that's what we -- we still see us on that path. Just maybe it's a little a little slower. But I think you're going to see that slow and gradual improvement in the rate of decline there. You're seeing really good growth in Experiential. And then Retailer, we talked about that being able to grow in the second half of the year.

So you've got -- you're going to have some equalization, if I can say it that way, of the margin across the businesses as one grows and one declines, and you're going to have -- you've got investments that are influencing that. And then you've got the benefit of the stabilization of Branded Services that will allow us to achieve that kind of margin stability, and hopefully, margin growth next year.

There are no further questions at this time. I will now turn the call back to Dave for closing remarks.

We want to thank everybody for joining, and we look forward to connecting with this group next quarter.

This concludes today's call. Thank you for attending. You may now disconnect.

Greetings, and welcome to the Advantage Solutions First Quarter 2026 Earnings Call. [Operator Instructions]

As a reminder, this conference is being recorded.

Welcome to Advantage Solutions First Quarter Earnings Conference Call. Dave Peacock, Chief Executive Officer, and Chris Growe, Chief Financial Officer, are on the call today. Dave and Chris will provide their prepared remarks, after which we will open the call for a Q&A session.

During this call, management may make forward-looking statements within the meaning of the federal securities laws. Actual outcomes and results could differ materially due to several factors, including those described more fully in the company's annual report on Form 10-K filed with the SEC. All forward-looking statements are qualified in their entirety by such factors.

Our remarks today include certain non-GAAP financial measures, which are reconciled to the most comparable GAAP measure in our earnings release. As a reminder, unless otherwise stated, the financial results discussed today will be from continuing operations and revenues will exclude reimbursable expenses. And now I would like to turn the call over to Dave Peacock.

Thanks, operator. Good morning, and thank you for joining us. I want to first acknowledge our team for a solid start to the year. We have a lot of work ahead of us, but I am grateful for the resilience our people are showing in this uncertain time. Our first quarter was solid and ahead of our internal expectations, reflecting strong growth in Experiential Services, improvement in Retailer Services and continued headwinds affecting Branded Services.

In the first quarter, total company net revenues of $723 million were up 4% year-over-year and up 4.7% on a pro forma basis, excluding divestitures. Adjusted EBITDA of $68 million was up over 16% and up 22% on a pro forma basis, excluding divestitures, driven by strong incremental margins in Experiential Services and improved profitability in Retailer Services. Our results reflect continued progress on the growth and productivity initiatives outlined last quarter, especially our centralized labor model, which is driving improved retail execution and profitability. Our technology investments also continue to enhance our workforce productivity and improve our ability to drive sales for clients.

We are still in the early stages of realizing the benefits of these initiatives. We recently launched the last phase of our SAP implementation, and we continue to advance the rollout of our human capital management system. First quarter cash flow was strong. We generated $74 million in adjusted unlevered free cash flow and ended the quarter with $144 million in cash after a meaningful debt paydown in March. While we remain focused on cash generation and productivity, we have increased our efforts to drive growth across our platform. Technology will enable this push.

Faster insights to action using AI built on top of our data lake will enable us to better meet increasing demand for Experiential and other in-store services and drive demand for clients' brands through a better understanding of product level performance. In Experiential, Retailer Services, we are using AI tools integrated with legacy systems as well as process redesign to increase our hiring speed to better meet in-store labor needs.

Our Branded Services team continues to advance our analytic architecture, driving faster action, increasing the likelihood of accelerating brand performance and driving in-store brand merchandisers dynamically. We leveraged partnerships like our alliance with Instacart to help drive better retail pricing and assortment decisions on behalf of clients. We're collaborating to leverage proprietary data and an alert-based model to more effectively deploy retail reps to the highest yielding in-store opportunities.

Our retail pilot with Instacart is expanding and initial results have been positive. We're also expanding into new markets and services and see a meaningful opportunity to expand beyond grocery retail. We are in active discussions with several non-food retailers to perform similar services that we've been doing with grocers and in other food channels for years. While growth is our focus, we continue to pursue several productivity initiatives.

First, our centralized labor model is improving service quality and supporting long-term margin expansion, particularly in Experiential Services. We also see an opportunity to extend some of these capabilities into our Retailer Services segment as we execute product resets and store remodel work in approximately 80% of the U.S. grocery channel. Second, we are in the final stages of our enterprise technology transformation. Our SAP and Oracle platforms have strengthened our data integrity, improved our reporting capability, reduced duplicative systems and are improving our ability to deliver insight-driven services while our Workday implementation will further improve our talent management.

The heavy lifting of this transformation will be mostly complete by year-end. Beginning in 2027, we expect to more fully realize the efficiency benefits of these investments. Finally, we are integrating AI across our operations. Today, AI-enabled staffing and scheduling tools are already improving our speed and labor utilization. We're leveraging AI to drive further efficiency across our businesses and expect it to play a large role in improving execution, forecasting and labor productivity.

This includes a use case-based approach to AI tool selection and development and accelerating the fidelity and maturity of our data to ensure accuracy. I am proud of our execution in the quarter, controlling what we can amid ongoing consumer softness. Several enduring trends impacted our business and the consumer sector more broadly. Lower and middle-income consumers remain highly focused on value, while higher income consumers are shifting spending towards healthier options and also beginning to look for savings opportunities. Rising gas prices are constraining consumer spending and have contributed to the lowest consumer sentiment since tracking began in 1952.

We do not expect these dynamics to change in the near term, but we are adapting our business accordingly and helping our manufacturing clients and retailer customers also adjust their strategies. Additionally, our exposure to the fast-turning consumer packaged goods sector provides less volatility in this environment compared to other sectors and our heavier focus on the food category, which represents the majority of Branded Services revenues, provides a degree of built-in resilience as consumption patterns in food tend to be relatively stable or shift more slowly over time.

Finally, as a scaled outsourced labor provider, we are well positioned to support clients as they seek greater efficiency and return on their investment at retail. Hiring remains competitive, but it is consistent with recent quarters, and we are investing in our workforce and training to support the durable demand growth we are seeing. As I stated at the outset of this call, our segment results were mixed. Experiential Services delivered very strong first quarter results. Events grew over 19% and execution rates improved on both an annual and sequential basis.

As we build top line momentum, we are focused on increasing profitability by advancing the centralized labor model rollout, enhancing training and safety protocols and driving a favorable mix shift toward higher-margin events. Branded Services continues to navigate a challenging environment, resulting in some client turnover that we will continue to lap through the year. Our focus is on stabilizing the revenue base with strengthened client retention efforts, executive engagement and targeted growth opportunities with existing clients.

We are already seeing progress with several existing clients have shifted retail account coverage to us earlier this year. New business development remains active with a disciplined focus on higher-quality opportunities. While still under pressure, we believe the business will move towards stabilization as the initiatives take hold. Retailer Services delivered a solid quarter of positive revenue and EBITDA growth despite a timing-related benefit in the quarter. We are encouraged by improving activity, pricing and the more moderate impact of channel mix shifts.

Pipeline momentum is strong, and we are converting our pipeline of new customers and new service offerings, which should continue to support growth in this segment. We have seen strong conversion in our retail merchandising business in particular. Finally, we remain focused on revenue and cost alignment and improving execution discipline. Cash generation remains a core strength of our business.

Strong cash flow performance continued in the quarter, supported by disciplined working capital management, though the timing of some new system implementations contributed to a slight sequential increase in DSOs. We expect DSOs to be elevated in the near term before improving later in the year. Our capital spending is on pace with our full year expectation, and we paid down roughly $130 million of debt in the quarter. Overall, enhanced liquidity is supporting our operations and strategic flexibility.

While we are pleased with our results, we are maintaining a prudent outlook reflecting the continued uncertainty that I mentioned earlier. We expect strength in Experiential Services and improved growth performance in Retailer Services and progress toward achieving stabilization in Branded Services throughout the year. We are reiterating our full year guidance of flat to low single-digit revenue growth, adjusted EBITDA that is flat to down mid-single digits as our revenue growth is weighted towards lower-margin businesses in our portfolio.

Adjusted unlevered free cash flow of $250 million to $275 million and net free cash flow conversion of 25% of adjusted EBITDA, excluding the incremental costs related to the recent debt refinancing. We are encouraged by our progress and remain focused on executing our strategy and driving long-term profitable growth. 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 first quarter performance by segment, discuss our cash flow and capital structure and provide additional detail on our outlook.

As noted last quarter, we recently divested a small business, an equity stake and a portion of our European joint venture that collectively accounted for approximately $20 million in revenues and over $10 million of EBITDA in 2025. As a result of these divestitures, first quarter net revenues and EBITDA were adjusted down by approximately $5 million and $3 million, respectively. These businesses were all contained within our Branded Services segment, and we will call this out for comparability in our discussion of the quarter.

Starting with Branded Services. In the first quarter, we generated $226 million of revenues and $21 million of adjusted EBITDA, down 12% and 25% year-over-year, respectively. As noted, on a pro forma basis, excluding divestitures, revenue was down 10% and EBITDA was down 17%. This segment remains under pressure due to a challenging macro environment, select client losses and an unfavorable mix shift. While we maintain cost discipline in this segment, we are not able to fully offset these impacts.

That said, we are taking targeted actions to improve performance, including expanding our customer footprint, accelerating cross-sell across our existing client base, leaning into newer, higher-value services and converting a solid pipeline of opportunities. We are also leveraging technology to drive greater efficiency and enhance ROI for our clients. While near-term conditions remain challenging, we believe the business will move toward a more stable baseline as the year progresses.

In Experiential Services, we generated $270 million of revenue and $26 million of adjusted EBITDA, up 22% and 116% year-over-year, respectively, driven by higher event volumes, strong execution and an easier comparison to the prior year period. We saw growth from both existing clients and new retail partners launching programs, reflecting continued strong demand.

Operationally, we benefited from improved alignment between demand and labor availability, supporting higher event execution rates and increased volumes as well as price optimization, partially offset by higher variable labor and wage costs. We remain focused on converting strong demand into sustained margin improvement through better labor utilization and mix, supported by our CLM initiatives as well as onboarding and retention improvements. The CLM initiative is already benefiting execution in Experiential Services.

Our hiring initiatives accelerated in the first quarter with a significant increase in net hires. Retention remained consistent with the prior year, positioning us well to support strong execution in Q2. In addition to supporting growth, we're seeing improved efficiencies in our hiring processes, reflected in a meaningful reduction in cost per hire during the first quarter. We continue to hire to support growth, including frontline associates, event managers and shift supervisors.

We are investing in our teammates in 2026 to elevate service levels for our customers. As a result, in Experiential Services, we expect strong revenue growth for the year with adjusted EBITDA growth broadly in line with the revenue growth due to these investments. In Retailer Services, we generated $227 million of revenues and $21 million of adjusted EBITDA, up 4% and 14% year-over-year, respectively. Performance was supported by new business wins, pricing, the continued ramp of key client programs and project timing.

We are pleased that the Retailer Services segment returned to adjusted EBITDA growth during the quarter. In the first quarter, we lapped a client loss from the prior year period, while the timing of certain project work also provided a benefit. We also saw a reduced impact from channel mix shift, resulting in a lower drag on growth in the quarter. Additionally, we expect the combination of new projects, new service lines and new clients onboarded during the first quarter to support overall growth in 2026 with year-over-year comparison factors affecting the quarterly cadence.

Our focus remains on execution, staffing alignment and operational discipline to convert pipeline strength into more consistent earnings. We are encouraged by the current pipeline momentum. First quarter shared service costs were lower year-over-year, reflecting reduced labor and professional services spend. We expect shared services costs to be stable in 2026 versus the prior year, even as we continue investing in growth and transformation with operating efficiencies helping to fund those investments.

Moving to the balance sheet and liquidity. We ended the quarter with $144 million in cash, down from the fourth quarter as we utilize our strong cash position to reduce debt, but up from $121 million in the prior year period, reflecting disciplined capital management. As mentioned on our last earnings call, we completed an extension of our debt maturities to 2030 during the first quarter, improving our liquidity profile and overall financial flexibility.

We also now have a largely fixed and hedged rate structure. At quarter end, our net leverage ratio was 4.2x adjusted EBITDA, down from 4.4x at the end of the fourth quarter, and we expect to end the year around this level. We are executing against a clear plan to further reduce leverage and achieve our long-term target of 3.5x or below.

Turning to cash flow and working capital. Cash generation remains a core strength of the business, and we continue to prioritize it through disciplined cost management, lower restructuring costs and a focus on working capital improvements.

DSO increased slightly in the first quarter and is expected to remain elevated over the next few months, primarily due to the temporary impact of ongoing systems implementations and upgrades, including the final phase of our SAP implementation, which is going live this week. We expect disciplined management of DSO as the year progresses. While it will remain elevated midyear, we expect year-end levels to be below the prior year, supporting strong full year cash flow generation.

Adjusted unlevered free cash flow was $74 million in the quarter with a conversion rate of 110%. Restructuring costs were lower in the first quarter, and we continue to expect full year restructuring costs to be approximately half of the prior year level.

Finally, turning to our outlook. We are encouraged by our first quarter results; we are maintaining a prudent outlook in light of ongoing macro uncertainty and unfavorable margin mix shift resulting from strong growth in lower-margin business segments. Additionally, a portion of the outperformance in the quarter reflects timing-related benefits that may normalize over the balance of the year.

As Dave mentioned, we are reiterating our prior 2026 guidance, including flat to low single-digit revenue growth, adjusted EBITDA flat to down mid-single digits, adjusted unlevered free cash flow of $250 million to $275 million and net free cash flow conversion of approximately 25% of adjusted EBITDA, excluding incremental costs related to our debt extension.

From a cadence perspective, we now expect the first half to represent in the low 40% range of full year adjusted EBITDA. Key factors influencing our outlook include labor and benefit costs, mix dynamics and our ability to convert pipeline into revenue, particularly within Branded Services. Overall, we remain focused on execution, cost discipline and positioning the business for consistent and sustainable performance. Thank you for your time. I will now turn it back over to Dave.

Thanks, Chris. The first quarter reflected solid progress against our strategic priorities with strong performance in Experiential Services, improving results in Retailer Services and disciplined execution across the business. Looking ahead, we believe our growth and productivity initiatives, including our centralized labor model, technology transformation and AI investments position us well to navigate the current environment.

At the same time, we are building on this momentum while taking the necessary actions to stabilize Branded Services. We remain focused on executing our strategy and generating strong cash flow over time as we position advantage for long-term profitable growth.

I want to thank everybody for joining, and we look forward to connecting with this group next quarter.

Thank you. we'll now begin the Q&A session. [Operator Instructions]

And your first question comes from the line of Greg Parrish with Morgan Stanley.

Dave, you mentioned opportunity to expand beyond grocery retail. I think you said you're in active discussions with a few nonfood retailers. Can you give us maybe some flavor there? I mean, what verticals are we talking about? And then, I mean, I guess, what was different about these markets historically? And then why are you able to attack them today? And then I mean, do you think this might be a contributor going into 2027?

Yes. Thanks for the question. So I'd say, one, if you think about our business over the last several years, it evolved, right? I mean we acquired Daymon, which significantly changed our business in 2018, integrated that business and then COVID hit. And that had a lot of impacts on our business from the Experiential business all the kind of drying up and the grocery headquarter business really taking off. And then you have been the reverse of that. So I think we were so focused on managing through a lot of uncertainty and change that we didn't have the time to really focus on these other retailers, number one.

Number two, I think you're seeing what we've now known as a business that was really began and focused on grocery retail to kind of lift our eyes up and see that a lot of the same impacts are affecting other retailers. We've had business with other but we feel there's opportunity to do more.

If you think about what they deal with as far as labor shortages and the augmented labor that we provide for episodic tasks in store is one example. And Supply Chain as a Service within our branded segment has an opportunity to help retailers with either slower-moving items or what we kind of call limited time specials, what have you.

So it's very early process, and we're having good dialogue and probably a much higher level of willingness to explore opportunities, but it will take some time because we're cultivating those relationships as we speak.

Can I add to that, Greg, that just one consideration here would be that this is actually occurring across each of the segments. So Dave talked about Supply Chain as a Service, which is something we have in our Branded Services segment, but we're seeing this opportunity in Retailer and Experiential as well to move beyond the typical grocery store client and customer that we have across our business.

Yes. Okay. That's very helpful. And then maybe as a follow-up, I just want to dive into Experiential a little bit. You had great growth there for years and maybe slowed a little bit and then now you've just sort of exploded here. Maybe just help us unpack this. I mean is a lot of it -- all that HR system work you did last year? Is it that? A lot of the work that you do is just one big Retailer. So is this -- are you just doing more work in store than you used to? And then we're going at a 20% clip here. So how do we think about the rest of the year in Experiential?

Well, I'd say a couple of things. And let's go back because I think sometimes because we do these quarterly, we forget maybe what happened a year ago. In the first quarter last year, we talked pretty openly that we had some issues on just the hiring side, right, and supplying labor to our business. And that had a little more of a profound impact on the Experiential segment.

So we are lapping that, which contributed to the kind of significant lift you saw this quarter. And then obviously, as we're able to supply labor as we were able -- as we did this quarter, you just get better fixed cost coverage that improves your margins. And I would argue our labor readiness has improved, meaning both the caliber training and just readiness of the labor force that comes in is better because of a lot of the initiatives that our workforce operations team has embarked upon a year ago.

So that is built to sustain a pretty robust growth rate for the Experiential segment, our Retailer segment where we've got our SAS division that does resets and remodels and then even within our branded segment where you've got our branded merchandising. It's an important part of our business and one that there's increasing demand for. So I really think it's those things.

It's a lot of initiatives around training, hiring, get -- shortening the time in which people from when they're hired to when they actually start is another thing that we've been focused on. And what that does is leads to higher retention rates because you have to remember when you hire an hourly worker, they really need the job right away typically. And when it gets started right away. So we've been focused on that as well as improving the employee experience.

Greg, I'll just add a couple of points on to Dave's perspective there. Dave mentioned the easier comparison, but we had really strong 2-year growth as well in that business. And we've been tracking at, call it, that 30-plus percent incremental margin, and you saw about that same level this quarter. And when you have nearly 20%, call it, 19.5% execution -- I'm sorry, demand growth and then you have execution accelerate sequentially, those are the things that lead to not just the growth overall, but in the strong margin performance as well.

I also want to note, though, that we've seen an expansion with -- we've added some new customers there. So it goes beyond just the core business. We've actually had some new customers come in as well, which I think is just an encouraging sign for the continuation. But we -- just one final comment. We said in the release -- I'm sorry, I think in the script would be that we do expect solid revenue growth there this year. We expect EBITDA to be mostly in line with the revenue growth. So this is an area that we're investing in. We see the opportunity for very strong incremental returns on that investment. So just be aware that as the year goes on, we want to try to invest back here as well to support the growth going forward.

Your next question comes from the line of Luke Morison with Canaccord.

So maybe we can just start on some of the -- just double-clicking on some of the efficiency benefits you're seeing from the SAP and the Oracle and the Workday implementation. It sounds like we're finally at the point where that's starting to really bear fruit and be more fully realized. Maybe you can just speak to sort of like the timing and the cadence of how that's going to flow into the model. I know you said we're going to see most of it in 2027, but maybe just frame like when we can expect to see that and then also just the magnitude of that? Like are we talking tens of basis points of margin uplift? Are we talking hundreds? Just help us think through that.

Yes. I think this is Chris Growe, obviously, and I'll have Dave, I'm sure, follow my comments here. But this is -- so we talk about this transformation phase for the company largely being completed by the end of this year. And just to be sure, and we said this in our script, we are going live with another instance of SAP today. So it will be our last kind of major business going on to SAP.

And there's always going to be refinements and work to that going forward. But I want to just give you a perspective that we're not done yet. We still are investing. There still are some -- a heavy amount of work from our teams to get this over the line, but we've really been in a good place on that. Oracle is in place and then Workday goes in place next year. So I just want to be sure I level set us on kind of where we are today. And I think therefore, we made a comment that '27 is when a lot of the efficiencies occur.

The groundwork for all that's happening right now. So meaning that we're not -- there's not just the systems being in place, but all the work to now really harness the value of these systems. There is AI built into these systems. There's efficiencies that come from having all of our -- I'll call it the better data integrity across our business. We're really utilizing the data lake.

I know that's a word you've heard us talk about. But in reality, that's going to lead to significant efficiency and again, integrity in the way we manage the data. I think the key you're going to see here is efficiency across the business and the performance of -- in the value of the margin of the business, no doubt, and I'm not going to quantify that for you, but that should be beneficial, especially in '27.

And then we also talked about, for example, DSO. So like our cash flow benefits coming from this should be quite significant as well. So I think that's the way I would look at it. Again, I can't give you a number necessarily, but look at that to be more of a '27 opportunity, and it goes beyond just the margin performance, but also the cash flow.

Yes. And I'm going to pile on. We're really excited about what Workday can mean to our business. I mean when you've got almost 70,000 folks and 70 million labor hours, I've seen in a smaller setting when I worked at the regional grocer, what Workday can do as far as employee experience, employee engagement and just ease of operation and actually enhancement around training.

I mean you can't underemphasize how important training is to delivering a superior both client experience, but customer experience for our clients. But right now, we're seeing a lot of benefits, as Chris said, with the data lake and cloud migration that we went through that's enabling us to leverage machine learning and AI, and I know that's a buzz term right now, but a little more profoundly in our business.

And some of the cases are in our workforce operations where it's helping us streamline the hiring process, and we're working on projects right now that are breaking down the process for that time between when you're hired and when you start with us. And a lot of companies have gone through this. They're in the high-volume labor businesses. But it's exciting to see because when you think about large language models, this type of volume of data and then the positive impact it can have with employee experience retention, hopefully lowering hiring costs over time. We're seeing some of the seeds of that, but we're excited about where that can go in the future.

Yes. Super helpful. And then maybe just a follow-up, double-clicking on Pulse and Instacart. Those continue to be highlighted. They continue to be topics of conversation. Maybe just help us think about like at this point, are you seeing them being cited in new business wins? Are they generating meaningful revenue or value for customers at this stage? Are they still kind of in the investment or ramping phase? Just help us think through that.

Yes, it's more in the ramping phase. We -- our partnership with Instacart, and we'll acknowledge them for a great first quarter we saw today, is early stages, and we've expanded our pilot. The pilot has been successful in what we were trying to accomplish as it relates to a more kind of real-time signal-based processes in our merchandising businesses. And the data efficacy that we get and that transference of data between the 2 companies has been very successful. So we're bullish on what that can mean.

And I think we are able to provide value to each other and to the benefit of our clients and customers. So early days, and we're not sharing details because the pilot, I could say, is so early, but as it expands, and we are finding a lot of client interest and willingness to join us in the journey of testing these new capabilities. But I think you'll see more of the benefits of that in 2027.

There are no further questions at this time. I will now turn the call back over to Dave Peacock for closing comments.

Thank you. We appreciate everybody joining the call. We look forward to our second quarter call later this summer, and have a good day. Appreciate it.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the Advantage Solutions Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

Welcome to Advantage Solutions' Fourth Quarter and Full Year 2025 Earnings Conference Call. Dave Peacock, Chief Executive Officer; and Chris Growe, Chief Financial Officer, are on the call today. Dave and Chris will provide the prepared remarks, after which we will open the call for a question-and-answer session. During this call, management may make forward-looking statements within the meaning of the federal securities laws. Actual outcomes and results could differ materially due to several factors, including those described more fully in the company's annual report on Form 10-K filed with the SEC. All forward-looking statements are qualified in their entirety by such factors. Our remarks today include certain non-GAAP financial measures, which are reconciled to the most comparable GAAP measure in our earnings release. As a reminder, unless otherwise stated, the financial results discussed today will be from continuing operations and revenues will exclude pass-through costs.

And now I would like to turn the call over to Dave Peacock.

Thanks, operator. Good morning, everyone. Thank you for joining us. I want to thank our teammates across the organization for their ongoing commitment to successfully serving our clients as they navigate the market uncertainty and volatility, helping them adapt and succeed. Before turning to our results, I'd like to highlight several strategic actions we've taken over the past few months to strengthen our foundation for shareholders, employees and customers and to position the company to drive sustained performance in 2026 and beyond.

First, we move towards refinancing our debt later this month. We had over 99% acceptance of a new debt package from our lender group, extending maturities to 2030. This refinancing is intended to provide operating flexibility and enhance our liquidity profile while helping us achieve our long-term leverage target of 3.5x or less. This provides us with greater financial flexibility and ensures we have the capital necessary to continue investing in our core capabilities while delivering exceptional service to our clients. This planned refinancing includes a paydown of approximately $90 million of our debt.

Second, we further sharpened our portfolio through the divestiture of 3 noncore businesses. These transactions streamline our focus and allow us to redeploy capital into higher return opportunities align with our long-term strategy. As a result of these actions and our strong cash flow performance, we ended the year with $241 million in cash and a strengthened balance sheet, positioning us in a place of greater stability and optionality as we enter 2026. We Finally, our upcoming reverse stock split supports broader institutional accessibility as we enter our next phase of growth. Taken together, these initiatives increase our strategic flexibility, enhance operational focus and allow us to move from defense to offense.

Turning to fourth quarter results. Net revenues of $785 million were up approximately 3% year-over-year, reflecting an improving trajectory in experiential services, while branded services continue to face cyclical headwinds and retailer services faced slowing spend and some revenue timing shifts. Combined, our overall company delivered adjusted EBITDA of $88 million, which reflects the ongoing mix shifts towards more labor-intensive lower-margin businesses. Our cash flow generation was strong and in the second half of 2025, we generated $174 million in unlevered free cash flow, a significant increase from $50 million in the first half and representing over 100% unlevered free cash flow conversion, excluding the payroll timing of factor.

One reason for this was our successful SAP implemention earlier this year. Net free cash flow of $74 million in the second half exceeded our target of 30% of adjusted EBITDA, excluding payroll timing. And as I discussed earlier, our cash position strengthened materially. We believe our liquidity position provides ample flexibility to serve our clients effectively, invest selectively and further improve the balance sheet. As I mentioned earlier, we further streamlined our portfolio in recent months, including in early 2026, and with several small divestitures of noncore businesses, resulting in an approximately $55 million in proceeds, further bolstering our cash position. Before discussing our strategy going forward, I want to briefly reflect on how we arrived at this point, both from an external and internal perspective.

Externally, consumers continue to be cautious, value-seeking and selective. This is affecting overall shopping behaviors spending at retail with lower end consumers buying more on promotion at a lower price points, while higher-end consumers are shifting purchasing habits away from expandable consumption categories to healthier options. These 2 dynamics affect our business in 3 ways: one, we can see overall lower commission revenue where we manage sales for CPGs or private label manufacturers. Two, we see CPG and retailer P&Ls challenge leading to some lower spending on merchandising projects, resets and remodels. And three, we are seeing overall pullback in traditional marketing as retailers demand more investment in their retail media networks. These pressures are real, and many are cyclical in nature.

Despite them, we made meaningful progress adapting our business to these conditions to compete more effectively for the long term. Internally, we have been proactively investing in a multiyear IT transformation that concludes this year. These investments require upfront spending that are already driving efficiencies across the business. We expect our capital spending to decline in 2027, reflective of ongoing support rather than transformation investments. We continue to rationalize applications to reduce complexity and support efficiency in our IT platform.

We also experienced some client losses in certain areas, particularly where clients became more price sensitive or chose to bring work in-house. At the same time, overall retention remains high, and we continue to execute against our pipeline of new clients, reinforcing the fact that there is continued demand for our services when we compete on the value of our offering.

With that context, let me turn to what we are doing to structurally improve performance and strengthen the balance sheet. First, we are improving productivity across the organization with our centralized labor model serving as a core driver. This model is strengthening our high-volume labor businesses by improving utilization, execution, consistency and cost efficiency. Throughout 2025, we advanced the rollout of this model in experiential services, and it is already delivering tangible results including reduced reliance on third-party labor, improved execution rates and better profitability per labor hour. Expanding this rollout remains a key priority for 2026.

Technology will continue to be another critical driver of our productivity while also differentiating our ability to better serve our clients and customers. Given our investments in new systems, we are able to rationalize many of our legacy applications and systems to provide a more efficient IT backbone our enterprise transformation, including our new SAP and Oracle systems, in addition to our Workday implementation later this year, creates a strong and modern platform to provide insight-driven services to our clients and customers. Our new technology platforms are enabling efficiency gains, better workforce optimization, faster data integration and sharp visibility into performance, positioning us to operate as a truly insights-driven organization, which we believe will propel us to a leading position in the industry.

In parallel and in conjunction with our materially upgraded systems, we are integrating AI where it drives the most impact. One example is AI-enabled staffing and scheduling which is already making us more effective and efficient, reducing manual work while improving speed, predictability and labor utilization. Second, we are focused on driving growth that deepens client relationships, expands our addressable market and leverages the capabilities we have built. Our partnership with Instacart is a good example as it continues to progress combining their in-store audit capabilities and consumer insights with our retail execution network to help CPG brands improve on-shelf and overall in-store performance. We remain focused on pursuing new partnerships with retailers outside the grocery sector, which would significantly expand our addressable market. Our efforts are focused on retail segments where our capabilities translate well. We will share more as these opportunities progress.

Finally, we are leveraging our industry-leading data investments through our alert-based sales system called Pulse. This is an AI-enabled decision engine that integrates proprietary retail data with real-time capabilities to help clients anticipate demand and drive growth while more quickly identifying opportunities. Pulse will help our key account managers either remediate underperformance in an account or accelerate growth by more quickly providing the causal analysis and recommended actions. This was enabled by our migration to the cloud and creation of our data lake, which is helping us ingest and analyze more data than ever before.

Turning to our segments. Experiential Services delivered strong Q4 results and stands as the clearest proof point of our progress in 2025. Accelerating demand, improved hiring velocity higher labor readiness and more consistent execution drove increased event volumes, stronger execution rates and better predictability positioning us well entering 2026. Branded services remained under pressure, consistent with prior guidance. Softer CPG spending, tighter procurement and client insourcing continued to weigh on performance. While we are not expecting a near-term inflection, we believe many of these pressures are cyclical.

In 2026, our priorities are stabilizing the revenue base and converting new business even faster. Our pipeline of new opportunities has expanded, and we expect to provide more visibility into conversion and win rates as the year progresses. We are also managing costs and continuing targeted investments in data and analytics and partnerships to drive measurable client ROI. Retailer services results were affected by channel mix shifts, project timing and cautious retail spending, particularly in grocery. Some activities shifted into early 2026, creating a timing mismatch as costs were incurred in 2025.

Overall, while performance varied by segment, the underlying theme is clear. Execution discipline and operating consistency are improving particularly in Experiential Services, which gives us confidence looking ahead.

Turning to our outlook. We are approaching 2026 with cautious optimism as we shift from heavy investment to enhanced execution. 2026 is the final year of our elevated IT spending, and we expect to begin seeing the operating benefits of these investments flow through our results. While the industry faces continued macro headwinds, we expect revenue to be flat to up low single digits, excluding divestitures, driven by continued momentum in experiential services, a more stable trajectory in retailer services and a move towards stabilization and branded services over the course of the year. We expect adjusted EBITDA to be flat to down mid-single digits, excluding divestitures. I want to be direct about why. This reflects ongoing macro uncertainty and mix shifts toward more labor-intensive, lower-margin services, while some higher-margin businesses remain challenged. That said, execution discipline, labor productivity initiatives and technology investments should drive an improving margin profile as the year progresses.

Cash flow remains a core strength and priority. We expect unlevered free cash flow of approximately $250 million to $275 million for the year and net free cash flow conversion of at least 25% of adjusted EBITDA excluding the incremental costs related to a potential debt refinancing. This reflects continued working capital discipline, including further improvement in our DSO performance and a steady CapEx profile as we enter the final stage of our IT transformation. Overall, this outlook reflects both the realities of the current environment and our confidence in the progress we are making. We are building a more durable, predictable and cash-generative company and the actions we are taking across labor, technology and execution position us well over time.

I'll now pass it over to Chris for more details on our performance and guidance.

Thank you, Dave, and welcome, everyone, to our call today. I will review our fourth quarter and full year 2025 performance by segment, discuss our strong cash flow results and improved capital position and expand on Dave's guidance commentary. Starting with branded services. In the fourth quarter, we generated approximately $259 million in revenues and $39 million adjusted EBITDA, down 9% and 29% year-over-year, respectively. For the full year 2025, Branded Services generated $1 billion in revenues and $143 million in adjusted EBITDA, down 9% and 21% year-over-year, respectively. Performance reflected sustained softness in CPG spending throughout the year, which continued to pressure results in the fourth quarter along with challenges in the sales brokerage and omni-commerce marketing businesses. In-sourcing remains a headwind, but we believe this is a cyclical and we are focused on converting our large expanded pipeline of new business to counteract this trend. We continue to manage costs tightly while prioritizing execution and positioning the business for recovery as client spending improves.

In Experiential Services, fourth quarter performance once again exceeded our expectations. We generated approximately $280 million in revenues and $28 million adjusted EBITDA, up 19% and 115% year-over-year, respectively. Results reflected higher event volume, up 15% in the quarter, and faster and more -- hiring with execution rates exceeding 93%. The EBITDA margin was once again in the double digits as the incremental margin in the quarter reached over 30% despite elevated labor-related costs, including workers' compensation and medical benefits. For the full year 2025, Experiential Services delivered $1 billion in revenues and $101 million of adjusted EBITDA, up 8% and 34% year-over-year, respectively. This segment experienced a strong second half finish to the year, supported by our hiring initiatives, strong execution and robust demand supporting momentum as we move into 2026.

In Retailer Services, fourth quarter revenues were $246 million, with adjusted EBITDA of $20 million, up 1% and down 22% year-over-year, respectively. As Dave mentioned, performance was impacted by delayed projects, leading to cost being incurred ahead of revenue being recognized an ongoing pressure in advisory and agency work due to channel mix. A portion of planned project activity shifted out of the quarter and into early 2026, while social labor onboarding and training costs were already incurred. We also saw higher workers' compensation and medical benefit costs in this segment as well. For the full year 2025, retailer services generated $944 million in revenue and [indiscernible] million adjusted EBITDA, down 2% and 12% from the prior year, respectively.

Looking forward, we believe this business is positioned to grow in 2026 in a more normalized environment for retail project work, expanding our retail partners beyond the grocery segment and the extended suite of new value-added services we are developing. For the year, shared services and IT costs increased as systems move fully from build to live operations, which is in line with our expectations.

We see shared service costs rising modestly in 2026 and inclusive of higher IT spending as we near the end of our transformational IT investments. We do expect the growth in these costs to moderate after 2026, allowing us to capitalize on the efficiencies created through our shared service infrastructure.

Moving to the balance sheet and cash flow. We ended the quarter with $241 million in cash, up roughly $40 million sequentially. The strong cash performance was driven by improved working capital performance, proceeds from recent divestitures and as well as the partial settlement on the Take Five litigation. Specifically, we sold our minority interest in Action Foodservice in September for approximately $20 million. When we sold Small Talk, our small marketing-oriented business in December for approximately $20 million. In January, we divested part of our stake in Advantage Smollan for $27 million and we also received the final $27.5 million cash payment in early '26 from the sale of [indiscernible]. We did not repurchase debt or shares during the quarter.

Our net leverage ratio was approximately 4.4x adjusted EBITDA at quarter end, in line with the third quarter, but above our long-term target of 3.5x, and we're executing against a clear plan to reduce. Given our strong cash position, we expect to apply approximately $90 million of debt paydown as part of our refinancing. Over the course of 2026, we expect our strong cash flow to contribute to continued paydown. With cash on hand, expectations for improved cash generation in the year and approximately $440 million available under our revolver, we believe our liquidity position supports our needs amidst the still volatile macro environment.

Turning to cash generation. DSOs improved during the fourth quarter to approximately 57 days, the lowest level in our history, reflecting improved working capital management and intense focus on collections and normalization following earlier system led disruptions in the year. Optimizing DSO has been a priority for the organization, and we will continue to make progress in reducing DSOs as we move through 2026, which will contribute to additional cash flow generation. CapEx was approximately $24 million in the fourth quarter due to heavier IT-related spending against our transformation plan. For the full year 2025, CapEx totaled $53 million.

Turning to cash flow. We generated approximately $75 million adjusted unlevered free cash flow in the fourth quarter, and the conversion rate was nearly 130%, excluding the payroll timing shift. Cash flow performance exceeded expectations driven primarily by strong working capital execution, including improved DSOs. For the full year 2025, adjusted unlevered free cash flow achieved an approximately 80% conversion rate, excluding payroll timing reflecting a materially stronger second half performance. As Dave mentioned, the planned extension of our debt maturities from 2027 and 2028 to 2030 provides meaningful financial flexibility of the business while improving the balance sheet over time. We believe this outcome will be favorable for all stakeholders and will allow us to execute our strategy and remain focused on delivering improving operating and financial results. The strategies we have in place are the right ones to achieve that goal.

Turning to our outlook for 2026. Our guidance reflects a measured and prudent view of the macroeconomic environment, coupled with confidence in our cash flow generation. Excluding issues, which contributed approximately $20 million to revenues in 2025. And we saw revenue growth to be flat to up low single digits with continued strength in experiential services and more sole performance in retailer services as project timing normalizes and a gradual recovery profile in branded services over the course of the year. Also excluding divestitures, which contributed over $10 million to adjusted EBITDA in 2025. We expect adjusted EBITDA growth to be flat to down mid-single digits year-over-year, reflecting continued macroeconomic headwinds and last year of our major IT investments and mix shifts toward lower-margin labor-intensive businesses, particularly within experiential services, but also within brand services.

While we expect execution and profitability to improve through the year, our guidance seems a conservative margin profile early in the year and does not rely on a near-term inflection in branded services. Cash flow remains a core focus on our outlook. We expect unlevered free cash flow of $250 million to $275 million for the year, with net free cash flow conversion of approximately 25% of adjusted EBITDA, excluding any incremental debt refinancing costs. This outlook is supported by improved DSO performance and disciplined working capital management and a steady CapEx profile. We expect CapEx to be approximately $50 million to $60 million in 2026, consistent with 2025 levels this represents our final year of elevated CapEx levels before we start to see a meaningful reduction in future years.

While we do not provide quarterly guidance, we do expect a widening of the first half, second half adjusted EBITDA breakdown with the second half representing approximately 60% of EBITDA. Importantly, this guidance reflects our current assumptions around consumer spending, the labor environment and timing of known project activity. As always, we aim to plan our business prudently and responsibly. Thank you for your time.

I will now turn it back over to Dave.

Thanks, Chris. Our expertise and range of services position us well to navigate through 2026 with resilience and agility. We continue to execute with discipline and advance our productivity and growth initiatives. We are making measurable progress in our transformation and see proof points across the business. Finally, our focus on long-term shareholder value creation is unwavering.

Operator, we are now ready to take questions.

[Operator Instructions] And our first question comes from the line of Luc Morison with Canaccord.

Maybe just first on the debt exchange. So it seems like, clearly, the right move to be extending the runway to 2030 and removing that near-term maturity risk I guess my follow-on question is just around the rate step up from 6.5% to 9%. And whether that changes the sequencing or urgency around getting to about 3.5x leverage and just sort of your path to that level?

Yes. Thanks, Luc. Just to give you some perspective on that, you're right, it does step up, and obviously, the term loan steps up in cost as well. Your overall borrowing rates going up, call it, 150 basis points, roughly that. And I think through this time to get that incremental time in terms of our ability to extend the debt to 2030, there was an incremental cost related to that, which we were aware of. I think you'll see, call it, roughly $10 million or so million of incremental interest costs in 2026 and we'll see that full sort of annualization of those costs in '27.

I would just note that on the term loan, it's a SOFR plus 600 basis points. So SOFR has come down. That's led to a little less incremental cost but I think what I'd say is that, that certainty around the runway we have right now to 2030, another 4-plus years for the debt, that incremental cost, I think, was very much worth it and gives us the ability now to invest, right? And we've been investing very heavily back in the business. We're calling sort of this year to be the end of that heavy transformation investment and now gives us the time to kind of put that in action, if I can say it that way, to start to really accelerate the growth of the business.

Yes. Yes, it makes sense. And then maybe just to follow on, just looking at the guide, you explained the spread between revenue and EBITDA growth a little bit. Maybe just like double-click there and help us think about the structural cost base? And what's the eventual path to those 2 lines converging over the medium term? .

Yes. I mean, I think when you look at the business, we see a couple of drivers, especially with the fourth quarter. One, we had unusually high labor costs largely in the benefits area due to higher claims. And this is something where we've brought in a new benefits adviser immediately and have started looking at options to bring those costs in line. We've seen pretty significant inflation across the benefits lines over the last couple of years.

And then the other has been mixed within our business, both cross-segment and interest segment mix. And this is basically lower margin businesses, some of our labor-intensive business is growing faster than some of the businesses that are less labor-intensive. I'd say that as we look to stabilize the branded services segment in the back half of this year, later part of this year, and then obviously aim to grow that long term, that's going to help. And then we're also seeing strong incremental margin in our labor businesses. And so we're going to get to a point where the margins that are being generated from some of these labor businesses get up to the average margin in our overall business. So we do see that arresting over time and those lines ultimately inflecting differently, where you've got EBITDA growth and revenue growth, either more in line or even EBITDA performance even ahead of revenue performance.

The last thing I'd say on it is some of the technology adoption. Chris talked a lot about our new systems and some of the efficiencies that will come with those. I like a lot of firms, we are early in the stages, I think anyone who says they're late in the stages is probably not truthful on the AI front. And there are significant efficiencies to be gained there. Both what I call the personal productivity but also an enterprise-wide productivity that we're just, I think, scratching the surface like most companies, but are excited about the potential.

Our next question comes from the line of Greg Parrish with Morgan Stanley.

Maybe just to start, maybe the revenue guide is flat to up single low single digits. 25% was down 1.5%. So maybe like kind of how bridge that step-up, if you will, like what's kind of baked into your expectations on which segment is improving implied in the guide to get here in '26.

Yes. Greg, it's Chris here, and thanks for your question. I would just say that in the fourth quarter, we did grow revenue. So that's a good indication as the year went on. You've seen that really a significant step up in the growth of Experiential. We talked last quarter and talk the last couple of quarters about just the demand signals there being very strong and then I really want to give credit to the organization to come together to achieve the hiring needs and the execution rates that we needed to satisfy that demand. We talked about 93% execution. I hope that's even higher here in '26 against this rising demand. So that's going to be a key driver of our 2026 momentum, and they're certainly with them in that business.

I think we do see the retailer segment growing. We do think branded services moves more towards stabilization throughout the year. So I think that's one that will be a bit of a drag early on, but get better as the year goes forward. I think that's the contract we expect for the growth in the year. I think the difference sources Q4 is we do expect the retailer Services segment to grow and that will be kind of the key components that we expect for '26 growth in revenue.

Okay. That's helpful color. And maybe just double click on branded here. I think you said you're not confident in an inflection near term. But maybe just help us like what's the catalyst here over the next 6, 9, 12 months to get that on the right track in the second half? I mean, is it mostly market volumes? Or are there other factors that you think that could drive upside?

I think some of it, Greg, is we saw some client losses where price became a significant issue relative to the competition. And we're lapping those, number one. Number two, frankly, we've got some new leadership and position and really a renewed focus on what I call the foundations of the business. This is not a difficult business, tell our team all the time, if you simply do what you say you're going to do in follow-up consistently with both our retail customers and our CPG clients. It's amazing how easy this business can be. And frankly, I think between transformation and some macro noise in the market that has certainly been difficult and disruptions around pricing, they can relate to tariffs and other things, disruptions in supply chain.

We still have some clients that struggling to meet market demand with supply and just other macro headwinds, I think we've allowed ourselves to get too distracted and need to be focusing on executing at peak levels. despite the conditions we may be competing in. So we feel very good about some of the things we're seeing with clients, the way we're operating with them, the fact that some of our clients that we've had long-term relationships with are starting to shift accounts to us to cover versus in-sourcing and maybe reversing some of those decisions. And so I think all of these things would give us confidence as we head into the latter part of 2026 about the branded services space.

And then our new business pipeline has really never been this rest, if you will. And a lot of it can be market driven. So it's not always the large CPG that you're thinking about a lot of the emerging brands, the midsize CPG companies and then just picking up a couple of accounts with various CPG companies at the market level where there's not a lengthy RFP process that the conversion rate is much quicker. So that gives us some optimism as we head into the back half of '26.

Great. That's very helpful. And maybe just lastly for me on the divestitures. Could you size how much revenue that is? I think small 1 is deconsolidated, but I don't know, maybe just sort of rough numbers, like what the divestitures would impact things.

Sure, Greg, it's Chris. And I did give this in my script, so you can just go back to check those. But $20 million of revenue in 2025 and then about a little more than $10 million of EBITDA. And I think you hit the nail on the head. The reality of the -- so two of those businesses that we divested, I think our action foodservice stake, which occur -- we already told you about which occurred back in the third quarter, and then the Advantage small and have no revenue effect, but they have an EBITDA effect. And then you've got the small talk business, which is a marketing-oriented business that we sold in December, that's the totality of the revenue.

So when I take the revenue from that one business, but on the EBITDA from all 3, I get that over $10 million effect on EBITDA. So it's just the point is to try to keep that in mind. Our guidance is based on, call it, the pro forma base, excluding that $10 million.

There are no further questions at this time. I want to turn the call back over to David Peacock for closing comments.

Thank you. We want to thank everybody for joining, and we look forward to connecting with this group next quarter. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the Advantage Solutions Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce [ Vic Mohan ]. Thank you. And Vic, you may begin.

Thank you, operator. Welcome to Advantage Solutions Third Quarter 2025 Earnings Conference Call. Dave Peacock, Chief Executive Officer; and Chris Growe, Chief Financial Officer, are on the call today. Dave and Chris will provide their prepared remarks, after which we will open the call for a question-and-answer session.

During this call, management may make forward-looking statements within the meaning of the federal securities laws. Actual outcomes and results could differ materially due to several factors, including those described more fully in the company's annual report on Form 10-K filed with the SEC. All forward-looking statements are qualified in their entirety by such factors. Our remarks today include certain non-GAAP financial measures, which are reconciled to the most comparable GAAP measure in our earnings release. As a reminder, unless otherwise stated, the financial results discussed today will be from continuing operations and revenues will exclude pass-through costs.

And now I would like to turn the call over to Dave Peacock.

Thanks, Vic. Good morning, everyone, and thank you for joining us. Before we begin, I want to acknowledge the continued focus and dedication of our teammates. You are advantage and your commitment to delivering for our clients and customers, especially as they navigate a complex consumer environment remains central to our success. Starting with our third quarter results. Revenues of $781 million were down 2.6% versus prior year. Adjusted EBITDA was $99.6 million, a decline of 1.4% versus prior year, a sequential improvement from the second quarter.

This was the result of a strong performance in our Experiential segment, where demand remains robust. This partially offset softer trends in branded services and anticipated declines in retailer services due in part to timing shifts. We generated strong cash flow driven by our marked improvement in working capital, resulting in adjusted unlevered free cash flow of $98 million or nearly 100% of EBITDA. As a result of the strong cash flow generation, we ended the quarter with over $200 million in cash, including the proceeds from the sale of our 7.5% equity stake in Acxion Foodservice.

During the quarter, we leveraged the benefits of our structurally diversified platforms, pulling levers in real time across our high-volume labor business and retailer and experiential. We meaningfully increased hiring activity to meet growing customer demand, enabling the business to execute more events in in-store retail work, which drove strong incremental margins. Our ability to respond to rapidly changing dynamics with the right data, systems and talent provides resilience in the near term, while longer term, we remain well positioned for an improving environment across our network businesses, primarily in branded services.

As we move into the acceleration phase of our IT transformation and modernization effort, having implemented our new ERP and enterprise data infrastructure with Phase 1 of our SAP and our Oracle EPM environment in place, we are beginning to leverage these systems to drive efficiency gains, improve workforce optimization, increase cash flow, accelerate data integration and sharpen visibility into performance. These actions enable us to operate as a truly insights-driven organization even as we continue the remaining phases of our SAP and Workday implementations over the next 15 months. We remain committed to establishing a leading data architecture and system foundation to yield operational savings and better data-driven services for our clients and customers.

We're advancing the development of our new Pulse system, an AI-enabled end-to-end decision engine designed to elevate the speed, precision and impact of our commercial decision-making across sales and merchandising. This next-generation platform will seamlessly integrate Advantage's data intelligence, including unique retail data with dynamic real-time capabilities, augmenting our team's ability to anticipate demand, prioritize actions and drive efficiency and effectiveness across client workflows.

At the same time, we are deepening key strategic partnerships that enhance our technology capabilities and operational reach, most recently through our expanded collaboration with Instacart. By combining their live in-store audit capabilities with Advantage's retail execution network, we are building an alert-based retail model that allows CPG brands to quickly identify and correct on-shelf availability, pricing and display issues in real time.

This approach leverages Instacart's network of more than 600,000 shoppers alongside our execution expertise to reduce out of stocks, improve compliance and drive stronger ROI for our customers. We closed over 6 million distribution voids and out-of-stocks each year, and this new partnership will enable us to do more of this and do it faster than anyone in the industry. The early results of our 200-store pilot have been encouraging and the partnership will scale into additional markets in 2026. The partnership reinforces our commitment to data-driven execution and technology-enabled growth.

We also continue to roll out our centralized labor model, which we believe will significantly strengthen our high-volume labor businesses in our retailer and Experiential segments over time through increased utilization, which will drive higher retention and ultimately stronger execution for clients and customers. We see this as providing some benefit in the fourth quarter with acceleration in 2026. Our teams remain laser-focused on the fundamentals, deepening customer relationships, elevating our technology platform and driving better labor utilization in our highest volume service lines. These actions are helping us to operate with more consistency and improved execution in the market, which leads to a better experience for our customers. Turning to a review of our segments.

We are adapting as we continue to operate in a dynamic macro environment. Inflationary pressures and a cautious consumer continue to curb demand. Last quarter, we noted that higher income shoppers remain more resilient while value-oriented consumers were becoming more selective, and we saw the trend persist in the third quarter. Accordingly, CPG companies and retailers alike are remaining increasingly cautious and sharply focused on stronger ROI on every dollar deployed. Our platform with its ability to drive efficient execution, informed decisions with data and improved commercial outcomes positions us well to help our customers compete and win.

In Branded Services, we faced uncertain market conditions as tariffs, channel shifts and a softening growth environment continue to influence spending. While the decline in revenues and EBITDA eased sequentially, the business continued to face headwinds. The result was a reduction in commission-based revenues through scope and customer retention that was not fully offset by new customer wins and growth in incremental services within our existing client base. While the environment remains challenging, we continue to focus on investing back into this business, strengthening our value proposition and pursuing customers that can benefit from our core offerings, both near and long term.

We expect branded services revenues and EBITDA to remain under pressure. However, we are encouraged with a larger pipeline of new business opportunities as we close out the year. Turning to Experiential Services. We had a very strong quarter with solid growth in revenues and EBITDA. Demand for events continued to rise, and we responded with increased staffing levels, resulting in higher revenues and incremental margin. Demo event volume grew strongly in the quarter, up 7% on an underlying basis and execution reached 91%. We continue to see strong demand signals in this business, and we expect improving execution in the fourth quarter as we enhance our talent acquisition processes even more.

Retailer Services was down year-over-year in revenues and EBITDA. As we indicated in our last earnings call, this reflected a difficult year-over-year comparison and a shift in the timing of some project activity out of the third quarter. We also experienced a negative impact from ongoing channel shift toward club and mass stores as well as some pressure from more cautious retailer spending. We remain focused on the controllables as staffing levels and execution rates continued to improve through the quarter, enabling stronger coverage and an ability to satisfy demand for projects.

We view these staffing improvements, along with a healthy project pipeline as leading indicators of stabilization and recovery and are well positioned for improving revenues and EBITDA in the fourth quarter and beyond. While consumer behavior remains challenging, effective execution, transformation-enabled technology, a solid project pipeline and accelerating customer demand gives us confidence in the long-term trajectory of the business. Our diversified business model, which includes high-volume labor businesses, creates operating leverage and the disciplined execution, we can redeploy teams and flex staffing to meet customer demand, creating outsized incremental margin growth in the business. We also continue to improve our productivity through AI initiatives, which are accelerating efficiencies in our back office as well as sales tools and data analysis while engaging with vendors to build platforms and applications at scale.

Taking into account our expectations for the fourth quarter, we are reiterating our revenue growth guidance of flat to down low single digits for the year. We are updating our EBITDA guidance for the year to include the Acxion Foodservice divestiture as well as the challenging macro environment, especially affecting our Branded Services segment and now expect mid-single-digit decline. We continue to expect unlevered free cash flow to be greater than 50% of EBITDA. We are encouraged by the strong cash flow performance despite the negative impact from a timing shift of our payroll period weighing on the working capital in the fourth quarter.

We expect cash flow generation to remain strong, driven by continued working capital improvements, lower CapEx and benefits from our labor and efficiency initiatives. Our business is built to generate consistent cash flow. And as the transformation investments taper and our modernization work takes hold, we continue to expect strong cash conversion going forward. We are confident in the trajectory of the business and are taking the right long-term actions to strengthen our position and restore growth. We continue to focus on disciplined execution while improving our systems, technology and labor capabilities.

I'll now pass it over to Chris for more details on our performance and guidance.

Thank you, Dave, and welcome to all of you joining the call today. I will review our third quarter 2025 performance by segment, discuss our cash flow and capital structure and expand on Dave's guidance commentary. In Branded Services, we generated $258 million of revenues and $42 million of adjusted EBITDA, down 9% and 15% on a year-over-year basis, respectively. This segment continues to experience challenges, mainly within the sales brokerage business, which we are working expeditiously to address as well as our omni-commerce marketing business.

The softer growth environment for consumer packaged goods companies has weighed on our organic growth performance, and we continue to see some pressure around in-sourcing, which has been a headwind to growth. However, we took cost actions earlier in the year to improve our efficiency. We maintain a robust pipeline of new business opportunities, offering confidence in our ability to move towards stabilization in 2026. In Experiential Services, we generated $274 million of revenues and $35 million of adjusted EBITDA, up 8% and 52% on a year-over-year basis, respectively. Solid execution and the continued improvement in staffing levels enabled our teams to execute more events in the quarter.

We were able to pull operational levers during the quarter to accommodate growing demand that was again ahead of our expectations. Events per day increased by 7% versus the prior year on an underlying basis, and we see momentum accelerating into the fourth quarter. Execution rates were approximately 91%. And given strong fixed cost leverage, we saw EBITDA margin improvement of 370 basis points year-over-year and up strongly on a sequential basis. We are beginning the rollout of our centralized labor model for part of our experiential business with the goal of further improving our efficiency, which will also support a better teammate experience as our teammates access an opportunity to garner more hours in the store.

In Retailer Services, we generated $249 million of revenues and $23 million of adjusted EBITDA, down 6% and 22% on a year-over-year basis, respectively. As expected, we faced a challenging comparison to the prior year period and results were impacted by project activity timing. Additionally, advisory and agency work were impacted by channel mix. We are developing more bespoke services to increase our value add to retailers and focusing on expanding our services beyond the grocery store to other retail outlets. We maintain a strong and growing pipeline of new business opportunities in this segment.

Across the businesses, shared service costs were down year-over-year in the quarter, which benefited profitability in all segments and reflects the stabilization of costs we expect to continue. Moving to the balance sheet and cash flow. We ended the quarter with $201 million in cash on hand, a notable increase from $103 million in the second quarter, driven by the improvement in working capital, mainly DSOs and the benefit of the $19 million in proceeds from the sale of our stake in Acxion Foodservice as well as the $22.5 million in proceeds in July related to the first of 2 deferred purchase price installments for June Group.

We did not repurchase debt or shares in the quarter. Our net leverage ratio was 4.4x adjusted EBITDA, which is down from the second quarter, and we expect it to hold at this level in the fourth quarter. With cash on hand, expectations for stronger cash generation going forward and approximately $450 million available on our undrawn revolving credit facility, we have ample liquidity to operate the business in the current macroeconomic climate while investing for growth and opportunistically paying down debt.

Turning to cash generation. We ended the quarter at approximately 62 days of sales outstanding, an 8-day improvement from the second quarter as cash collections continue to recover after the transition to our new ERP system. Optimizing DSOs has been a big focus for the organization, and we continue to make progress in reducing DSOs as we move forward into 2026, which will contribute to additional cash flow. CapEx was $11 million in the quarter. We now expect full year CapEx in the range of $45 million to $55 million, moderately below our previous guidance due to the timing of projects occurring this year and continued efficiency in our spending.

Adjusted unlevered free cash flow was $98 million in the quarter, and the conversion rate was nearly 100%, driven by the stronger working capital performance as well as lower-than-expected CapEx. In addition, we made progress on transforming and optimizing our portfolio. During the quarter, we monetized our 7.5% stake in Acxion Foodservice for $19 million in cash proceeds. This divestiture helped streamline our portfolio and boost our liquidity position. We will continue to capitalize on similar opportunities that make strategic sense going forward.

As Dave highlighted, our revenue guidance is unchanged, but we are adjusting our full year EBITDA guidance due to the divestiture of our stake in Acxion Foodservice as well as the more challenging macro environment. We remain encouraged by the sequential progress in 2025. After a challenging first quarter to start the year, we have seen a steady improvement in our operating performance, which has supported a strong revenue and EBITDA trend for the business. As indicated by our full year guidance, we expect a stable growth trend in revenue and EBITDA in the second half of the year, supported by strong execution across our labor-related businesses.

The diversity and resilience of our business model supports this improved business performance and provides confidence in our path forward. As Dave mentioned, we continue to expect 2025 adjusted unlevered free cash flow to be above 50% of adjusted EBITDA. We lowered our CapEx spending outlook slightly again this quarter to a range of $45 million to $55 million, which will aid unlevered free cash flow growth for the year. Our expectation for interest expense remains in the range of $140 million to $150 million, assuming no additional debt repurchases.

Robust cash generation is expected to continue in the fourth quarter. Excluding a $45 million year-end payroll shift into 2025 due to timing, we anticipate adjusted unlevered free cash flow conversion close to 100% and net free cash flow conversion of approximately 30% in the second half. We continue to expect our restructuring and reorganization expenses to be about half the level of the prior year, which is contributing to our stronger net free cash flow performance in the second half and the year. Our business is designed for efficient and consistent cash generation, and we expect to return to our typical net free cash flow conversion rate of at least 25% of adjusted EBITDA next year and beyond as our transformation improves our services and modernizes our processes for more consistent and efficient results. Thank you for your time. I will now turn it back over to Dave.

Thanks, Chris. We believe our expertise and range of services position us well to navigate the current macroeconomic environment with resilience and agility. We continue to execute with discipline and advance the foundational work of the company. We are making measurable progress in improving our systems and workforce efficiency, strengthening the backbone of our operations and competitive positioning. At the same time, we continue to make progress toward completing the strategic initiatives that will enable Advantage to reach its full potential as a technology-driven industry-leading service provider and generate meaningful cash flow for our shareholders. Operator, we are now ready for a Q&A session.

[Operator Instructions]

Our first question comes from Lucas Morison from Canaccord.

So maybe just to start here, discussing the EBITDA outlook and the minor trend there. Can you just frame like how much of that change was related to the divestiture versus core operations?

Yes, I can go. Luke, good to speak to you. Welcome to Advantage. In the fourth quarter, so we had an EBITDA contribution from that stake, like we do with other joint ventures that we have. It's a relatively small piece of the fourth quarter. And outside of that, obviously, you have this overall challenging macro backdrop that I'd say. But I'd just say we're bringing down a little bit, and there's one element of like business mix, never seen stronger growth from experiential versus branded as an example. So there's a little bit from the divestiture and a little bit from that just general macro environment that we're incorporating into the guidance here.

Got it. Makes sense. And then maybe just like thinking bigger picture longer term, it sounds like experiential continues to outperform. Branded services and retailer are kind of softer and lagging. Can you just talk about like how you see the overall portfolio mix evolving as we enter 2026? Do you expect experiential to remain the primary growth driver? And do you see stabilization in branded and retailer returning the model to a more balanced footing?

Yes, Lucas, this is Dave. Yes, we do see experiential continuing to perform well, and we see continued demand in that segment.

And then as it relates to branded and retailer, and we talked about it in the second quarter and just here again, retailer is really facing a little bit of an anomaly in the third quarter. We feel very good about the retailer segment and its outlook as we move into 2026, especially the merchandising services, which is the largest component of that business.

And then on the branded side, we expect sequential improvement as we move through 2026. Obviously, the macro backdrop affects that segment more than the others. But we recognize that the efforts we're undergoing to kind of get the business back where it needs to go are starting to pay off. And our pipeline for the fourth quarter as we end the year of new business is very strong. So we have optimism of a more stabilized branded services as we move into 2026.

Our next question comes from Greg Parrish from Morgan Stanley.

Maybe to start, I just thought it would be good to hear maybe an update on the market and the consumer. Obviously, hearing a lot of softness out there, especially on the lower income side this week even from some restaurants. So maybe kind of just update us on what you're hearing from your clients in store.

Yes. Thanks, Greg. And I'm glad you asked that question. We make the rounds with leadership across most of our clients and customers on a quarterly basis. And obviously, everyone has been tracking the consumer and the retail names pretty closely over the last couple of weeks and a little bit mixed. You see some positive results for some. But for the most part, you're seeing guidance down or a little more of a negative tone relative to the consumer. I do think we've got 2 realities.

You've got, call it, kind of higher income consumers still remaining resilient, still shopping, still realizing trip and what have you. But when you think of all the things that have hit consumers more broadly and especially those on the lower end, you've got pricing that largely rolled out at least in the businesses that we work with. Not all of them, but a lot of them in the kind of late second quarter, early third quarter. And there was a byproduct of tariffs or tariff concerns. There was a byproduct of commodities in some large categories.

You've got the continued GLP-1, which on the food side does have some effect on demand. And then you just -- if you look kind of longer term, you've got a little bit more constrained population growth. And it's not just immigration reform, but it's also birth rate is actually -- if you look kind of back a few years and look forward, it's lower. So I think that's created some of the environment we have. Now I think there's a belief that there's some cyclicality to those -- some of those dynamics. If you think of being GLP-1, there'll be a lapping of that eventually and the growth of the adoption of that will slow. Number one.

Number two, I think you see a lot of CPGs and even the private label side leaning into innovation and innovation can spark growth within these categories. And then you have different realities across different categories. So categories that are protein-centric, categories that are expandable consumption, categories that lean a little bit more on the health orientation continue to show pretty strong growth. And then you've got obviously other categories maybe they're struggling a little bit. So I think that it's -- as we move to '26, a little bit of cautious optimism that '25 was a pretty tough year for the consumer and some hope that some of the factors on the margins that have affected the consumer, especially on the low end, are mitigated a bit and taper a bit as we move into '26.

Our next question comes from Faiza Alwy from Deutsche Bank.

I wanted to -- you mentioned timing as it relates to retailer services, and it sounded like you're a little bit more optimistic on that business as we look ahead. So just talk a bit -- just put a finer point on the timing issues and talk more about the visibility and pipeline that you're seeing into next year.

Sure. Thanks. To be clear, so third quarter was a combination of a difficult comp due to the timing of project work last year, not all of which is going to be repeated this year. And then also the timing of some project work, as you saw in the second quarter, retailer had a pretty strong quarter, and we do anticipate improvement in the fourth quarter.

When we zoom out and look at the year, because I know we all look quarter-to-quarter, but I like to look at the year, the retailer segment will be for us, I think, largely in line with expectations, but for some of this kind of macro consumer impact that's obviously affected retailers that hit probably a little bit of our advisory business, a little bit on the merchandising services side, only in the retailers will pull back investment a bit on the project work. The continuity work continues, but it is important to understand that the continuity work is also funded by a flow-through of revenue for the retailer.

And then when we talk about the pipeline as we go into 2026, our business development team, and we've really redoubled efforts there, has really done a nice job building a pipeline really across, if you will, all our segments, but especially the branded segment. And we're seeing just better success as it relates to closing on opportunities. So we're optimistic as we look out into '26 and the ability as we lean into this business development effort.

And it's a byproduct of all the work that's been done by our teams around talent upgrades, which is a combination of some new people, but a lot of training, investment in technology and our data lake is now paying off with more robust and faster data at the fingertips of our sales teams because as you can imagine, that's the most critical factor in helping drive client performance is having deep and what I'd say, fast insights relative to what's happening with brands and SKUs so that they can make decisions around promotion schedules, merchandising plans, what have you.

Understood. And then I guess just a similar question on branded because I think you're saying that you're expecting declines to moderate into 2026. Like is that because of, again, some of these business development efforts that you're talking about? Or do you think like market conditions or the macro environment is likely to improve into 2026?

I mean, look, it's a lot of the work that I was describing before, which is the business development and just improving what I call the machine, the sales machine about underpins that Branded Services segment because so much of it is in how we represent our clients with retailers on the sales side and the headquarter selling support.

And then also on the retail merchandising side, with our Instacart partnership, especially being able to demonstrate ROI in the services we provide and addressing out of stocks. We mentioned in the prepared remarks, we're close to 6 million out of stocks a year. If we can leverage the relationship with Instacart to identify those more quickly and close those faster, that's just more sell-through, which both benefits us and our clients.

And then -- I mean, look, I believe opinion of one, that the industry, like I mentioned earlier, it has some cyclical aspects this year that likely won't repeat or the industry, as I say, learns to adjust to a new environment and some of the uncertainty that you heard a lot in the first half that I don't think you're hearing quite as much in the second half is probably an example of the industry, if you will, and companies kind of learning how to manage in this new reality. And I personally remain optimistic that the macro market should be a little bit better for the consumer as we move into 2026.

Our next question comes from Greg Parrish from Morgan Stanley.

Okay. Yes. So I don't know what happened, perhaps user error -- thanks for coming back. Chris, I just want to clarify on the EBITDA guide. So I think you said like stable second half. And then -- I mean, obviously, the mid-single digits, you can kind of plug in a lot of numbers the fourth quarter and get to that. So you've had improvement every quarter in the year-over-year EBITDA. Third quarter, you're down 1. So like sort of similar level, maybe a little bit better to flattish. How do we think about the year-over-year 4Q EBITDA relative to third quarter?

Yes. And I think relative to the third quarter, Greg, obviously, there's some nuances year-over-year. We do expect experiential to have a very good quarter. We mentioned retailer gets better in the quarter. There's a tougher comp on the branded services side, just given some of the activities of a year ago in the fourth quarter. That mid-single-digit growth is meant to have a range, and it would get you to a relatively flat second half overall, certainly for revenue and then like a flat to down level of EBITDA overall. And I think that's just where we keep it right now is right at that level and gives us a little bit of flex for the fourth quarter here.

Yes, Greg, I'll jump on Chris' response, too. I mean if you really look at our year without digging in detailed fourth quarter, let's talk about second and third, we all know we had a rough first quarter, and there was a couple of things. We knew when we implemented SAP that given our business and the fact that working capital is really driven for us by DSO and the impact that, that implementing SAP can have on cash collection and what have you that from a DSO standpoint, it would be a rough period.

We also knew we were transitioning to more centralized talent acquisition and workforce planning. And with any transition, you're going to have bumps. So we have that hiring shortfall. What I'm excited about is the team is hiring for us a record pace and doing a great job in bringing in more and more talent to address the increasing demand we have in the labor parts of our business. I'm also excited, and I think we don't always acknowledge we have had a very good SAP implementation.

And we've had a team that's really pulled together even amidst a challenging kind of broader environment and done a great job and to see our DSOs kind of back to close to where we were at the end of last year. Basically realizing about a 6-month challenge just given the implementation. We've all seen some of the other stories of more difficult or challenged SAP implementations. And I just want to note that our team has done a phenomenal job in implementing that amidst everything else going on in the industry. And I think it's an example of the ability to execute both projects but also on a day-to-day basis in driving the business.

Yes. Okay. And maybe one more each on the segments here. Maybe just experiential, you've been recovering from labor shortages. Like how much of this -- you talked about demand a lot this quarter. So really trying to unpack like how much of this is staffing up versus like real demand increases? And then how do I think about that heading into '26? And like how sustainable is the growth here, especially given the backdrop of you're recovering from COVID and staffing up post-COVID. And then as we reach normal here, what's going to sustain growth going forward? How do we think about that?

So events per day grew 7% and execution, frankly, was only 91%. What that implies is while we were able to satisfy an extra about 850-plus events per day during the quarter, we could have done more. And for us, it's why I'm even optimistic about the fourth quarter as we move into '26 because our -- the fidelity of our hiring and onboarding machine, if you will, is improving every day. And so -- and then demand is there.

I mean there was -- I would argue, unmet demand in the third quarter that we could have capitalized on and even with a great talent acquisition and onboarding process. So there's more to be had. I think the other thing you see is COVID is in this space kind of long in the rearview mirror. There are some retailers that have opportunity to kind of get back to that COVID level. There are a number of retailers that are at that level or beyond. So we're not doing that comparison back to COVID as we used to do because this is now just underlying growth and demand for this business.

And part of it is, as I mentioned earlier, the innovation that's going on within the industry, number one, especially on the consumables side. And then you are seeing some sampling efforts around general merchandise, and it's crazy that sounds. But we've got a program this year with one retailer around toys and having kids kind of be able to see in parents. So as they start planning for holidays, maybe driving those categories for these retailers a little bit more. So this is a segment that's going to continue to exhibit growth. And I'm just really proud of the team for meeting the demand and yet at the same time, challenging them every day to continue to find ways to both make the experience for our teammates as the best they can be and continue to bring more teammates in to meet this demand.

Greg, to add a couple of points here. I think from a high level, what I wanted to add was that these activities and this investment that retailers and/or CPGs make drives a return. So I think with the fact that you've got a return on this investment and you've got enough activity going on, there's a desire to want to lean into it. It also helps drive traffic. So there's a lot of good features of this business that can help differentiate a retailer.

The other thing I want to say was that we've had pretty solid pricing here, which gives us an ability to offset some of the incremental inflation in labor. So -- and then when I wrap it all together with the incremental demand and the pricing coming through to help offset some of the incremental investments we're making in wages and with our teammates, we've got a really strong incremental margin. So that really shined through in this quarter. And I think that's something where we can -- we should continue to see some of that incremental margin benefit as this business continues to grow.

Yes. Okay. That's all very helpful. And maybe just to wrap here, touch on branded and some of the comments you made. With the backdrop, I know it's been a very challenging market there. You called out some new customer losses. And then I think you mentioned in-sourcing on the call here as well. If you could unpack those 2. And are the losses to competitors? Or is that losses to in-sourcing? Or is both happening? And then is there an uptick of in-sourcing that you're seeing? I just wanted to maybe clarify that.

Yes. I think when the comments were made, it's a little bit more of a longer-term trend that we've seen relative to in-sourcing. And like most trends that we envision that ultimately tapering because you get to a point where you kind of in-source the accounts, if you will, that you want to call on. We've obviously seen some of that this year. We have had some losses to competitors as well. And then we've had wins and wins from those very same competitors. In fact, this year was a very good year from a win standpoint.

So -- and then we have to look at kind of net losses and wins. And we're constantly assessing the drivers and what I'll call the sales action plan that we started in earnest in the summer -- in the early part of the summer was to address the kind of root causes of that. And I think this notion of being the fastest in the industry, identifying, again, the root cause of any sales issue or opportunity our brand or SKU and be able to proactively action that on behalf of our clients has been the focus of our efforts.

So that combination of work and the upskilling of both the technology and talent against that with, again, as you heard, a little bit, at least in my view, of some optimism on maybe a little bit better macro environment next year and the fact that our business development efforts are really bearing some fruit as it relates to pipeline gives us some optimism to see that business start stabilizing and obviously improving as we get into '26.

And I might just add a quick comment on there, Greg, around the -- just 2 dynamics. We talked about the in-sourcing. I think that would be the predominant area of loss, if you will. But then beyond that, just there's been organic growth softness. We've talked enough about a challenging macro environment, but that definitely was a weight on the quarter and has been for the year, frankly.

So we can't dismiss that because it's a pretty meaningful contributor to this. Dave mentioned the large pipeline. That's actually just even accelerated in the third quarter. How we can go execute that pipeline. Let's be clear, but that's something I'd just say it gives you a lot of optimism in terms of the business going forward. And I just want to add one other element around the omni-commerce. There's a marketing business within this as well. It's been -- you can look at the industry trends there it's been a little more challenged. That's been also another, call it, factor in our softer revenue growth performance in this business.

There are no further questions at this time. I want to turn the call back over to David Peacock for closing comments.

Yes. We want to thank everybody for joining, and we look forward to connecting with this group on next quarter, and we will talk then.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for participating.