ADV 10-Q
Advantage Solutions Inc. (ADV)
res
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of |
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(I.R.S. Employer |
(Address of principal executive offices)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of May 5, 2026, the registrant had
Advantage Solutions Inc.
TABLE OF CONTENTS
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3 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
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Condensed Consolidated Statements of Stockholders’ Equity |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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32 |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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34 |
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35 |
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37 |
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2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ADVANTAGE SOLUTIONS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share data) |
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March 31, 2026 |
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December 31, 2025 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Accounts receivable, net of allowance for expected credit losses of $ |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, equipment, and capitalized software, net |
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Goodwill |
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Other intangible assets, net |
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Investments in unconsolidated affiliates |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities |
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Current portion of long-term debt |
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$ |
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$ |
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Accounts payable |
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Accrued compensation and benefits |
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Other accrued expenses |
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Deferred revenues |
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Total current liabilities |
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Long-term debt, net of current portion |
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Deferred income tax liabilities |
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Other long-term liabilities |
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Total liabilities |
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Equity attributable to stockholders of Advantage Solutions Inc. |
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Common stock, $ |
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Additional paid in capital |
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Accumulated deficit |
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( |
) |
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( |
) |
Loans to Karman Topco L.P. |
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( |
) |
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( |
) |
Accumulated other comprehensive loss |
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( |
) |
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( |
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Treasury stock, at cost; |
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( |
) |
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( |
) |
Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See Notes to the Condensed Consolidated Financial Statements.
3
ADVANTAGE SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
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Three Months Ended March 31, |
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(in thousands, except share and per share data) |
2026 |
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2025 |
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Revenues |
$ |
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$ |
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Cost of revenues (exclusive of depreciation and amortization shown separately below) |
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Selling, general, and administrative expenses |
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Depreciation and amortization |
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Gain on divestiture and income from investments in European joint venture |
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( |
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( |
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Total operating expenses |
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Operating income (loss) |
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( |
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Other expenses (income): |
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Interest expense, net |
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Income from unconsolidated investments |
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) |
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Other expense, including debt fees |
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Total other expenses, net |
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Loss before income tax expense |
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( |
) |
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( |
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Income tax expense |
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Net loss |
$ |
( |
) |
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$ |
( |
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Basic loss per common share |
$ |
( |
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$ |
( |
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Diluted loss per common share |
$ |
( |
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$ |
( |
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Weighted-average number of common shares: |
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Basic |
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Diluted |
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Comprehensive (Loss) Income: |
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Net loss |
$ |
( |
) |
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$ |
( |
) |
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Other comprehensive (loss) income, net of tax: |
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Foreign currency translation adjustments |
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( |
) |
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Total comprehensive loss |
$ |
( |
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$ |
( |
) |
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See Notes to the Condensed Consolidated Financial Statements.
4
ADVANTAGE SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Treasury Stock |
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Paid-in |
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Accumulated |
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Loans to |
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Comprehensive |
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Stockholders' |
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(in thousands, except share data) |
Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Topco |
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Loss |
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Equity |
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Balance at January 1, 2026 |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
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Comprehensive loss |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
Foreign currency translation adjustments |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Total comprehensive loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
Interest on loans to Karman Topco L.P. |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Retirement of treasury stock |
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— |
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— |
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( |
) |
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( |
) |
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— |
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— |
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— |
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— |
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Purchase of treasury stock |
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( |
) |
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— |
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( |
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— |
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— |
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— |
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— |
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( |
) |
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Shares issued under 2020 Employee Stock Purchase Plan |
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— |
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— |
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— |
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— |
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— |
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— |
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Payments for taxes related to net share settlement under 2020 Incentive Award Plan |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
) |
Shares issued under 2020 Incentive Award Plan |
|
19,595 |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at March 31, 2026 |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
478,028 |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Treasury Stock |
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Paid-in |
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Accumulated |
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Loans to |
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Comprehensive |
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Stockholders' |
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(in thousands, except share data) |
Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Topco |
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Loss |
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Equity |
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Balance at January 1, 2025 |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
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Comprehensive (loss) income |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
Foreign currency translation adjustments |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Total comprehensive loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
Interest on loans to Karman Topco L.P. |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Purchase of treasury stock |
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( |
) |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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( |
) |
|
Equity-based compensation of Karman Topco L.P. |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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( |
) |
Shares issued under 2020 Employee Stock Purchase Plan |
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— |
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— |
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— |
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— |
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— |
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— |
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Payments for taxes related to net share settlement under 2020 Incentive Award Plan |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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( |
) |
Shares issued under 2020 Incentive Award Plan |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at March 31, 2025 |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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See Notes to the Condensed Consolidated Financial Statements.
5
ADVANTAGE SOLUTIONS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Three Months Ended March 31, |
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(in thousands) |
|
2026 |
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2025 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities |
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Non-cash adjustments on derivatives and non-cash interest income |
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( |
) |
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( |
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Amortization of deferred financing fees |
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Depreciation and amortization |
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Deferred income taxes |
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Equity-based compensation of Karman Topco L.P. |
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( |
) |
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Stock-based compensation |
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Gain on divestiture and income from investments in European joint venture |
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( |
) |
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( |
) |
Income from unconsolidated investments |
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( |
) |
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Distribution received from equity method investments |
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Other |
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( |
) |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
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( |
) |
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Prepaid expenses and other assets |
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Accounts payable |
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Accrued compensation and benefits |
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( |
) |
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( |
) |
Deferred revenues |
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( |
) |
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Other accrued expenses and other liabilities |
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( |
) |
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Net cash provided by (used in) operating activities |
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( |
) |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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|
||
Purchase of investments in unconsolidated affiliates |
|
|
( |
) |
|
|
( |
) |
Purchase of property and equipment and development of capitalized software |
|
|
( |
) |
|
|
( |
) |
Proceeds from divestitures |
|
|
|
|
|
|
||
Net cash provided by (used in) investing activities |
|
|
|
|
|
( |
) |
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Payment of deferred financing fees for line of credit modification |
|
|
( |
) |
|
|
|
|
Principal payments on long-term debt |
|
|
( |
) |
|
|
( |
) |
Repurchases of senior secured notes and Term Loan Facility |
|
|
|
|
|
( |
) |
|
Proceeds from 2020 Employee Stock Purchase Plan |
|
|
|
|
|
|
||
Payments for taxes related to net share settlement of equity awards |
|
|
( |
) |
|
|
( |
) |
Purchase of treasury stock |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Net effect of foreign currency changes on cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
( |
) |
Net change in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash, end of period |
|
$ |
|
|
$ |
|
||
SUPPLEMENTAL CASH FLOW INFORMATION |
|
|
|
|
|
|
||
Purchases of property and equipment and development of capitalized software recorded in accounts payable and accrued expenses |
|
$ |
|
|
$ |
|
||
See Notes to the Condensed Consolidated Financial Statements.
6
ADVANTAGE SOLUTIONS INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Significant Accounting Policies
Advantage Solutions Inc. (the “Company”) is a provider of outsourced solutions to consumer goods companies and retailers. The Company’s Class A common stock is listed on the Nasdaq Global Select Market under the symbol “ADV.”
Basis of Presentation
Reverse Stock Split
On March 26, 2026, the Company effected a 1-for-25 reverse stock split of its Class A common stock. In connection with the reverse stock split, the Company amended its certificate of incorporation to reduce the number of authorized shares of Class A common stock and preferred stock by dividing the previously authorized share amounts by the reverse stock split ratio and applying a 1.5x multiplier. No fractional shares were issued in connection with the reverse stock split, and stockholders who otherwise would have been entitled to a fractional share received cash in lieu thereof. All share and per share amounts presented in these unaudited condensed consolidated financial statements, including shares underlying stock-based compensation equity awards, have been retroactively adjusted for all periods presented to give effect to the reverse stock split. The reverse stock split did not affect the per share par value of the Company’s Class A common stock.
Retirement of Treasury Shares
During the three months ended March 31, 2026, the Company retired
Revenue Recognition
The Company recognizes revenue when control of promised goods or services is transferred to the client in an amount that reflects the consideration that the Company expects to be entitled to in exchange for such goods or services. Substantially all of the Company’s contracts with clients involve the transfer of a service to the client, which represents a performance obligation that is satisfied over time because the client simultaneously receives and consumes the benefits of the services provided. In most cases, the contracts provide for a performance obligation that is comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). For these contracts, the Company allocates the ratable portion of the consideration based on the services provided in each period of service to such period.
Revenues related to the Branded Services segment are primarily recognized in the form of commissions, fee-for-service and cost-plus fees for providing headquarter relationship management, execution of merchandising strategies and omni-commerce marketing services. Revenues within the Branded Services segment are further disaggregated between brokerage services, branded merchandising services and omni-commerce marketing services. Brokerage services revenues are primarily outsourced sales and services for branded consumer goods manufacturers at retailer
7
headquarters, in-store and online. Branded merchandising services relate to merchandising in-store and online for branded consumer goods manufacturers. Omni-commerce marketing services primarily relate to digital and field marketing services.
Experiential Services segment revenues are primarily recognized in the form of fee-for-service and cost-plus fees for providing in-store, digital sampling and demonstrations, where the Company manages highly customized, large-scale sampling programs for leading brands and retailers.
Retailer Services segment revenues are primarily recognized in the form of commissions, fee-for-service and cost-plus fees for providing consulting services related to private brand development, the execution of merchandising strategies and marketing strategies within retailer locations, including retail media networks and analyzing shopper behavior. Revenues within the Retailer Services segment are further disaggregated between advisory services, retailer merchandising services and agency services to retailers. Advisory services primarily consist of consulting services related to private brand development. Retailer merchandising services primarily relate to the execution of merchandising strategies. Agency services primarily consist of providing marketing strategies within retail locations.
Disaggregated revenues were as follows:
|
|
Three Months Ended March 31, |
|
|
|||||
(in thousands) |
|
2026 |
|
|
2025 |
|
|
||
Branded Services |
|
|
|
|
|
|
|
||
Brokerage services |
|
$ |
|
|
$ |
|
|
||
Branded merchandising services |
|
|
|
|
|
|
|
||
Omni-commerce marketing services |
|
|
|
|
|
|
|
||
Total Branded Services revenues |
|
$ |
|
|
$ |
|
|
||
Experiential Services |
|
|
|
|
|
|
|
||
Experiential services |
|
$ |
|
|
$ |
|
|
||
Total Experiential Services revenues |
|
$ |
|
|
$ |
|
|
||
Retailer Services |
|
|
|
|
|
|
|
||
Retail merchandising services |
|
$ |
|
|
$ |
|
|
||
Advisory services |
|
|
|
|
|
|
|
||
Agency services |
|
|
|
|
|
|
|
||
Total Retailer Services revenues |
|
$ |
|
|
$ |
|
|
||
Total revenues |
|
$ |
|
|
$ |
|
|
||
Deferred revenues represent cash payments that are received in advance of the Company’s satisfaction of the applicable obligation and are included in Deferred revenues in the condensed consolidated balance sheets. Deferred revenues are recognized as revenues when the related services are performed for the client. Revenues recognized during the three months ended March 31, 2026 that were included in Deferred revenues as of December 31, 2025 was $
Accounting Standards Recently Issued but Not Yet Adopted by the Company
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03, as clarified by ASU 2025-01, is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted on a prospective or retrospective basis. The Company is currently evaluating the impact of ASU 2024-03 on the consolidated financial statements and related disclosures.
8
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which modernizes the accounting for internal-use software costs to reflect incremental and iterative development methods. The amendments remove prescriptive development stages and require capitalization of software costs once management has authorized and committed to funding the project and it is probable the project will be completed and the software will be used as intended. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, including interim periods within those years, with early adoption permitted and application on a prospective, modified retrospective, or retrospective basis. The Company is currently evaluating the impact of ASU 2025-06 on the consolidated financial statements and related disclosures.
Other new accounting pronouncements recently issued or newly effective were not applicable to the Company, did not have a material impact on the condensed consolidated financial statements or are not expected to have a material impact on the condensed consolidated financial statements.
2. Divestiture
Investments in European Joint Venture
During the three months ended March 31, 2026, the Company executed a series of agreements related to its investment in a European joint venture, which was accounted for under the equity method and in which the Company held an ownership interest as of December 31, 2025. Under the terms of these agreements, the Company sold its interest in a portion of the European joint venture business for total consideration of £
The Company recognized a gain of approximately $
For the three months ended March 31, 2025, the Company presented its proportionate share of earnings from the European joint venture within operating income, as reflected in Income from investment in European joint venture and other, because the results of that investment were considered integral to the Company’s operations at that time. Following completion of the restructuring of the investments in the European joint venture in 2026, the Company reassessed the nature of its retained equity‑method investment and concluded that the results of the remaining European joint venture investment are no longer integral to the Company’s core operating activities. Accordingly, for the three months ended March 31, 2026, the Company presents its proportionate share of Income from unconsolidated investments within Income from unconsolidated investments in the condensed consolidated statements of operations and comprehensive loss.
2024 Divestitures
During the three months ended March 31, 2026, the Company received the remaining installment of approximately $
3. Goodwill and Intangible Assets
The carrying amount of goodwill as of March 31, 2026 and December 31, 2025 was $
Amortization of intangible assets was $
9
The following tables set forth information for intangible assets:
|
|
|
|
March 31, 2026 |
|
|||||||||||||
(amounts in thousands) |
|
Weighted Average Useful Life |
|
Gross |
|
|
Accumulated |
|
|
Accumulated |
|
|
Net Carrying |
|
||||
Finite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Client relationships |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
Trade names |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total finite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Indefinite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Trade name |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Total other intangible assets |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
December 31, 2025 |
|
|||||||||||||
(amounts in thousands) |
|
Weighted Average Useful Life |
|
Gross |
|
|
Accumulated |
|
|
Accumulated |
|
|
Net Carrying |
|
||||
Finite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Client relationships |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
Trade names |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total finite-lived intangible assets |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||||
Indefinite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Trade name |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Total other intangible assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
As of March 31, 2026, estimated future amortization expense of the Company’s finite-lived intangible assets are as follows:
(in thousands) |
|
|
|
|
Remainder of 2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total amortization expense |
|
$ |
|
|
4. Debt
Long-term debt consisted of the following:
(in thousands) |
March 31, |
|
|
December 31, |
|
||
|
2026 |
|
|
2025 |
|
||
Term Loan Facility |
$ |
|
|
$ |
|
||
|
|
|
|
|
|||
|
|
|
|
|
|||
Total long-term debt |
|
|
|
|
|
||
Less: current portion |
|
|
|
|
|
||
Less: unamortized debt discount |
|
|
|
|
|
||
Less: debt issuance costs |
|
|
|
|
|
||
Long-term debt, net |
$ |
|
|
$ |
|
||
Refinancing
10
On March 11, 2026, Advantage Sales & Marketing Inc., the Company’s indirect wholly owned subsidiary, completed a refinancing transaction designed to extend maturities, enhance liquidity, and simplify its capital structure. The transaction was executed through a series of interrelated financing actions, including (i) an exchange offer and consent solicitation with respect to the Company’s outstanding senior secured notes, (ii) a refinancing and amendment of the Company’s term loan facility, and (iii) amendments to the Company’s asset‑based revolving credit facility.
As part of the refinancing, holders of approximately
Concurrently with the notes exchange, the Company refinanced its existing term loan facility by (i) entering into a new senior secured first lien term loan facility at an extended maturity (“the 2030 Term Loan Facility”) in an aggregate principal amount of $
The 2030 Notes
The Company’s obligations under the 2030 Notes are guaranteed by Karman Intermediate Corp. and each of the Company’s direct and indirect wholly owned material U.S. subsidiaries and Canadian subsidiaries (the “Guarantors”), and are secured by a lien on substantially all of the Company’s and the Guarantors’ assets (subject to certain permitted exceptions). The 2030 Notes have a first‑priority lien on the fixed asset collateral (equal in priority with the liens securing the 2030 Term Loan Facility) and a second‑priority lien on the current asset collateral (equal in priority with the liens securing the 2030 Term Loan Facility and second in priority to the liens securing the 2030 ABL), in each case, subject to other permitted liens.
The 2030 Notes may be redeemed, in whole at any time or in part from time to time, at
The 2030 Term Loan Facility
Borrowings under the Company’s 2030 Term Loan Facility amortize in equal quarterly installments in an amount equal to
11
The Company’s obligations under the 2030 Term Loan Facility are guaranteed by the Guarantors, and are secured by a lien on substantially all of the Company’s and the Guarantors’ assets (subject to certain permitted exceptions). The 2030 Term Loan Facility has a first‑priority lien on the fixed asset collateral (equal in priority with the liens securing the 2030 Notes) and a second‑priority lien on the current asset collateral (second in priority to the liens securing the 2030 ABL), in each case, subject to other permitted liens. The 2030 Term Loan Facility matures in April 2030, subject to potential extensions in accordance with its terms. The 2030 Term Loan Facility includes a payment-in-kind fee that was recorded as debt discount and is being amortized to interest expense over the term of the 2030 Term Loan Facility using the effective interest method.
The 2030 Asset-based Revolving Credit Facility
The Company's 2030 ABL provides for revolving loans and letters of credit in the aggregate amount of up to $
Borrowings under the 2030 ABL bear interest at variable rates based on the CME Group Benchmark Administration Limited Term Secured Overnight Financing Rate (“SOFR”) or a base rate, plus applicable margins, at the Company's option. The applicable margins for the 2030 ABL are
The Company’s obligations under the ABL are guaranteed by the Guarantors and are secured by liens on substantially all assets of the Company and the Guarantors, subject to certain permitted exceptions. These obligations have a first‑priority lien on current asset collateral and a second‑priority lien on fixed asset collateral, which is junior to the liens securing the 2030 Notes and the 2030 Term Loan Facility discussed below, in each case subject to permitted liens.
As of March 31, 2026, the Company had the ability to borrow up to $
Debt Covenants
The 2030 Notes, the 2030 ABL and the 2030 Term Loan Facility each contain customary affirmative and negative covenants applicable to the Guarantors, the Company and its subsidiaries. Collectively, these covenants restrict the ability of such parties to, among other things: (i) incur or guarantee additional indebtedness; (ii) pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock, or make other restricted payments; (iii) prepay, redeem, repurchase or modify the terms of certain junior or other indebtedness; (iv) issue certain preferred stock or similar equity securities; (v) make loans, advances, acquisitions or other investments; (vi) sell or otherwise dispose of or transfer assets; (vii) incur liens or other security interests on assets; (viii) enter into transactions with affiliates; (ix) enter into agreements restricting the ability of subsidiaries to pay dividends; (x) change the Company's line of business; and (xi) merge or consolidate with, or sell all or substantially all of their assets to, another entity.
Substantially all of the foregoing covenants under the 2030 Notes will be suspended, and the guarantees provided by the Guarantors released, for so long as the 2030 Notes maintain certain investment grade ratings, subject to customary exceptions.
The 2030 ABL additionally requires the Company to maintain a fixed charge coverage ratio (as defined in the related credit agreement) of not less than 1.00 to 1.00 as of the end of each fiscal quarter during any period in which excess availability is less than the greater of (a) $
12
The agreements governing the 2030 Notes, the 2030 Term Loan Facility and the 2030 ABL contain additional affirmative and negative covenants, including related definitions, thresholds, limitations and exceptions, that vary between the facilities. The 2028 Notes, 2030 Notes, and the 2030 Term Loan Facility rank pari passu in right of payment, subject to the applicable intercreditor arrangements and collateral priorities. As of March 31, 2026, the Company was in compliance with all applicable covenants.
The Company determined that all components of the Refinancing were considered to be modifications. Fees paid to creditors in connection with the Refinancing, including payment-in-kind fees associated with the 2030 Notes and the 2030 Term Loan Facility, were recorded as adjustments to the carrying amounts of the related debt instruments and are being amortized as interest expense over the remaining terms of the modified arrangements. Third-party fees of $
Debt Maturities
Future minimum principal payments on long-term debt as of March 31, 2026 are as follows:
(in thousands) |
|
|
|
Remainder of 2026 |
$ |
|
|
2027 |
|
|
|
2028 |
|
|
|
2029 |
|
|
|
2030 and thereafter |
|
|
|
Total future minimum principal payments |
$ |
|
|
5. Fair Value of Financial Instruments
The Company measures fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include: Level 1, defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The following table sets forth the Company’s financial assets and liabilities measured on a recurring basis at fair value, categorized by input level within the fair value hierarchy.
|
|
March 31, 2026 |
|
|||||||||||||
(in thousands) |
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Liabilities measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative financial instruments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total liabilities measured at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
December 31, 2025 |
|
|||||||||||||
(in thousands) |
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Liabilities measured at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivative financial instruments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total liabilities measured at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
13
Interest Rate Collar and Cap Agreements
The Company has interest rate collar contracts with an aggregate notional value of principal of $
Effective April 8, 2026, the Company entered into an interest rate collar with a $
As of March 31, 2026, the fair value of the Company’s outstanding interest collars of $
During the three months ended March 31, 2026 and 2025, the Company recorded a gain of $
Long-term Debt
The following tables set forth the carrying values and fair values of the Company’s financial liabilities measured on a recurring basis, categorized by input level within the fair value hierarchy:
(in thousands) |
|
Carrying Value |
|
|
Fair Value |
|
||
Balance at March 31, 2026 |
|
|
|
|
|
|
||
Term Loan Facility |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
Total long-term debt |
|
$ |
|
|
$ |
|
||
(in thousands) |
|
Carrying Value |
|
|
Fair Value |
|
||
Balance at December 31, 2025 |
|
|
|
|
|
|
||
Term Loan Facility |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|||
Total long-term debt |
|
$ |
|
|
$ |
|
||
6. Related Party Transactions
Unconsolidated Affiliates
During the three months ended March 31, 2026 and 2025, the Company recognized revenues of $
7. Income Taxes
The Company had an effective tax rate of (
14
8. Segments
The Company’s reportable segments, consisting of Branded Services, Experiential Services, and Retailer Services, have separate financial information and are evaluated regularly by the Company’s Chief Operating Decision Maker (“CODM”), a position currently held by the Company's , in deciding how to allocate resources and in assessing performance.
The tables below summarize revenues, significant expenses and operating income (loss) by reportable segment:
|
Three Months Ended March 31, 2026 |
|
|||||||||||||
(in thousands) |
Branded Services |
|
|
Experiential Services |
|
|
Retailer Services |
|
|
Total Company |
|
||||
Revenues |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
||||
Compensation and benefits |
|
|
|
|
|
|
|
|
|
|
|
||||
Reimbursable expenses1 |
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Other segment items2 |
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
||||
Gain on divestiture |
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Total segment operating expenses |
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total segment operating (loss) income |
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
Three Months Ended March 31, 2025 |
|
|||||||||||||
(in thousands) |
Branded Services |
|
|
Experiential Services |
|
|
Retailer Services |
|
|
Total Company |
|
||||
Revenues |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
||||
Compensation and benefits |
|
|
|
|
|
|
|
|
|
|
|
||||
Reimbursable expenses1 |
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Other segment items2 |
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
||||
Income from investment in European joint venture and other |
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Total segment operating expenses |
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total segment operating (loss) income |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
|
(1) Reimbursable expenses are costs incurred in the delivery of services to the Company's clients that the client has agreed to reimburse, including media, sample, retailer fees and other marketing and production costs.
(2) The “other segment items” category primarily consists of costs incurred in the execution of service obligations, including supplies, technology, and other direct expenses such as travel and indirect general and administrative expenses such as professional fees. These costs align with the segment-level information regularly provided to the CODM and represent the difference between revenue and the significant expense categories above in determining segment profitability.
9. Restructuring
During the first quarter of fiscal year 2026, the Company initiated restructuring activities primarily focused on transitioning certain back office functions to a third‑party operating model.
15
(in thousands) |
|
|
Three Months Ended March 31, 2026 |
|
|
Branded Services |
|
|
$ |
|
|
Experiential Services |
|
|
|
|
|
Retailer Services |
|
|
|
|
|
Total restructuring expenses |
|
|
$ |
|
|
The Company estimates that it will incur additional costs of approximately $
10. Commitments and Contingencies
11. Stock-Based Compensation
The Company has nonqualified stock options, restricted stock units (“RSUs”), and performance restricted stock units (“PSUs”). Stock-based compensation expense is recognized based on the fair value at the grant date over the requisite service period.
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
2026 |
|
|
2025 |
|
||
Restricted stock-based unit awards |
$ |
|
|
$ |
|
||
Other share-based awards |
|
|
|
|
|
||
Total stock-based compensation before tax |
|
|
|
|
|
||
Tax benefit |
|
( |
) |
|
|
( |
) |
Total stock-based compensation expense included in net loss |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Performance Restricted Stock Units
PSUs granted in fiscal years 2025 and 2024 cliff-vest after three years at a rate ranging from
PSUs granted in fiscal year 2023 vest over a
16
The fair value of PSU grants was equal to the closing price of the Company’s stock on the date of the applicable grant.
Year Granted |
|
Number of |
|
|
Number of |
|
|
Number of |
|
|
Weighted Average Grant Date Fair Value Per Share |
|
|
Maximum Remaining Unrecognized Compensation Expense |
|
|
Weighted-average remaining requisite service periods |
|
||||||
2025 |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
||||||
2024 |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
||||||
2023 |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
||||||
The following table summarizes the PSU activity for the three months ended March 31, 2026:
|
|
Performance Share Units |
|
|
Weighted Average Grant |
|
||
Outstanding at January 1, 2026 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Distributed |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
PSU performance adjustment (1) |
|
|
( |
) |
|
$ |
|
|
Outstanding at March 31, 2026 (2) |
|
|
|
|
$ |
|
||
|
|
(2) PSU award activity for each year used in the three year average achievement is presented at target until three year average achievement is approved by the HCC, at which point the awards are adjusted as outstanding awards, subject to additional performance requirements, TSR and service-based vesting conditions.
Restricted Stock Units
RSUs are subject to the recipient’s continued service to the Company. RSUs are generally scheduled to vest over
17
During the three months ended March 31, 2026, the following activities involving RSUs occurred under the Plan:
|
|
Number of RSUs |
|
|
Weighted Average Grant |
|
||
Outstanding at January 1, 2026 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Distributed |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Outstanding at March 31, 2026 |
|
|
|
|
$ |
|
||
As of March 31, 2026, the total remaining unrecognized compensation cost related to RSUs amounted to $
Stock Options
During the three months ended March 31, 2026, the following activities involving nonqualified stock options occurred under the Plan:
|
|
Stock Options |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Remaining Contractual Life |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding at January 1, 2026 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Cancelled/Expired |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Outstanding at March 31, 2026 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at March 31, 2026 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The fair value of the employee stock options was estimated using the following weighted average assumptions using a Black-Scholes option valuation model:
|
|
Period Ended March 31, 2026 |
|
|
Exercise Price |
|
$ |
|
|
Dividend yield |
|
|
% |
|
Expected volatility |
|
|
% |
|
Risk-free interest rate |
|
|
% |
|
Expected term |
|
|
|
|
|
|
|
|
|
As of March 31, 2026, the Company had approximately $
12. Earnings Per Share
The Company calculates earnings per share using a dual presentation of basic and diluted earnings per share. Basic earnings per share is calculated by dividing net income attributable to stockholders of the Company by the weighted-average shares of common stock outstanding without the consideration for potential dilutive shares of common stock. Diluted earnings per share represents basic earnings per share adjusted to include the potentially dilutive effect of performance stock units, restricted stock units, public and private placement warrants, the employee stock purchase plan and stock options. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding and the potential dilutive shares of common stock for the period determined using the treasury stock method. During periods of net loss, diluted loss per share is equal to basic loss per share because the antidilutive effect of potential common shares is disregarded.
18
The following is a reconciliation of basic and diluted earnings per common share:
|
|
Three Months Ended March 31, |
|
|||||
(in thousands, except share and earnings per share data) |
|
2026 |
|
|
2025 |
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average common shares outstanding - basic |
|
|
|
|
|
|
||
Weighted-average common shares outstanding - diluted |
|
|
|
|
|
|
||
Net loss per share - basic |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss per share - diluted |
|
$ |
( |
) |
|
$ |
( |
) |
In accordance with the treasury stock method the weighted average shares outstanding assuming dilution include the incremental effect of stock-based awards, except when such effect would be antidilutive. Stock-based awards of
13. Subsequent Events
On April 29, 2026, the Company granted approximately
19
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Quarterly Report”), including the section titled “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) including statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, our beliefs and our management’s assumptions. Such words as “expect,” “anticipate,” “outlook,” “could,” “target,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “should,” “may,” “assume” and “continue” as well as variations of such words and similar expressions are intended to identify such forward-looking statements, although not all forward-looking statements contain such terms. These statements are not guarantees of future performance and they involve certain risks, uncertainties and assumptions that are difficult to predict. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecasted by our forward-looking statements. More information regarding these risks and uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth in “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Annual Report”). Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission (the “SEC”), we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise.
Business Overview
We are a leading omni-commerce business solutions provider to consumer goods manufacturers and retailers. We have a strong platform of essential, business critical services like headquarter sales, retail merchandising, in-store sampling, digital commerce, and shopper marketing. We generate demand for brands and retailers of all sizes, helping get the right products on the shelf, whether physical or digital, and into the hands of consumers in every way they shop. We use a scaled platform to innovate as a trusted partner with our clients, solving problems to increase their efficiency and effectiveness across a broad range of channels.
We report financial results for the following three reportable segments. Through our Branded Services segment, which generated approximately 29.6% and 35.3% of our revenues in the three months ended March 31, 2026 and 2025, respectively, we provide services to branded consumer goods manufacturers through three main categories: brokerage, branded merchandising and omni-commerce marketing services. Through our Experiential Services segment, which generated approximately 44.3% and 38.2% of our revenues in the three months ended March 31, 2026 and 2025, respectively, we help brands and retailers reach consumers and convert shoppers into buyers through in-store and online sampling and demonstrations. Through our Retailer Services segment, which generated approximately 26.1% and 26.5% of our revenues in the three months ended March 31, 2026 and 2025, respectively, we provide end-to-end advisory, retailer merchandising and agency services to retailers.
Our quarterly results are seasonal in nature, with the fourth fiscal quarter typically generating a higher proportion of our revenues than other fiscal quarters, as a result of higher consumer spending. We generally record slightly lower revenues in the first fiscal quarter of each year, as our clients begin to roll out new programs for the year, and consumer spending generally is less in the first fiscal quarter than other quarters. The timing of our clients’ marketing expenses, associated with marketing campaigns and new product launches, can also result in fluctuations from one quarter to another.
Recent Developments
Refinancing. During the first quarter of 2026, we completed a refinancing designed to extend maturities, enhance liquidity, and simplify our capital structure. The transaction was effected through a series of interrelated financing actions, comprising (i) an exchange offer and consent solicitation with respect to our outstanding senior secured notes,
20
(ii) a refinancing and amendment of our term loan facility, and (iii) amendments to our asset‑based revolving credit facility. Collectively, these actions extended the weighted-average maturity of our term debt, senior secured notes, and revolving credit facility by approximately two years and were accompanied by a $131.3 million principal paydown during the quarter, reflecting our ongoing commitment to deleveraging the balance sheet. See Note 4–Debt–Refinancing in the Notes to the Company’s condensed consolidated financial statements.
Divestitures. Consistent with our strategy to focus the portfolio on markets where we have differentiated capabilities, we entered into a series of agreements to reduce our ownership interest in our European joint venture. Under those agreements, we sold a portion of our interest in the joint venture for total consideration of £20 million (approximately $28 million), comprised of £10 million (approximately $14 million) received in cash at closing and £10 million of deferred consideration. The Company retained a minority interest of 49.6% in the remaining portion of its ownership interest in the European joint venture.
Year-over-year comparisons are affected by divestitures completed after the first quarter of 2025. The divested businesses contributed approximately $5 million of revenues and $3 million of adjusted EBITDA to our first quarter 2025 results, which are not reflected in the first quarter of 2026.
Transformation. Also during the first quarter of 2026, we advanced our transformation strategy by initiating a restructuring of our Branded Services segment and transitioning certain back-office functions to a third-party service provider. These actions resulted in $2.2 million of restructuring charges in the quarter. The transition of services to the third-party provider is expected to be completed in 2027.
Executive Summary
|
Three Months Ended March 31, |
|
|
Change Reported |
|
|
||||||||||
(amounts in thousands) |
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
|
||||
Revenues |
$ |
869,601 |
|
|
$ |
821,792 |
|
|
$ |
47,809 |
|
|
|
5.8 |
% |
|
Operating income (loss) |
$ |
4,162 |
|
|
$ |
(14,621 |
) |
|
$ |
18,783 |
|
|
|
128.5 |
% |
|
Net loss |
$ |
(71,831 |
) |
|
$ |
(56,130 |
) |
|
$ |
(15,701 |
) |
|
|
(28.0 |
)% |
|
Adjusted Net Loss(1) |
$ |
(19,052 |
) |
|
$ |
(16,102 |
) |
|
$ |
(2,950 |
) |
|
|
(18.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted EBITDA(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Branded Services |
$ |
20,882 |
|
|
$ |
27,945 |
|
|
$ |
(7,063 |
) |
|
|
(25.3 |
)% |
|
Experiential Services |
|
26,077 |
|
|
|
12,069 |
|
|
|
14,008 |
|
|
|
116.1 |
% |
|
Retailer Services |
|
20,788 |
|
|
|
18,167 |
|
|
|
2,621 |
|
|
|
14.4 |
% |
|
Adjusted EBITDA |
$ |
67,747 |
|
|
$ |
58,181 |
|
|
$ |
9,566 |
|
|
|
16.4 |
% |
|
|
|
In the first quarter of 2026, revenues were $869.6 million, which represented a $47.8 million or 5.8% increase as compared to the same period last year. Reimbursable expenses accounted for $20.0 million or 2.4% of the increase with the remaining increase driven by growth in Experiential and Retailer services of $49.4 million and $8.1 million, respectively, partially offset by declines in Branded of $30.7 million.
We reported a net loss of $71.8 million in the first quarter of 2026, compared to a net loss of $56.1 million during the same period last year. The $15.7 million increase in net loss occurred despite a year-over-year improvement in operating performance, and was driven by two non-operating items: $20.4 million of third-party debt issuance costs related to the refinancing completed during the quarter, and a $16.2 million increase in income tax expense.
We generated operating income of $18.8 million in the first quarter of 2026, compared to an operating loss in the prior year period. The improvement reflected stronger results in Experiential Services, improvement in Retailer Services, and lower reorganization and restructuring costs, partially offset by weaker performance in Branded Services driven by lower revenues.
21
Adjusted EBITDA was $67.7 million for the first quarter of 2026 as compared to $58.2 million for the first quarter of 2025, reflecting an increase compared to the same period in 2025. The year‑over‑year increase was driven primarily by strong performance in our Experiential Services segment, reflecting continued client demand and effective execution, as well as the timing of certain holidays during the first quarter of 2026 relative to the prior‑year period in our Retailer Services segment. These improvements were partially offset by macroeconomic headwinds and client losses that impacted our Branded Services segment.
Results of Operations for the Three Months Ended March 31, 2026 and 2025
The following table sets forth items derived from the Company’s consolidated statements of operations for the three months ended March 31, 2026 and 2025 in dollars and as a percentage of total revenues.
|
Three Months Ended March 31, |
|
|
|||||||||||||
(amounts in thousands) |
2026 |
|
|
2025 |
|
|
||||||||||
Revenues |
$ |
869,601 |
|
|
|
100.0 |
% |
|
$ |
821,792 |
|
|
|
100.0 |
% |
|
Cost of revenues |
|
761,574 |
|
|
|
87.6 |
% |
|
|
722,754 |
|
|
|
87.9 |
% |
|
Selling, general, and administrative expenses |
|
53,309 |
|
|
|
6.1 |
% |
|
|
64,865 |
|
|
|
7.9 |
% |
|
Depreciation and amortization |
|
51,570 |
|
|
|
5.9 |
% |
|
|
50,361 |
|
|
|
6.1 |
% |
|
Gain on divestiture and income from investments in European joint venture |
|
(1,014 |
) |
|
|
(0.1 |
)% |
|
|
(1,567 |
) |
|
|
(0.2 |
)% |
|
Total operating expenses |
|
865,439 |
|
|
|
99.5 |
% |
|
|
836,413 |
|
|
|
101.8 |
% |
|
Operating income (loss) |
|
4,162 |
|
|
|
0.5 |
% |
|
|
(14,621 |
) |
|
|
(1.8 |
)% |
|
Other expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
34,798 |
|
|
|
4.0 |
% |
|
|
34,360 |
|
|
|
4.2 |
% |
|
Income from unconsolidated investments |
|
(2,472 |
) |
|
|
(0.3 |
)% |
|
|
— |
|
|
|
0.0 |
% |
|
Other expense, including debt fees |
|
20,352 |
|
|
|
2.3 |
% |
|
|
10 |
|
|
|
0.0 |
% |
|
Total other expenses |
|
52,678 |
|
|
|
6.1 |
% |
|
|
34,370 |
|
|
|
4.2 |
% |
|
Loss before income tax expense |
|
(48,516 |
) |
|
|
(5.6 |
)% |
|
|
(48,991 |
) |
|
|
(6.0 |
)% |
|
Income tax expense |
|
23,315 |
|
|
|
2.7 |
% |
|
|
7,139 |
|
|
|
0.9 |
% |
|
Net loss |
$ |
(71,831 |
) |
|
|
(8.3 |
)% |
|
$ |
(56,130 |
) |
|
|
(6.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other Financial Data |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted Net Loss(1) |
$ |
(19,052 |
) |
|
|
(2.2 |
)% |
|
$ |
(16,102 |
) |
|
|
(2.0 |
)% |
|
Adjusted EBITDA (1) |
$ |
67,747 |
|
|
|
7.8 |
% |
|
$ |
58,181 |
|
|
|
7.1 |
% |
|
Comparison of the Three Months Ended March 31, 2026 and 2025
Revenues
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
(amounts in thousands) |
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
||||
Branded Services |
|
$ |
256,992 |
|
|
$ |
289,841 |
|
|
$ |
(32,849 |
) |
|
|
(11.3 |
)% |
Experiential Services |
|
|
385,480 |
|
|
|
314,020 |
|
|
|
71,460 |
|
|
|
22.8 |
% |
Retailer Services |
|
|
227,129 |
|
|
|
217,931 |
|
|
|
9,198 |
|
|
|
4.2 |
% |
Total revenues |
|
$ |
869,601 |
|
|
$ |
821,792 |
|
|
$ |
47,809 |
|
|
|
5.8 |
% |
Branded Services segment revenues decreased $32.8 million for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease includes a $2.1 million reduction in revenues from reimbursable expenses. Excluding the impact of reimbursable expenses, the decline was primarily attributable to lower volumes, client losses experienced in 2025 and reductions in scope of services, which exceeded new business wins. These trends reflect continued macroeconomic uncertainty, as clients continue to manage their brand support spending with heightened scrutiny during the period.
Experiential Services segment revenues increased $71.5 million during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase includes $22.1 million of additional revenues from
22
reimbursable expenses. Excluding the impact of reimbursable expenses, the remaining increase was primarily driven by higher event volume on improved demand and higher average pricing, reflecting continued recovery and growth in client activation activity.
Retailer Services segment revenues increased $9.2 million during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was driven primarily by higher product volumes due, in part, to the timing of certain holidays during the first quarter of 2026 relative to the prior‑year period.
Cost of Revenues
Cost of revenues as a percentage of revenues for the three months ended March 31, 2026 was 87.6%, as compared to 87.9% for the three months ended March 31, 2025. The decrease was driven primarily by lower fixed labor costs resulting from restructuring actions implemented in prior periods, as well as reduced discretionary bonus and professional services expenses. These favorable impacts were partially offset by higher variable labor and employee benefits costs
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses as a percentage of revenues for the three months ended March 31, 2026 was 6.1%, compared to 7.9% for the three months ended March 31, 2025. The decrease as a percentage of revenue was primarily driven by lower compensation costs and lower stock-based compensation expense.
Depreciation and Amortization Expense
Depreciation and amortization expense was $51.6 million for the three months ended March 31, 2026 compared to $50.4 million for the three months ended March 31, 2025. The net increase was primarily due to a $1.8 million increase in depreciation expense as a result of an increase in software amortization on increased investment in software, primarily due to the implementation of our new global enterprise resource planning system, partially offset by a $0.6 million decrease in intangible asset amortization expense.
Operating Income (Loss)
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
(amounts in thousands) |
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
||||
Branded Services |
|
$ |
(16,061 |
) |
|
$ |
(15,322 |
) |
|
$ |
(739 |
) |
|
|
(4.8 |
)% |
Experiential Services |
|
|
11,499 |
|
|
|
(3,504 |
) |
|
|
15,003 |
|
|
|
428.2 |
% |
Retailer Services |
|
|
8,724 |
|
|
|
4,205 |
|
|
|
4,519 |
|
|
|
107.5 |
% |
Total operating income (loss) |
|
$ |
4,162 |
|
|
$ |
(14,621 |
) |
|
$ |
18,783 |
|
|
|
128.5 |
% |
In the Branded Services segment, the increase in operating loss during the three months ended March 31, 2026 as compared to the same period in the prior year was primarily due to lower revenues, as discussed above, partially offset by lower operating costs, primarily due to lower stock-based compensation expense, lower restructuring and reorganization expense, and a decrease in expected credit loss expense.
In the Experiential Services segment, the improvement from operating loss to operating income during the three months ended March 31, 2026 as compared to the same period in the prior year was primarily due to the increase in revenues as discussed above, as well as lower restructuring and reorganization costs and lower stock-based compensation expense.
In the Retailer Services segment, the increase in operating income during the three months ended March 31, 2026 as compared to the same period in the prior year was primarily due to the increase in revenues as discussed above, as well as lower restructuring and reorganization costs and lower stock-based compensation expense.
23
Interest Expense, net
Interest expense, net increased by $0.4 million, or 1.3%, to $34.8 million for the three months ended March 31, 2026, from $34.4 million for the three months ended March 31, 2025. The increase was driven primarily by higher interest rates associated with the refinancing completed during the first quarter of 2026, partially offset by lower average principal balances resulting from principal payments made in connection with the refinancing. Additional information regarding the debt refinancing is included in “Liquidity and Capital Resources—Credit Facilities”
Provision for Income Taxes
The Company recognized provision for income taxes of $23.3 million and $7.1 million for the three months ended March 31, 2026 and 2025, respectively. The year‑over‑year change primarily reflects an increase in the valuation allowance recorded against deferred tax asset related to interest expense limitation carryforwards during the 2026 period.
24
Reconciliation of Non-GAAP Financial Measures
Non-GAAP Financial Measures
We manage and assess our performance through various means including the use of the financial measures of Adjusted Net Loss, Adjusted EBITDA and Adjusted EBITDA by Segment. A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP measure is provided below. These financial measures are not presented in accordance with U.S. generally accepted accounting principles (“GAAP”). These non-GAAP financial measures are derived from our consolidated and segment financial information but exclude or adjust for certain items that are included in the most directly comparable GAAP measures. We believe these non-GAAP (“Non-GAAP”) financial measures provide investors with additional insight into our operating performance, underlying business trends, and period-over-period comparability. However, these measures are not in accordance with GAAP, and should not be considered in isolation or as a substitute for the most directly comparable GAAP measures.
We define Adjusted Net Loss, which is a non-GAAP financial measure, as net (loss) income before (i) net income attributable to noncontrolling interest, (ii) impairment of goodwill and indefinite-lived assets, (iii) equity-based compensation of Karman Topco L.P., (iv) changes in fair value of warrant liability, (v) acquisition and divestiture related expenses, (vi) restructuring expenses, (vii) reorganization expenses, (viii) litigation expenses, (ix) amortization of intangible assets, (x) gain on repurchases of senior secured notes and Term Loan Facility, (xi) costs associated with (recovery from) with collection efforts involving Take 5 Media Group, (xii) other adjustments that management believes are helpful in evaluating our operating performance, and (xiii) related tax adjustments. We present Adjusted Net Loss because we use it as a supplemental measure to evaluate the performance of our business in a way that also considers our ability to generate profit without the impact of items that we do not believe are indicative of our operating performance or are unusual or infrequent in nature and aid in the comparability of our performance from period to period. Adjusted Net Loss should not be considered as an alternative for Net (loss) income, our most directly comparable measure presented on a GAAP basis.
Adjusted EBITDA and Adjusted EBITDA by Segment are supplemental non-GAAP financial measures of our operating performance.
Adjusted EBITDA means net loss before (i) interest expense, net, (ii) income tax expense, (iii) depreciation and amortization of capitalized software, (iv) amortization of intangible assets, (v) changes in fair value of warrant liability, (vi) stock-based compensation expense, (vii) equity-based compensation of Karman Topco L.P., (viii) acquisition and divestiture related expenses, (ix) (gain) loss on divestiture, (x) restructuring expenses, (xi) reorganization expenses, (xii) litigation expenses, (xiii) costs associated with (recovery from) with collection efforts involving Take 5 Media Group, (xiv) EBITDA for economic interests in investments and (xv) other adjustments that management believes are helpful in evaluating our operating performance.
Adjusted EBITDA by Segment means, with respect to each segment, operating income (loss) before (i) depreciation and amortization of capitalized software, (ii) amortization of intangible assets, (iii) impairment of goodwill, (iv) stock based compensation expense, (v) equity-based compensation of Karman Topco L.P., (vi) acquisition and divestiture related expenses, (vii) restructuring expenses, (viii) reorganization expenses, (ix) litigation expenses, (x) costs associated with (recovery from) with collection efforts involving Take 5 Media Group, (xi) EBITDA for economic interests in investments and (xii) other adjustments that management believes are helpful in evaluating our operating performance, in each case, attributable to such segment.
We present Adjusted EBITDA and Adjusted EBITDA by Segment because they are key operating measures used by us to assess our financial performance. These measures adjust for items that we believe do not reflect the ongoing operating performance of our business, such as certain non-cash items, unusual or infrequent items or items that change from period to period without any material relevance to our operating performance. We evaluate these measures in conjunction with our results according to GAAP because we believe they provide a more complete understanding of factors and trends affecting our business than GAAP measures alone. Furthermore, the agreements governing our indebtedness contain covenants and other tests based on measures substantially similar to Adjusted EBITDA. Neither Adjusted EBITDA nor Adjusted EBITDA by Segment should be considered as an alternative for Net (loss) income or operating income (loss), our most directly comparable measures presented on a GAAP basis.
25
Non-GAAP financial measures are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and income are excluded or included in determining these non-GAAP financial measures. Additionally, other companies may calculate non-GAAP measures differently, or may use other measures to calculate their financial performance, and therefore our non-GAAP measures may not be directly comparable to similarly titled measures of other companies.
Adjusted Net Loss
A reconciliation of Adjusted Net Loss to Net loss is provided in the following table:
|
|
Three Months Ended March 31, |
|
|
|||||
(in thousands) |
|
2026 |
|
|
2025 |
|
|
||
Net loss |
|
$ |
(71,831 |
) |
|
$ |
(56,130 |
) |
|
Add: |
|
|
|
|
|
|
|
||
Financing costs for debt modification |
|
|
21,530 |
|
|
|
10 |
|
|
Gain on divestiture from investments in European joint venture |
|
|
(1,014 |
) |
|
|
— |
|
|
Equity-based compensation of Karman Topco L.P. (a) |
|
|
— |
|
|
|
(1,524 |
) |
|
Divestiture related expenses (b) |
|
|
237 |
|
|
|
423 |
|
|
Restructuring expenses (c) |
|
|
2,246 |
|
|
|
931 |
|
|
Reorganization expenses (d) |
|
|
5,461 |
|
|
|
12,240 |
|
|
Litigation expenses (e) |
|
|
362 |
|
|
|
831 |
|
|
Amortization of intangible assets (f) |
|
|
42,311 |
|
|
|
42,915 |
|
|
Gain on repurchases of senior secured notes and Term Loan Facility (g) |
|
|
— |
|
|
|
(1,624 |
) |
|
Tax adjustments related to non-GAAP adjustments (h) |
|
|
(18,354 |
) |
|
|
(14,174 |
) |
|
Adjusted Net Loss |
|
$ |
(19,052 |
) |
|
$ |
(16,102 |
) |
|
|
|
(a) |
|
Represents expenses related to equity-based compensation expense associated with grants of Common Series D Units of Karman Topco L.P. made to one of the Company's private equity sponsors. |
(b) |
|
Represents fees and costs associated with activities related to our divestitures and related reorganization activities, including professional fees, due diligence, and integration activities. |
(c) |
|
Restructuring charges, including programs designed to integrate and reduce costs intended to further improve efficiencies in operational activities and align cost structures consistent with revenue levels associated with business changes. |
(d) |
|
Represents fees and costs associated with various internal reorganization and transformational activities, including professional fees, lease and other contract exit costs, severance, and nonrecurring compensation costs. |
(e) |
|
Represents legal settlements, reserves, and expenses that are unusual or infrequent costs associated with our operating activities. |
(f) |
|
Represents the amortization of intangible assets recorded in connection with acquisitions. |
(g) |
|
Represents a gain associated with the repurchases of senior secured notes and Term Loan Facility, net of deferred financing fees. |
(h) |
|
Represents the tax provision or benefit associated with the adjustments above, taking into account our applicable tax rates, after excluding adjustments related to items that do not have a related tax impact |
26
Adjusted EBITDA
Reconciliations of Adjusted EBITDA to Net loss are provided in the following table:
|
|
Three Months Ended March 31, |
|
|
|||||
(in thousands) |
|
2026 |
|
|
2025 |
|
|
||
Net loss |
|
$ |
(71,831 |
) |
|
$ |
(56,130 |
) |
|
Add: |
|
|
|
|
|
|
|
||
Interest expense, net |
|
|
34,798 |
|
|
|
34,360 |
|
|
Income tax expense |
|
|
23,315 |
|
|
|
7,139 |
|
|
Depreciation and amortization |
|
|
51,570 |
|
|
|
50,361 |
|
|
Gain on divestiture of Investments in European Joint Venture |
|
|
(1,014 |
) |
|
|
— |
|
|
Other expense, including debt fees |
|
|
20,352 |
|
|
|
10 |
|
|
Stock-based compensation expense (a) |
|
|
2,000 |
|
|
|
6,485 |
|
|
Equity-based compensation of Karman Topco L.P. (b) |
|
|
— |
|
|
|
(1,524 |
) |
|
Divestiture related expenses (c) |
|
|
237 |
|
|
|
423 |
|
|
Restructuring expenses (d) |
|
|
2,246 |
|
|
|
931 |
|
|
Reorganization expenses (e) |
|
|
5,461 |
|
|
|
12,240 |
|
|
Litigation expenses (f) |
|
|
362 |
|
|
|
831 |
|
|
EBITDA for economic interests in investments (g) |
|
|
251 |
|
|
|
3,055 |
|
|
Adjusted EBITDA |
|
$ |
67,747 |
|
|
$ |
58,181 |
|
|
Financial information by segment, including a reconciliation of Adjusted EBITDA by Segment to operating income (loss), the closest GAAP financial measure, is provided in the following table:
Branded Services segment |
|
Three Months Ended March 31, |
|
|
|||||
(in thousands) |
|
2026 |
|
|
2025 |
|
|
||
Operating loss |
|
$ |
(16,061 |
) |
|
$ |
(15,322 |
) |
|
Add: |
|
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
31,322 |
|
|
|
31,462 |
|
|
Gain on divestiture of Investments in European Joint Venture |
|
|
(1,014 |
) |
|
|
— |
|
|
Stock-based compensation expense (a) |
|
|
512 |
|
|
|
2,172 |
|
|
Equity-based compensation of Karman Topco L.P. (b) |
|
|
— |
|
|
|
(95 |
) |
|
Divestiture related expenses (c) |
|
|
237 |
|
|
|
378 |
|
|
Restructuring expenses (d) |
|
|
1,390 |
|
|
|
358 |
|
|
Reorganization expenses (e) |
|
|
1,674 |
|
|
|
5,455 |
|
|
Litigation expenses (f) |
|
|
99 |
|
|
|
482 |
|
|
EBITDA for economic interests in investments (g) |
|
|
2,723 |
|
|
|
3,055 |
|
|
Branded Services segment Adjusted EBITDA |
|
$ |
20,882 |
|
|
$ |
27,945 |
|
|
Experiential Services segment |
|
Three Months Ended March 31, |
|
|
|||||
(in thousands) |
|
2026 |
|
|
2025 |
|
|
||
Operating income (loss) |
|
$ |
11,499 |
|
|
$ |
(3,504 |
) |
|
Add: |
|
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
11,299 |
|
|
|
10,537 |
|
|
Stock-based compensation expense (a) |
|
|
595 |
|
|
|
1,792 |
|
|
Equity-based compensation of Karman Topco L.P. (b) |
|
|
— |
|
|
|
(729 |
) |
|
Divestiture related expenses (c) |
|
|
— |
|
|
|
7 |
|
|
Restructuring expenses (d) |
|
|
467 |
|
|
|
186 |
|
|
Reorganization expenses (e) |
|
|
2,055 |
|
|
|
3,581 |
|
|
Litigation expenses (f) |
|
|
162 |
|
|
|
199 |
|
|
Experiential Services segment Adjusted EBITDA |
|
$ |
26,077 |
|
|
$ |
12,069 |
|
|
27
Retailer Services segment |
|
Three Months Ended March 31, |
|
|
|||||
(in thousands) |
|
2026 |
|
|
2025 |
|
|
||
Operating income |
|
$ |
8,724 |
|
|
$ |
4,205 |
|
|
Add: |
|
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
8,949 |
|
|
|
8,362 |
|
|
Stock-based compensation expense (a) |
|
|
893 |
|
|
|
2,521 |
|
|
Equity-based compensation of Karman Topco L.P. (b) |
|
|
— |
|
|
|
(700 |
) |
|
Divestiture related expenses (c) |
|
|
— |
|
|
|
38 |
|
|
Restructuring expenses (d) |
|
|
389 |
|
|
|
387 |
|
|
Reorganization expenses (e) |
|
|
1,732 |
|
|
|
3,204 |
|
|
Litigation expenses (f) |
|
|
101 |
|
|
|
150 |
|
|
Retailer Services segment Adjusted EBITDA |
|
$ |
20,788 |
|
|
$ |
18,167 |
|
|
|
|
(a) |
|
Represents non-cash compensation expense related to performance stock units, restricted stock units, and stock options under the 2020 Advantage Solutions Incentive Award Plan and the Advantage Solutions 2020 Employee Stock Purchase Plan. |
(b) |
|
Represents expenses related to equity-based compensation expense associated with grants of Common Series D Units of Karman Topco L.P. made to one of the Company's private equity sponsors. |
(c) |
|
Represents fees and costs associated with activities related to our divestitures and related reorganization activities, including professional fees, due diligence, and integration activities. |
(d) |
|
Represents costs associated with the Company’s Digital Operating Model Restructuring Initiative, primarily related to workforce transition activities, including employee rebadging, retention‑related compensation, and other qualifying exit or disposal costs. |
(e) |
|
Represents costs associated with the Company’s Transformation Strategy, including non‑routine, one‑time expenses incurred in connection with internal reorganization and transformation activities. |
(f) |
|
Represents legal settlements, reserves, and expenses that are unusual or infrequent costs associated with our operating activities. |
(g) |
|
Represents adjustments to reflect the Company’s proportional share of Adjusted EBITDA related to its equity method investments. For these investments, the adjustment reflects the Company’s proportional share of Adjusted EBITDA rather than reported earnings, consistent with how management evaluates operating performance. |
28
Liquidity and Capital Resources
Operating cash flow, as supplemented by the divestiture of non-core businesses identified over our transformation period, provides the primary source of cash to fund operating needs and capital expenditures. Excess cash is used to fund debt repurchases and share repurchases.
Our working capital as of March 31, 2026, included $143.9 million of cash and cash equivalents and $572.6 million of accounts receivable, net of allowance for expected credit losses, both of which will be a significant source of ongoing liquidity. Additionally, as of March 31, 2026, we had the ability to borrow up to $385.8 million under our 2030 ABL after consideration of the borrowing base limitations and outstanding letters of credit.
We believe our cash on hand, cashflows from operations and current and possible future credit facilities will be sufficient to satisfy our working capital requirements, purchase commitments, interest payments, transformation initiatives, capital expenditures, and other financing requirements for the foreseeable future.
Cash Flows
A summary of our cash operating, investing and financing activities are shown in the following table:
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2026 |
|
|
2025 |
|
||
Net cash provided by (used in) operating activities |
|
$ |
23,728 |
|
|
$ |
(39,627 |
) |
Net cash provided by (used in) investing activities |
|
|
27,518 |
|
|
|
(18,432 |
) |
Net cash used in financing activities |
|
|
(146,656 |
) |
|
|
(22,139 |
) |
Net effect of foreign currency changes on cash, cash equivalents and restricted cash |
|
|
(1,565 |
) |
|
|
(3,685 |
) |
Net change in cash, cash equivalents and restricted cash |
|
$ |
(96,975 |
) |
|
$ |
(83,883 |
) |
Net Cash Provided by (Used in) Operating Activities
Cash provided by operating activities during the three months ended March 31, 2026 was $23.7 million compared to cash used in operating activities of $39.6 million during the three months ended March 31, 2025, representing an increase of $63.4 million. The increase primarily reflects favorable movements in working capital, including lower prepaid expenses and other current assets and a smaller decrease in accrued compensation and benefits. Operating cash flows for the three months ended March 31, 2026 also benefited from increased collections of accounts receivable on higher sales. These increases were partially offset by unfavorable changes in our working capital balances, including a larger increase in accounts payable, a decrease in deferred revenue and a decrease in other accrued expenses, which was primarily driven by a decrease in accrued interest payable due to the timing of interest payments at the end of the first quarter of 2026 compared with the fourth quarter of 2025.
Net Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities during the three months ended March 31, 2026 primarily consisted of $27.5 million in deferred proceeds from the sale of Jun Group completed in 2025 and $13.4 million cash received for the partial sale of an equity method investment joint venture. These cash inflows were partially offset by purchases of property and equipment of $11.4 million, primarily driven by investments in software, including our enterprise resource planning systems, and purchases of investments in unconsolidated affiliates of $2.0 million.
Net cash used in investing activities during the three months ended March 31, 2025 primarily consisted of the purchase of property and equipment of $15.1 million, primarily driven by investments in software, including our enterprise resource planning systems, which includes upgrading our information system platform, and the purchase of investments in unconsolidated affiliates of $3.3 million.
Net Cash Used in Financing Activities
Cash flows used in financing activities during the three months ended March 31, 2026 were primarily related to $124.9 million for repayment of the 6.5% Senior Secured Notes (as defined below) and First Term Loan Facility (as
29
defined below) debt in connection with the Refinancing (as defined below), $13.7 million payment of deferred financing fees in connection with the Refinancing (as defined below), $6.5 million quarterly principal payment for the 2026 Term Loan Facility (as defined below), and $2.3 million for payments related to the share repurchase program.
Cash flows used in financing activities during the three months ended March 31, 2025 were primarily related to repurchases of Notes of $18.2 million, repayment of principal on our Term Loan Facility of $3.3 million, payments for taxes related to net share settlement of $0.7 million, payments for taxes related to share settlement under the 2020 Incentive Award Plan and payments related to the share repurchase program of $0.9 million.
Credit Facilities
During the first quarter of 2026, we completed a refinancing transaction (the “Refinancing”) designed to extend maturities and modify our capital structure, which is more fully described in Note 4—Debt to the condensed consolidated financial statements. As of March 31, 2026, we had $385.8 million of unused availability under the revolving credit facility after giving effect to borrowing base limitations and $62.0 million of outstanding letters of credit.
From time to time, we may repurchase portions of our outstanding indebtedness under the 2030 Term Loan Facility and 2030 Notes. Such repurchases, if any, will depend upon prevailing market conditions, our liquidity and capital position, contractual limitations and other factors. The amounts and timing of any such repurchases will be at our discretion and we are under no obligation to repurchase any specific amount of indebtedness.
Share Repurchases
On November 9, 2021, we announced that our board of directors authorized a share repurchase program (the “2021 Share Repurchase Program”) pursuant to which we may repurchase up to $100.0 million of our Class A common stock.
The 2021 Share Repurchase Program does not have an expiration date, but provides for suspension or discontinuation at any time. The 2021 Share Repurchase Program permits the repurchase of our Class A common stock on the open market and by other means from time to time. The timing and amount of any share repurchase is subject to prevailing market conditions, relevant securities laws and other considerations, and we are under no obligation to repurchase any specific number of shares.
During the three months ended March 31, 2026, we executed open market purchases of $2.3 million of our Class A common stock under the 2021 Share Repurchase Program. During the three months ended March 31, 2026, we retired 566,408 treasury shares that had been previously purchased under the 2021 Share Repurchase Program. As of March 31, 2026, there remained $43.8 million of share repurchase availability under the 2021 Share Repurchase Program.
Future Cash Requirement
Other than the extension of debt maturities resulting from the Refinancing and an increase in required quarterly principal payments under the 2030 Term Loan Facility to approximately $6.5 million from $3.3 million under the First Term Loan Facility, there were no material changes to our contractual future cash requirements from those disclosed in our 2025 Annual Report.
Cash and Cash Equivalents Held Outside the United States
As of March 31, 2026 and December 31, 2025, $2.2 million and $14.0 million, respectively, of our cash and cash equivalents were held by foreign subsidiaries. As of March 31, 2026, and December 31, 2025, $68.1 million and $37.9 million, respectively, of our cash and cash equivalents were held by foreign branches.
We expect existing domestic cash and cash flows from operations to continue to be sufficient to fund our domestic operating activities and cash commitments for investing and financing activities, such as debt repayment and capital expenditures, for at least the next 12 months and thereafter for the foreseeable future. Nonetheless, we assessed our determination as to our indefinite reinvestment intent for certain of our foreign subsidiaries and branches and recorded a deferred tax liability of approximately $1.7 million of withholding tax as of March 31, 2026 for unremitted earnings in
30
Canada. We continue to assert indefinite reinvestment on earnings of our foreign operations, other than Canada and the United Kingdom. No deferred tax liability is required for the United Kingdom unremitted earnings. However, we may change our assertion if we identify a higher return on this capital in the U.S. and we are able to repatriate the income in a tax-efficient means.
Off-Balance Sheet Arrangements
The Company does not have any off‑balance‑sheet financing arrangements or liabilities, including guarantee contracts, retained or contingent interests in transferred assets, or obligations arising from material variable interests in unconsolidated entities that would require disclosure under applicable accounting guidance. The Company does not have any majority‑owned subsidiaries that are not included in its condensed consolidated financial statements and does not have material interests in, or relationships with, special‑purpose entities.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are included in our 2025 Annual Report and did not materially change during the three months ended March 31, 2026.
Recently Issued Accounting Pronouncements
Accounting Standards Recently Issued but Not Yet Adopted by the Company
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03, as clarified by ASU 2025-01, is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted on a prospective or retrospective basis. The Company is currently evaluating the impact of ASU 2024-03 on the consolidated financial statements and related disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which modernizes the accounting for internal-use software costs to reflect incremental and iterative development methods. The amendments remove prescriptive development stages and require capitalization of software costs once management has authorized and committed to funding the project and it is probable the project will be completed and the software will be used as intended. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, including interim periods within those years, with early adoption permitted and application on a prospective, modified retrospective, or retrospective basis. The Company is currently evaluating the impact of ASU 2025-06 on the consolidated financial statements and related disclosures.
Other new accounting pronouncements recently issued or newly effective were not applicable to the Company, did not have a material impact on the condensed consolidated financial statements or are not expected to have a material impact on the condensed consolidated financial statements.
31
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Risk
Our exposure to foreign currency exchange rate fluctuations is primarily the result of foreign subsidiaries and foreign branches primarily domiciled in Canada. We use financial derivative instruments to hedge foreign currency exchange rate risks associated with our Canadian operations.
The assets and liabilities of our foreign subsidiaries and foreign branches, whose functional currencies are primarily Canadian dollars, are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at the average exchange rates prevailing during the period. The cumulative translation effects for subsidiaries using a functional currency other than the U.S. dollar are included in accumulated other comprehensive loss as a separate component of stockholders’ equity. We estimate that had the exchange rate in each country unfavorably changed by ten percent relative to the U.S. dollar, our consolidated loss before taxes would have decreased by approximately $1.2 million for the three months ended March 31, 2026.
Interest Rate Risk
Interest rate exposure relates primarily to the effect of interest rate changes on borrowings outstanding under the 2030 Term Loan Facility, the 2030 ABL and 2030 Notes.
We manage our interest rate risk through the use of derivative financial instruments. Specifically, we have entered into interest rate collar agreements to manage our exposure to potential interest rate increases that may result from fluctuations in SOFR. We do not designate these derivatives as hedges for accounting purposes, and as a result, all changes in the fair value of derivatives, used to hedge interest rates, are recorded in “Interest expense, net” in our condensed consolidated statements of operations and comprehensive loss.
We have interest rate collar contracts with an aggregate notional value of principal of $700.0 million as of March 31, 2026, from various financial institutions to manage our exposure to interest rate movements on variable rate credit facilities. Interest rate collar contracts with notional value of principal of $300.0 million matured on April 5, 2026 with the remaining interest rate collar contracts maturing on April 5, 2027 and 2028. In July 2024, we entered into two interest rate collar contracts with a notional value of principal of $200.0 million each. The interest rate collar contracts are effective December 16, 2024 and will mature on April 5, 2027 and 2028. The aggregate fair value of our interest rate caps and collars represented an outstanding net liability of $0.2 million as of March 31, 2026.
In April 2026, we entered into one interest rate collar contract with a notional value of principal of $100.0 million. This interest rate collar will mature on April 8, 2029.
Holding other variables constant, a change of one-eighth percentage point in the weighted average interest rate above the floor of 0.75% on the 2030 Term Loan Facility and 2030 ABL would have resulted in an increase of $0.5 million in interest expense, net of gains from interest rate caps and collars, for the three months ended March 31, 2026.
In the future, in order to manage our interest rate risk, we may refinance our existing debt, enter into additional interest rate cap agreements or modify our existing interest rate cap agreement. However, we do not intend or expect to enter into derivative or interest rate cap transactions for speculative purposes.
ITEM 4. CONTROLS AND PROCEDURES
Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of March 31, 2026, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and (2) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
32
In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Changes in Internal Control Over Financial Reporting
During the quarter ended March 31, 2026, the Company continued enhancements related to the phased implementation of its global enterprise resource planning (“ERP”) system. These activities primarily related to ongoing configuration, integration, and preparatory work in advance of future phases of deployment. The initial deployment was completed in fiscal year 2025, and additional phases are expected to be implemented over time, including enhancements to support more complex transaction flows and reporting requirements, with a subsequent phase anticipated during fiscal year 2026.
The Company evaluated the impact of these activities as part of its ongoing assessment of internal control over financial reporting and will continue to monitor the design and operating effectiveness of relevant controls as additional phases of the ERP system are implemented. Except for the foregoing, there were no changes in the Company’s internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved in various legal matters that arise in the ordinary course of our business. Some of these legal matters purport or may be determined to be class and/or representative actions, or seek substantial damages or penalties. Some of these legal matters relate to disputes regarding acquisitions. In connection with certain of the below matters and other legal matters, we have accrued amounts that we believe are appropriate. There can be no assurance, however, that the below matters and other legal matters will not result in us having to make payments in excess of such accruals or that the below matters or other legal matters will not materially or adversely affect our business, financial position, results of operations, or cash flows.
Commercial Matters
We have been involved in various litigation matters and arbitrations with respect to commercial matters arising with clients, vendors and third-party sellers of businesses.
Employment-Related Matters
We have also been involved in various litigation, including purported class or representative actions with respect to matters arising under the U.S. Fair Labor Standards Act, California Labor Code and Private Attorneys General Act. Many involve allegations for allegedly failing to pay wages and/or overtime, failing to provide meal and rest breaks and failing to pay reporting time pay, failing to reimburse for certain expenses, waiting time penalties and other penalties.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors disclosed under Part I, Item 1A “Risk Factors” in the 2025 Annual Report, the current effects of which are discussed in more detail in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. These risks are not the only risks that may affect us. Additional risks that we are not aware of or do not believe are material at the time of this filing may also become important factors that adversely affect our business.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth repurchases of our Class A common stock during the three months ended March 31, 2026:
Period |
|
Total number of shares purchased (1) |
|
|
Average price paid per share |
|
|
Total number of shares purchased as part of publicly announced plans |
|
|
Approximate dollar value of shares that may yet be purchased under the plan (in thousands) (2) |
|
||||
January 1, 2026 to January 31, 2026 |
|
|
179 |
|
|
$ |
20.41 |
|
|
|
— |
|
|
$ |
46,154 |
|
February 1, 2026 to February 28, 2026 |
|
|
2,414 |
|
|
$ |
27.00 |
|
|
|
— |
|
|
$ |
46,154 |
|
March 1, 2026 to March 31, 2026 |
|
|
94,176 |
|
|
$ |
24.48 |
|
|
|
94,176 |
|
|
$ |
43,848 |
|
Total |
|
|
96,769 |
|
|
$ |
24.54 |
|
|
|
94,176 |
|
|
|
|
|
|
|
During the three months ended March 31, 2026, we retired 566,408 treasury shares that had been previously purchased under the 2021 Share Repurchase Program.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Plans
During the three months ended March 31, 2026, none of our directors and executive officers
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ITEM 6. Exhibits
The following exhibits are filed with this Report:
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Incorporated by Reference |
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Exhibit No. |
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Description |
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Form |
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File No. |
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Exhibit |
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Filing Date |
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4.1 |
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|
8-K |
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001-38990 |
|
4.1 |
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March 11, 2026 |
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|
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|
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|
|
|
|
4.2 |
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Form of 9.000% Senior Secured Notes due 2030 (included in Exhibit 4.1). |
|
8-K |
|
001-38990 |
|
4.2 |
|
March 11, 2026 |
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|
|
|
|
|
|
|
|
|
|
4.3 |
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|
8-K |
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001- 38990
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|
4.3 |
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March 11, 2026 |
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|
|
|
|
|
|
|
10.1 |
|
|
8-K |
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001- 38990 |
|
10.1 |
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March 11, 2026 |
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|
|
|
|
|
|
|
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10.2 |
|
|
8-K |
|
001- 38990 |
|
10.2 |
|
March 11, 2026 |
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31.1+ |
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31.2+ |
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32.1** |
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32.2** |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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35
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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+ Filed herewith. * Pursuant to Item 601(a)(5) of Regulation S-K, certain schedules and other attachments have been omitted from this filing and will be furnished to the Securities and Exchange Commission supplementally upon request. ** Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. # Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request. |
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***
36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ADVANTAGE SOLUTIONS INC. |
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By: |
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/s/ David Peacock |
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David Peacock |
|
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Chief Executive Officer (Principal Executive Officer) |
Date: |
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May 6, 2026 |
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By: |
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/s/ Christopher Growe |
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|
Christopher Growe |
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Chief Financial Officer (Principal Financial Officer) |
Date: |
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May 6, 2026 |
37