Advantage Solutions Inc.

Greetings and welcome to the Advantage Solutions fourth quarter and full year 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press the star one. As a reminder, this conference is being recorded. Thank you.

Welcome to Advantage Solutions' fourth quarter and full year 2025 earnings conference call. Dave Peacock, Chief Executive Officer, and Chris Grohe, 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, 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 moved 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 3.5 times 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 sharpen our portfolio through the divestiture of three non-core businesses. These transactions streamline our focus and allow us to redeploy capital into higher return opportunities aligned 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. 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 face slowing spend and some revenue timing shifts. Combined, our overall company delivered adjusted EBITDA of $88 million, which reflects the ongoing mixed shifts toward 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 factor. One reason for this was our successful SAP implementation 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, with several small divestitures of non-core businesses resulting in 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 behavior spending at retail with lower-end consumers buying more on promotion at lower price points, while higher-end consumers are shifting purchasing habits away from expandable consumption categories to healthier options. These two dynamics affect our business in three 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 challenged, 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 multi-year IT transformation that concludes this year. These investments required 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 full 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're improving productivity across the organization with our centralized labor models 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 and 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 sharper visibility into performance, positioning us to operate as a truly insight-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. 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 continue 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 and experiential services, a more stable trajectory in retailer services, and a move towards stabilization in 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 mixed 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 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.