ADV

• Overall Q2 Performance

  • Net revenue grew 3% YoY (4% excluding divestitures), while adjusted EBITDA declined 12% YoY (9% excluding divestitures) due to one-time factors and mixed segment performance
  • Adjusted unlevered free cash flow was $19 million, with a 25% conversion rate of adjusted EBITDA; first-half unlevered free cash flow conversion reached 79% of adjusted EBITDA
  • The company ended Q2 with $102 million in cash; Day Sales Outstanding remained elevated due to temporary SAP implementation impacts, which management expects to improve through the rest of the year

• Growth Initiatives

  • Experiential Services sees sustained strong demand for product demonstrations, with higher daily event volumes in international regions that serve as a growth blueprint for the U.S. market
  • The company is focused on scalable, high-return CPG merchandising projects in Branded Services to address persistent retail out-of-stock issues, supported by the pulse selling system that improves on-shelf availability visibility and resource targeting
  • An alert-based real-time execution model is being rolled out to quickly identify out-of-stocks, distribution gaps, and missing displays

• Productivity and Technology Transformation

  • A centralized labor planning model has improved execution, with 95% experiential event execution rates in Q2, supporting higher demand
  • The enterprise SAP transformation is in its final phase, with heavy lifting expected to be completed in 2026; full benefits of the investment will be realized in 2027
  • AI integration is a core priority, with a dedicated chief AI officer role and company-wide AI training; current pilots include event manager compliance tools, photo verification, cartless automation, and supervisor intelligence dashboards to improve efficiency and service

• Capital Allocation

  • Free cash flow generation remains a core structural priority; excess free cash flow is primarily directed toward debt reduction, with occasional share repurchases to offset equity dilution from stock compensation

• Macro Environment Alignment

  • The company has adapted to broad-based value-seeking consumer behavior across income groups, growing price competition among retailers, and rising share of emerging brands by focusing on measurable ROI, disciplined staffing, and flexible outsourced capacity that aligns with client needs

• Management reiterated full-year 2026 guidance for revenue, adjusted EBITDA, adjusted unlevered free cash flow of $250 to $275 million, and 25% net free cash flow conversion (excluding debt refinancing costs)
• The balanced full-year outlook reflects continued strong growth in Experiential Services, sequential performance improvement and moderating earnings volatility in Retailer Services as larger projects ramp up in the second half, and a more gradual recovery timeline for Branded Services than initially expected
• Management expects modest improvement in Branded Services performance in the second half of 2026, with full stabilization not expected until 2027
• DSO improvement is expected through the second half of 2026, supporting full-year cash flow targets

1. Experiential Services: Generated $296 million in revenue (up 19% YoY) and $34 million in adjusted EBITDA (up 32% YoY). Event volumes grew 18% YoY. This segment contributed 39% of total company Q2 net revenue.
2. Retailer Services: Revenue increased 3% YoY, but adjusted EBITDA declined approximately 25% YoY. This soft performance was driven by project timing, difficult year-over-year comparisons against an unusually strong Q2 prior year, and higher execution costs on merchandising projects. It contributed 0% of total revenue (absolute revenue not explicitly stated in the transcript).
3. Branded Services: Revenue declined 13% YoY (11% excluding divestiture impacts). CPG merchandising projects within this segment performed as a relative bright spot, with project share growing to nearly 25% of segment work from ~15% a year prior, and project work growing over 20% YoY. This segment contributed 0% of total revenue (absolute revenue not explicitly stated in the transcript). Total company Q2 net revenue was $757 million, up 3% YoY (4% excluding divestitures), and adjusted EBITDA was $76 million, down 12% YoY (9% excluding divestitures).

• Persistent constrained CPG client spending, procurement-driven industry dynamics, client insourcing, and select client losses are slowing the recovery of Branded Services, creating ongoing margin pressure from business mix shifts
• Temporary execution cost pressures and project timing volatility impacted Retailer Services performance in Q2
• Working capital pressure related to the final SAP implementation phase negatively impacted Q2 cash flow
• Broad macroeconomic uncertainty around consumer behavior, driven by energy prices, tariffs, and geopolitical developments, remains a monitored risk
• Business mix shift (fast-growing Experiential Services has lower current margins than other segments) is creating near-term aggregate margin pressure for the company

Q: What catalysts will stabilize Branded Services by 2027 and beyond, and what is the outlook for other segments next year? / A: Management noted that after recent large client losses, Branded Services now has a more balanced, fragmented client base. Top 25-30 existing clients are already growing year-over-year, and the contracted nature of the business means stabilization will take time to work through quarterly cycles. Retailer Services underlying demand remains strong, with Q2 weakness only from a tough comparison to a large one-time 2025 project that did not repeat in 2026. Experiential Services continues to see strong new and existing client demand, giving management confidence across all segments moving into 2027.

Q: How durable is the current strong growth of Experiential Services, and what supports this momentum beyond 2026? / A: Management confirmed the strength is very durable. Macro trends including continued growth of emerging brands and new product innovation from established brands are driving ongoing demand for product sampling and trial. Retailers now view in-store experiential activations as a key competitive differentiator, further supporting demand. AI integration is streamlining hiring workflows and compliance verification, improving execution rates and efficiency to sustain growth. Management is also making deliberate investments in capacity to support continued expansion, which has already delivered strong incremental margin in Q2.

Q: What is driving the recent strength of CPG merchandising projects in Branded Services, and what is the underlying segment mix shift? / A: CPG merchandising addresses persistent retail out-of-stock issues that clients have prioritized, as products cannot sell if they are not on shelf. Project work (unplanned work to remediate out-of-stocks and secure additional display space) has grown to nearly 25% of segment work from ~15% a year prior, with project volume up over 20% year-over-year. The business leverages an existing experienced in-store workforce, allowing it to generate healthy margins by deploying staff across multiple clients. The team is also shifting to an alert-based deployment model that targets issues in real time, improving resource efficiency.

Q: Experiential is the fastest-growing but lowest-margin segment, so what will close the aggregate margin gap from this mix shift? / A: Near-term margin pressure is the result of deliberate reinvestment in Experiential Services capacity to sustain its growth, paired with the current decline of higher-margin Branded Services. As Branded Services gradually stabilizes and its rate of decline slows, and Retailer Services grows in the second half, margin contribution across segments will equalize. The gradual stabilization of Branded Services will ultimately deliver aggregate margin stability and margin growth in 2027.