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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.

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

It is now my pleasure to introduce Ruben Mella, Vice President of Investor Relations. Thank you, and Ruben, you may begin.

Thank you, operator. Welcome to Advantage Solutions' Second 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 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 includes 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, Ruben. Good morning, everyone. Thank you for joining us. Before we get started, I want to thank our teammates for their continued commitment to successfully serving our clients who continue to navigate ongoing market uncertainty. Our second quarter revenues of $736 million and adjusted EBITDA of $86 million, were down 2% and 4%, respectively from the prior year. Our performance was in line with our internal plan, and we are pleased with the sequential improvement in the business relative to the first quarter.

We made solid progress toward resolving the first quarter staffing shortfall, enabling both our experiential and retailer services teams to increase execution volume. This operational improvement contributed to year-over-year adjusted EBITDA growth across both segments. As of July, staffing has largely returned to desired levels for the second half of the year, and we are confident in our ability to continue to recruit and retain personnel to meet client demand.

Our financial results continue to be impacted by a client loss in branded services last year, which accounted for the entirety of the company's EBITDA decline. Additionally, we continue to invest behind our transformation initiatives, which weighed on profitability in the quarter. Both of these items will be mostly lapped on a year-over-year basis starting in Q3.

Given our scale, serving over 4,000 clients and retail stores operating in over 90% of ZIP codes, we have a unique perspective on the U.S. consumer. In recent months, we surveyed thousands of shoppers alongside a broad cross-section of our CPG and retailer clients to gain a deeper understanding of the evolving macroeconomic environment. While consumer health remains pressured and value-seeking behaviors remaining prevalent, our findings revealed several actionable insights.

Specifically, our merchandising supply chain, product sampling and private brand development services are essential offerings to help clients in this environment and optimize their return on investment. Retailers tell us that they lose nearly 40% of potential sales when a product is not carried or is out of stock. Our merchandising teams deliver a strong ROI for CPGs and retailers by ensuring that products are properly placed and advertised at the right price points, in-store signage is optimized and that there is an ample supply of product on shelf and on display.

Nearly 65% of retailers told us that their supply chains are evolving in response to trade disruptions. As part of our end-to-end retail services, we provide a full suite of logistics services that help clients diversify their sourcing and deliver products to the store shelves consistently and efficiently.

Finally, 85% of retailers on our survey are prioritizing private brands to address channel shifting and shopper preferences. Our market-leading private brand advisory and execution business called Daymon, offers end-to-end capabilities with access to over 6,000 supplier partners and leading private brand design capabilities, having won over 30 awards this year for best-in-class work.

These are just a few examples of tailwinds and parts of our service portfolio that are driving a healthy new business pipeline. We are engaging with prospective clients and demonstrating our value proposition to generate attractive returns. We are encouraged by the success to date renewing existing relationships and securing new service wins as we continue to work through a longer-than-normal sales cycle. For example, we recently helped the client AGI, with their transition from exclusively direct-to-consumer to a national entry into retail.

We partnered with them for a retail [ launch ] earlier this summer through our branded services brokerage team while also supporting them with an aggressive sampling program through our experiential team. The results have exceeded expectations, positioning AGI for future success at retail. This shows how we can leverage the different parts of our business to drive sales for our clients.

Turning to our segments and beginning with branded services. Clients continue to prioritize cost optimization as they adapt their supply chains, manage elevated input costs and respond to evolving channel shifts. This has resulted in more in-sourcing of select services, a reduction in order volume and a pullback in sales and marketing investments. These headwinds have mostly impacted our brokerage and omnicommerce marketing offerings in the first half of the year, while demand for our merchandising and supply chain services has remained steady.

As we enter the second half, we expect sequential improvement for our branded services as we lap client exits and losses [indiscernible] in the first half, the materialization of new business wins and streamlined operations as our transformation enabled technology and analytics advancements are driving faster and more efficient processes in this area. Within experiential services, the recovery from the staffing shortfall in Q1 led to a year-over-year increase in events executed in the quarter. Events per day grew approximately 1% and were up 5%, excluding the loss of a client last year who chose not to sample in store any longer.

The demand for sampling and other experiential projects remain favorable for the second half of the year, particularly for our largest clients. This is typical seasonality favors the second half, and we are optimistic as some of our centralized labor management efforts are beginning to help us drive talent attraction and retention.

In retailer services, recovery and staffing levels and improved project activity led to growth in the quarter. Retailers are continuing to seek our merchandising services at increasing levels due to their only shortages and the efficiency we bring in a more variable work environment. While staffing levels support our plan for the second half of the year, we will face a difficult prior year comparison and unfavorable project timing in Q3, but expect a more favorable comparison in the fourth quarter.

We continue to invest in delivering a higher ROI and service level for our CPG clients and retail customers. We remain on track to complete the implementation of our data architecture and system foundation by 2026. These projects are helping us deliver value today to our clients. We are delivering category insights and intelligence at an accelerated rate to unlock growth opportunities through our [indiscernible] power dashboards deploying image recognition technology for more than 1,000 brokerage clients across 800-plus subcategories.

This will help our in-stores and sales teams work faster and with more accuracy as they leverage better insights in distribution and product assortment decisions. Specifically, we are integrating retail point-of-sale, shopper panel, geodemographic data as well as advantages proprietary in-store execution data to help our teams identify distribution opportunities competitive gaps and monitor innovation performance in almost real time.

This helps clients maximize outcomes and retailers meet shifts in shopper behavior. In addition, our account managers can now evaluate promotional performance at a highly granular level, helping CPG companies maximize their return on trade spend and drive higher ROI per dollar. As we look to the future, 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 commercial decision-making across sales and merchandising. This next-generation platform will seamlessly integrate advantages data intelligence, including unique retail data with dynamic real-time capabilities augmenting our team's ability to anticipate demand, prioritize actions and drive efficiency across client workflows.

Shifting to our people and processes. We are continuing to invest behind implementation of a centralized labor management model that we expect will be operational starting in early 2026, and Workday's human capital management system that will be available in 2027. This new strategy for centralized labor management is designed to yield benefits in 3 areas. First is labor utilization. We remain committed to achieving at least a 30% lift in available hours for teammates.

The #1 concern our teammates have when I speak to them is the inability to get enough hours with us. More available hours will increase retention and productivity with a more tenured staff. The second is improving teammate experience, which we expect will create a win-win scenario for our teammates and clients as we drive retention even higher. This has manifested in the speed of our application to hire process all the way to route scheduling. Third is efficiency. We are investing in technology enablers to drive improved teammate and customer engagement. One example is the deployment of AI-assisted staffing across our retail customers.

The pilot program underway is validating these objectives as teammate utilization and retention rates continue to outpace nonpilot market performance. We remain on track to continue scaling and refining the pilot program to support the broad scale rollout of the centralized labor model throughout the second half of 2025 and early 2026. Taking current market conditions into account alongside our investment and operational execution plans, we are reaffirming our 2025 guidance, projecting revenue and adjusted EBITDA to be flat to down low single digits compared to the prior year.

The confidence in our outlook comes from favorable demand signals for experiential and retail merchandising services as well as expectations for sequentially improving trends in branded services. The majority of our business is well positioned to partner with clients as we deploy our enhanced capabilities to strengthen our value proposition in other areas. We also expect a reduction in the year-over-year shared service costs in the second half of the year, supported by savings derived from leveraging the IT system upgrades.

As Chris will discuss in more detail, we expect cash generation in the back half of this year to be above normalized levels, excluding the unique year-end payroll timing shift from January to December, as we transition from the heavier part of the transformation investment to the acceleration phase and continuous improvement. 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 modernize our processes for more consistent and efficient results.

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 second quarter 2025 performance by segment, discuss our cash flow and capital structure and expand on Dave's guidance commentary. In Branded services, we generated $257 million of revenues and $34 million of adjusted EBITDA, down 10% and 21% on a year-over-year basis, respectively. This segment continues to experience challenges, namely within brokerage and omni-commerce marketing, which we are working expeditiously to address. While some of the declines are business specific, including the aforementioned client loss from last year, which account for more than 1/3 of the segment EBITDA decline.

We also continue to combat a difficult macroeconomic backdrop. In experiential services, we generated $249 million of revenues and $26 million of adjusted EBITDA, up 6% and 14% on a year-over-year basis, respectively. The recovery in staffing levels enabled our teams to execute more events in the quarter. Events per day increased by 1% versus the prior year and were up 5%, excluding the client loss last year. Execution rates were approximately 93% on greater volume. As a result, margins returned to expected levels, expanding by approximately 80 basis points year-over-year to 10.4%.

In Retailer Services, on a year-over-year basis, revenues were down slightly to $231 million and adjusted EBITDA grew 8% to $26 million. Merchandising activity increased in the quarter due to improved staffing levels and uptick in project activity, including a pull forward from the third quarter and diligence in pricing to manage rising labor costs. Partially offsetting these items was softness in advisory and agency work, where we were impacted by the continued unfavorable channel mix. I would note that for both experiential and retailer services, higher shared service costs and a higher allocation of those dollars weighed on profit growth in the quarter.

Moving to balance sheet and cash flow. We ended the quarter with $103 million of cash on hand, reflective of a heavier use of working capital in the first half of the year. As a result, we did not repurchase debt or shares in the quarter. We received $22.5 million in proceeds on July 31 related to the first of 2 deferred purchase price installments for June Group. With cash on hand, these proceeds, expectations for stronger cash generation in the second half of the year and approximately $400 million available on the untapped 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.

Our net leverage ratio was approximately 4.6x of adjusted EBITDA, including [indiscernible] operations. We expect this level to taper over the balance of the year. Turning to cash generation. We ended the quarter at approximately 70 days of sales outstanding, a 1-day improvement from the first quarter as cash collections began to recover after the cutover to the new ERP system. The vast majority of the company is now on the new system, and we expect DSOs to decrease in the second half of the year. CapEx in the quarter was $2 million due to the timing of transformation investments and a significant undercapitalization of labor. We now expect CapEx to end the year in the range of $50 million to $60 million below our original guidance.

Adjusted unlevered free cash flow was $57 million and the conversion rate was 66%, driven by the lower-than-expected CapEx. As Dave highlighted, we are maintaining our full year guidance, we expect shared service costs to decline year-over-year in the second half of the year. Headcount has decreased by approximately 8% in Finance and IT since the end of last year due to the use of automation and technology to streamline back-office functions.

We also expect restructuring and reorganization costs for the full year to decline by roughly 50% compared to 2024. Branded services will remain under pressure, but we anticipate that the top line will start moving towards stabilization by the end of this year and into early 2026. From a seasonality perspective, the second half of the year is the peak season for Experiential and Retailer Services. As Dave mentioned, Retailer Services faces a difficult third quarter due to project timing and year-over-year discrete comparison factors, but we do expect a favorable comparison in the fourth quarter.

Full year adjusted EBITDA margin should be mostly in line with the prior year during this period of transformation investment. We continue to expect 2025 adjusted unlevered free cash flow to be over 50% of adjusted EBITDA. Cash generation is expected to improve in Q3 and Q4 from an artificially low level in the first half of this year. Excluding the approximately $45 million year-end payroll timing shift into 2025, we anticipate adjusted unlevered free cash flow conversion of roughly 100%, and net free cash flow conversion exceeding 30% in the second half of the year.

We are targeting a net free cash flow conversion rate of at least 25% next year and beyond, turning more in line with the performance in 2023 before the strategic investment in the transformation. Interest expense remains in the range of $140 million to $150 million, assuming no additional debt repurchases.

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

Thanks, Chris. We believe our expertise and range of services positions us well to navigate the current macroeconomic environment with resilience and agility. At the same time, we will continue to make progress towards 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 the Q&A session.

[Operator Instructions] Our first question is from Faiza Alwy of Deutsche Bank.

I wanted to ask about branded services and the investment reductions that you talked about that are impacting the brokerage and omnicommerce marketing services. I'm curious, is that -- are you seeing that across the board? Or is that specific to a particular type of customer, whether it's large versus small or a particular category?

And then like, are there signs of that improving because you talked about stabilization by the end of the year. So just curious if that's driven by something else, whether it's new business or are you expecting these market headwinds to improve?

This is Dave. I appreciate the question. So I'd say the reductions that we referenced really depends on the client and their situation within the marketplace. So it's not a pattern that we recognize across all our clients, nor is it even category specific. It's almost company specific, but you are seeing that. I'd say a little more so on the marketing side, which is obviously a smaller piece of our business than on the sales agency side. It has been reported pretty broadly that you're seeing some pullback in marketing to consumers. But -- and then as we get into the second half, one, we were lapping the client loss we referenced in the first half that -- we largely are going to be passed as we get in the third quarter. There's a little bit of economics there in July. And then we've got wins that we've got plant wins that could be smaller. But when you add them up, they're meaningful, that should help us with sequential growth as we get into the second half.

Understood. And then you talked about the new workforce system, and it sounds like that your -- it's basically going to be available in the second half. So talk a bit more about -- you mentioned more subjectively, some of the benefits that you're expecting. I guess what does that mean in terms of -- whether it's the EBITDA margin uplift. And maybe more generally, as you think about the transformation costs, like are we towards the end of the transformation costs? And just help us as to where we are in the cycle of, one, the costs and two, achieving -- starting to achieve some of the benefits of implementing these new systems. .

Sure. Absolutely. And that's kind of 2 questions, which is good because I can tackle them both. And I'll start with the latter first. So on transformation costs, we are. We're seeing pretty significant reductions in restructuring costs and onetime costs that would be helped -- just against EBITDA. In fact, year-to-date, we're about half of the level that we were this time last year, and we're going to see continued decline as you go through the year. We also had lower shared service costs in the second half of this year than in the first half of this year. as we kind of lap the increases that we saw last year, and we're starting to see some ramp down as it relates to transformation costs.

It doesn't mean we're not investing in our business. There are still specific initiatives we're investing in and labor is one of them. Labor -- improving our labor utilization, improving the teammate experience has been a priority for us and lay out in the prepared remarks, what we're thinking about there. One example of where we're seeing benefit of an overall system improvement with our labor approach. And some of it is system-based, meaning technology and some of it is just improved process and workflow.

But we had a net reduction in overall hires in the first quarter of about 1,500 people, and we had a net higher in the second quarter of 1,400. So it's almost 3,000 person swing, if you will, from first quarter to second quarter. And part of that is driven by shorter time from application to higher better S&OP or sales and operations demand signals so that we are hiring the appropriate amount of personnel for the work required.

And then we track really closely what we call, the application of higher funnel and where we may have gaps because along that path, you can lose potential teammates. And so we've been much more rigorous with our workforce operations team in tracking that funnel so that we have a higher percentage of folks that make it through it and then ultimately get onboarded into the company.

So we feel really good about both the pilot that's been going on, where we've been sharing labor across geographies versus being banner-specific, but also just in the improvement in workflows within their workforce operations.

If I can just add to that. Faiza, if we did get to a point where throughout the quarter, we improved on the hiring front. And I think we entered the second half in a good place. What I just want to know is that -- I think that manifests itself, especially in the retailer segment, where we get better staffing levels there overall, which puts us in a good place to be able to take on some incremental project work, which can be very beneficial for us, and then also stronger execution in experiential, not only execution of rate, but also the ability to handle more demos. We've seen really good demand signals there that they put us into good place to be able to accommodate those, and that should benefit our Experiential segment, particularly in the second half of the year.

All right. Great. And then just last one on cash flow, right? So you're talking about slightly better cash flow conversion. Is that primarily coming from lower CapEx? And whether -- I know you mentioned timing of projects. But is this -- are we shifting CapEx into next year? Or just give us a bit more color around what's driving the lower CapEx this year?

Yes. So obviously, we did take the CapEx down a little bit, about $15 million at the midpoint. And that would, therefore, be a little bit of a benefit to the cash flow. But the real benefit is coming from the improved DSO, which we saw at the beginning [indiscernible] this quarter, we'll see really kind of take hold in Q3 and especially across Q4. And then also the lower restructuring costs year-over-year that some of the big factor for the second half of the year. So you've got a stronger EBITDA kind of top to bottom, stronger EBITDA contributor -- contribution, less CapEx much better working capital. Working capital then becomes a benefit to the company, working capital source in the second half of the year, and then you'll see the lower restructuring costs as well. So all those things contribute to the better cash flow performance for the second half of the year. And I will say it's in line what we expected with what we indicated last quarter. It's coming through as expect.

Our next question is coming from Greg Parrish with Morgan Stanley.

Congrats on the result. I just want to unpack branded EBITDA heading into the second half. I mean I think to hit the guide, we had to see some improvement there, right? How you did that last year? I think in the quarter, you [indiscernible] decline as client loss. So I guess, backing that out, right, the other 2/3, like maybe how does the other 2/3 improve in the second half? Maybe just kind of unpack the drivers there and what we should expect? .

Yes. This is Dave. We see a few things, Greg. We see -- we talked about it a minute ago, just wins in the business. Number one, we see a little bit of seasonality where you've got orders which is how we're obviously paid through a commission-based business from a revenue standpoint, increasing as you get into the back half of the year with things like holidays, especially the categories that most represent our client base when you think of things like food and personal care. So those are 2 of the big drivers. We've also obviously been able to manage our cost to serve.

We talked about our new Pulse program, which we're really excited about because it's giving us kind of greater fidelity in the decisioning that we have within the business because if you can think about a sales business, you're assessing information to take action to improve an outcome effectively. And we are getting faster signals as it relates to brand performance and especially those things that are kind of the root cause drivers to market share growth or decline. So we're able to to capitalize on those more quickly. But it also -- because it's leveraging expansive data and analytics, in an automated way, it's also a little bit more efficient as well. So that combination puts us in a position to see some growth as we get into the second half.

Great. Very helpful. I'm starting to come back to the CapEx point, but I mean the $2 million was a little bit surprising. So I guess, I mean does that slow down like your completion of some of the technology investments that you're doing? I'm just trying to better understand here.

I think it looks -- honestly, there's been -- so it was lower than we expected in the quarter and truly a lot of it is timing. But we did bring the overall guidance down by $15 million at the midpoint. So there is less overall spending. And I would just say that we do expect the second half to be a heavier level of spend overall, largely all IT projects are the main driver of our spend for the year. We have give visibility to those.

And as I've said to you before, if we can push the timing out when we pay them, then we're going to take advantage of that, and there's been a little bit of that. We did also talk in the script about just underutilizing capitalizing labor, however I say that properly, but we capitalized labor at the proper rate, which it comes through more OpEx than CapEx.

And I think it's something we're working on very diligently. And a lot of it comes down to planning and planning around our projects to make sure that we're accomplishing those on time and starting with on time. If not, you can tend to see that bleed into OpEx. So there was an element of that as well. But with that said, I would say that maybe some of this shifted a bit into '26. But really, at the end of the day, there's just a more efficient delivery of the capital products we expect for the year now.

Okay. That's helpful, too. And then maybe just lastly from me. On the wage front, maybe just kind of update. I mean, obviously, you kind of reverted some of the headwinds you had in the first quarter on labor availability, but then just on the wage front, just kind of mark us to market here on where we're at? And what you're seeing from the market in terms of wages? .

Yes. We have seen pretty consistent wage inflation through the year. And about what we expected in that, call it, 3% range overall for the year, and we've been able to manage that quite well. I'd also say that in the quarter, our pricing nearly offset our labor inflation was very close. So I felt good about that progress we made on getting some price increases through -- to help offset, was obviously still some higher labor costs that are coming through in the economy today in our business. I think for the second half of the year, I expect that same consistency, we don't have a lot of incremental sort of regulatory type changes that are occurring there.

So I feel like we're in a pretty good place to be able to mostly offset that -- the labor cost inflation with pricing.

Our next question is coming from Joseph Vafi with Canaccord Genuity.

Well, [ Johnson ] on here for Joe. So you can maybe drill down a bit on resolving that staffing shortfall in July? And anything you can share kind of about the demand signals there that have given me confidence in those levels being more sustainable through the rest of the year? And then maybe if you can drill down in the retail services, and how we should think about kind of that staffing uplift against maybe some more difficult Q3 comps in that project from a project timing perspective?

Yes. So we do have that staffing shortfall in July. In fact, the trajectory of our kind of workforce operations and talent acquisition continues a pace even as we move into July. When we talk about the project timing, it's literally just that, and we referenced the fact that some of these projects. And this can happen on a year-over-year basis that may have occurred in Q3, maybe shifting more into Q4, and which is why you'll see a little bit in the retailer segment, especially a part of that business, a little bit of shortfall in Q3 versus prior year, but much better Q4 and we have visibility to that.

On the demand signal front, we're seeing strong demand for demos and on the experiential space and such that we're better able to meet that demand and hit higher level of execution rates because of the strength of our hiring and talent acquisition and overall retention plans. And then we feel very good about the S&OP process with our retailer group and being able to kind of flex that force as needed based on project timing.

And a lot of these projects occur in the third quarter and going into the early fourth. Obviously, as you get into holiday periods, retailers look to have fewer -- less third-party labor in the stores, which is very common and normal and is in our normal seasonality. But in the retailer space is the one where just due to timing, you're going to have a little bit of less project work in the third quarter, but we know that gets kind of compensated for in the fourth quarter.

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

Thank you, Janice. We will be attending the Canaccord Growth Conference on August 12 next week in Boston with a webcast of a fireside chat at noon Eastern Time. We hope to see you there. And again, thank you for joining us today.

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