Advantage Solutions Q3 Earnings Call Highlights

Key Points

• Third-quarter revenue rose 1% to $782 million on a pro forma basis, marking a fourth consecutive quarter of growth, while Adjusted EBITDA fell 12% to $85 million amid planned investments and pressure in Branded Services.
• Performance diverged by segment: Experiential Services revenue grew 12% and Retailer Services Adjusted EBITDA rose 43%, while Branded Services revenue declined 11% and Adjusted EBITDA dropped 55% due to client losses and unfavorable business mix.
• The company’s restructuring is expected to deliver about $25 million in annualized net savings. Advantage Solutions reaffirmed its full-year free cash flow outlook of $250 million to $275 million and said cash generation will primarily go toward debt reduction.

Advantage Solutions NASDAQ: ADV reported third-quarter revenue growth on a pro forma basis excluding divestitures, supported by continued momentum in its Experiential Services and Retailer Services operations, while Branded Services remained under pressure from client losses and business mix changes.

Chief Executive Officer Dave Peacock said third-quarter net revenue totaled $782 million, up 1% year over year on a pro forma basis and marking the company’s fourth consecutive quarter of growth. Adjusted EBITDA was $85 million, down 12% from the prior-year period, reflecting planned investments in the business and continuing headwinds in Branded Services.

For the first nine months of the year, Peacock said revenue was up 3% and Adjusted EBITDA declined 3%, which he described as broadly in line with the company’s outlook at the beginning of the year.

Experiential and Retailer Services Drive Growth

Experiential Services generated third-quarter revenue of $306 million, up 12% year over year, while Adjusted EBITDA increased 0.3% to $35 million. The segment benefited from strong demand, higher event volumes and execution, according to Chief Financial Officer Chris Growe.

Peacock said events per day increased more than 13% during the quarter. However, profit growth was limited by a difficult comparison and investments in wages, recruiting and staffing intended to support demand and preserve service levels.

“Pricing actions began to take effect during the quarter and should increasingly offset our labor investments,” Peacock said. The company expects double-digit revenue and Adjusted EBITDA growth, as well as margin expansion, in Experiential Services during the fourth quarter and for the full year.

Retailer Services posted revenue of $251 million, up 1%, and Adjusted EBITDA of $32 million, up 43%. The results included a small benefit from tariff refunds associated with goods sourced for retail clients. Excluding those refunds, Growe said segment Adjusted EBITDA would have increased by more than 30%.

The segment was supported by pricing, project activity and new business wins in its SAS business, along with solid performance at Daymon, the company’s private-label business. Peacock said Daymon has benefited as retailers focus on affordability and expand private-brand offerings.

Management expects roughly flat revenue and Adjusted EBITDA growth for Retailer Services for the full year, noting that the business faces a more difficult comparison in the fourth quarter and that project timing can cause quarterly volatility.

Branded Services Remains Under Pressure

Branded Services generated $225 million of revenue, down 11% year over year, while Adjusted EBITDA fell 55% to $18 million. Growe attributed the decline to client losses, unfavorable business mix and declines in higher-margin headquarters sales and agency businesses.

The company said growth in supply-chain revenue partly offset those declines. Peacock said Advantage Solutions has built a network of more than 100 omnichannel fulfillment centers and multiple freight partnerships to serve business-to-business, direct-to-consumer and e-commerce clients. He said the supply-chain-as-a-service business is expected to grow meaningfully in 2026 and continue growing in 2027.

Management also cited improvement in new-business wins and growth in branded retail project work during the quarter. Peacock said the company expects sequential improvement in Branded Services in the fourth quarter and is targeting stabilization of the segment in 2027.

Restructuring Program Targets Cost Alignment

Advantage Solutions announced a restructuring plan aimed at simplifying its organization, reducing layers of management and aligning costs with the company’s current business mix. The program is expected to produce approximately $25 million in annualized savings, net of investment, with plans for more than $5 million of additional net savings over time.

The restructuring will begin in the fourth quarter and continue into 2027. The company expects to incur $7 million to $10 million of restructuring and reorganization costs, with most of the costs recognized in the fourth quarter.

Peacock said the company is preserving the two organizational layers closest to clients and customers, while continuing to add client-facing roles. The company is moving to four regions with profit-and-loss ownership assigned to regional leaders, while also strengthening teams serving large national accounts.

Growe said the restructuring includes organizational delayering, support-function consolidation, reductions in vendor and third-party spending, real estate optimization and lower discretionary costs. Most of the near-term operating actions are weighted toward Branded Services and selected support functions.

Workday Paused; Cash Flow Guidance Reaffirmed

The company also paused its Workday implementation after determining that the project’s expected costs and anticipated benefits no longer provided an adequate return. Advantage Solutions will continue operating its existing human-capital platform, pursue targeted upgrades and use artificial intelligence to improve workflows, Growe said.

The decision lowered the company’s expected 2026 capital expenditures to a range of $40 million to $45 million. It expects 2027 capital expenditures of $35 million to $40 million, subject to an update after spending plans are finalized.

Adjusted unlevered free cash flow reached $99 million in the third quarter, representing a conversion rate of 116%, according to Growe. The company ended the quarter with approximately $131 million in cash and net leverage of about 4.6 times.

Advantage Solutions reiterated its full-year outlook for revenue growth ranging from flat to low-single digits and Adjusted EBITDA ranging from flat to down mid-single digits. It also reaffirmed adjusted unlevered free cash flow guidance of $250 million to $275 million. Management said cash generation and free cash flow will continue to be directed primarily toward debt reduction.

About Advantage Solutions (NASDAQ:ADV)

Advantage Solutions Inc is a provider of outsourced sales and marketing services for consumer goods manufacturers, retailers and other brands. The company helps clients improve how their products are presented, promoted and sold across retail, e-commerce and other consumer channels.

Its services include retail merchandising, sales representation, brand marketing, experiential marketing, digital and omnichannel marketing, category management, analytics and business intelligence. Advantage Solutions also provides services designed to support product launches, in-store execution, shopper engagement and connections between brands and consumers.

The company serves clients primarily in the United States and Canada, working across categories such as food and beverage, consumer packaged goods, health and wellness, beauty and household products.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.