Advantage Solutions Inc.

Greetings and welcome to the Advantage Solutions second quarter 2025 earnings call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. To ask a question during the session, press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. If anyone should require operator assistance during the conference, please press star 0. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ruben Maia, Vice President of Investor Relations. Thank you. And Ruben, you may begin.

Thank you, operator. Welcome to Avani Solutions' second quarter 2025 earnings conference call. Dave Peacock, Chief Executive Officer, and Chris Crowey, 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, 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 were 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 remain prevalent, our findings reveal 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 in our survey are prioritizing private brands to address channel shifting and shopper preferences. Our market-leading private brand advisory and execution business, called Damon, 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 in 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 a client, AG1, 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 AG1 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 insourcing 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 realized 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 and store any longer. The demand for sampling and other experiential projects remains favorable for the second half of the year, particularly for our largest clients. This is typical as 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 in 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 own labor 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 data lake power dashboards, deploying image recognition technology for more than 1000 brokerage clients across 800 plus subcategories. This will help our in-store 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 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 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 human capital management system that will be available in 2027. This new strategy for centralized labor management is designed to yield benefits in three areas. First is labor utilization. We remain committed to achieving at least a 30% lift in available hours for teammates. The number one 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 is manifest 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 non-pilot 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 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 modernizes our processes for more consistent and efficient results. I'll now pass it over to Chris for more details on our performance and guidance.