Item 2. Management’s Discussion and Analysis
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, 2024 (the “2024 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 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.
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.
We report financial results for the following three reportable segments:
Through our Branded Services segment , which generated approximately 34.5% and 37.5% of our revenues in the six months ended June 30, 2025 and 2024, respectively, we provide services to branded consumer goods manufacturers through three main categories: brokerage, branded merchandising and omni-commerce marketing services. Brokerage services is primarily an outsourced sales and services agency for branded consumer goods manufacturers at retailer headquarters, in-store and online. Additionally, we lead with insights to execute branded merchandising strategies for branded consumer goods manufacturers related to merchandising in-store and online to drive product sales. Our omni-commerce marketing services primarily relate to digital and field marketing services, including shopper marketing, targeted advertising, interactive design and development, inventory management, application development and content management solutions.
Through our Experiential Services segment , which generated approximately 39.0% and 36.1% of our revenues in the six months ended June 30, 2025 and 2024, respectively, we help brands and retailers reach consumers and convert
21
shoppers into buyers through in-store and online sampling and demonstrations. We manage highly customized, large-scale sampling programs for leading brands and retailers. We also manage, organize and execute special events for brands and retailers, including large-scale meetings, mobile tours, summits and festivals.
Through our Retailer Services segment , which generated approximately 26.5% and 26.3% of our revenues in the six months ended June 30, 2025 and 2024, respectively, we provide end-to-end advisory, retailer merchandising and agency services to retailers. Advisory services primarily consist of consulting services related to private brand development, including coordination related to the sourcing, manufacturing, branding and distribution of private label products to the end retailer. Retailer merchandising services primarily relate to the execution of merchandising strategies, including traditional services such as interior store construction, store resets, category updates and new item implementation. Agency services primarily consist of providing marketing strategies within retail locations, including retail media networks, and analyzing shopper behavior to offer planning, execution and measurement of insight-based, retailer-specific promotions that target retailers' specific shopper base to drive product sales.
Executive Summary
Three Months Ended
June 30,
Change Reported
Six Months Ended
June 30,
Change Reported
(amounts in thousands)
2025
2024
$
%
2025
2024
$
%
Revenues
$
873,707
$
873,357
$
350
0.0
%
$
1,695,499
$
1,734,769
$
(39,270
)
(2.3
)%
Operating income (loss) from continuing operations
10,011
(91,259
)
101,270
(111.0
)%
(4,610
)
(121,209
)
116,599
(96.2
)%
Net loss from continuing operations
(30,440
)
(113,016
)
82,576
(73.1
)%
(86,570
)
(163,149
)
76,579
(46.9
)%
Adjusted Net Income (1)
14,478
21,992
(7,514
)
(34.2
)%
(1,624
)
31,222
(32,846
)
(105.2
)%
Adjusted EBITDA (1)
Branded Services
34,042
42,856
(8,814
)
(20.6
)%
61,987
77,191
(15,204
)
(19.7
)%
Experiential Services
25,886
22,611
3,275
14.5
%
37,955
39,304
(1,349
)
(3.4
)%
Retailer Services
26,484
24,431
2,053
8.4
%
44,651
44,044
607
1.4
%
Adjusted EBITDA from Continuing Operations
$
86,412
$
89,898
$
(3,486
)
(3.9
)%
$
144,593
$
160,539
$
(15,946
)
(9.9
)%
af
(1) Adjusted Net Income and Adjusted EBITDA from Continuing Operations are financial measures that are not calculated in accordance with GAAP. For a discussion of our presentation of Adjusted Net Income and Adjusted EBITDA from Continuing Operations and reconciliations of Net income to Adjusted Net Income and Adjusted EBITDA from Continuing Operations, see “ —Non-GAAP Financial Measures .”
Revenues increased by $0.4 million for the three months ended June 30, 2025, and decreased by $39.3 million, or 2.3%, for the six months ended June 30, 2025, both as compared to the same period in 2024. Reimbursable expenses increased in the three months and six months ended June 30, 2025 by $14.6 million and $12.4 million, respectively, compared to the same period in 2024. After consideration of reimbursable expenses, the decline in revenue was driven predominantly by our clients prioritizing cost optimization, including a reduction in order volume, during a period of uncertain macro-economic environment. Also impacting year-over-year comparisons are the loss of certain clients in the second half of 2024.
Adjusted Net Income decreased by $7.5 million for the three months ended June 30, 2025 and $32.8 million for the six months ended June 30, 2025, both as compared to the same period in 2024, due to the incurrence of tax expense in fiscal 2025 versus a tax benefit in fiscal 2024, lower Adjusted EBITDA, as discussed below, partially offset by lower interest expense and higher equity earnings from unconsolidated investments.
Adjusted EBITDA from Continuing Operations decreased by $3.5 million for the three months ended June 30, 2025, and $15.9 million for the six months ended June 30, 2025, both as compared to the same period in 2024, predominantly due to lower order volume and a reduction of client sales and marketing investments driven by an uncertain macro-economic environment, the impact of staffing challenges, which were significantly remediated in the second quarter, partially offset by lower fixed compensation costs and discretionary bonus.
22
Non-GAAP Financial Measures
In the accompanying analysis of financial results, we include certain financial measures that 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. A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP measure is provided below:
• Adjusted Net Income
• Adjusted EBITDA from Continuing Operations
• Adjusted EBITDA by Segment
We define Adjusted Net Income, 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) gain on deconsolidation of subsidiaries, (iv) equity-based compensation of Karman Topco L.P., (v) changes in fair value of warrant liability, (vi) fair value adjustments of contingent consideration related to acquisitions, (vii) acquisition and divestiture related expenses, (viii) restructuring expenses, (ix) reorganization expenses, (x) litigation expenses, (xi) amortization of intangible assets, (xii) gain on repurchases of Term Loan Facility and Notes (as such terms are defined below) debt, (xiii) COVID-19 benefits received, (xiv) costs associated with (recovery from) the Take 5 Matter, (xv) other adjustments that management believes are helpful in evaluating our operating performance, and (xvi) related tax adjustments. We present Adjusted Net Income 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 Income should not be considered as an alternative for Net (loss) income, our most directly comparable measure presented on a GAAP basis.
Adjusted EBITDA from Continuing Operations and Adjusted EBITDA by Segment are supplemental non-GAAP financial measures of our operating performance.
Adjusted EBITDA from Continuing Operations means net (loss) income before (i) interest expense (net), (ii) provision for (benefit from) income taxes, (iii) depreciation, (iv) amortization of intangible assets, (v) impairment of goodwill, (vi) changes in fair value of warrant liability, (vii) stock-based compensation expense, (viii) equity-based compensation of Karman Topco L.P., (ix) fair value adjustments of contingent consideration related to acquisitions, (x) acquisition and divestiture related expenses, (xi) (gain) loss on divestitures, (xii) restructuring expenses, (xiii) reorganization expenses, (xiv) litigation expenses (recovery), (xv) COVID-19 benefits received, (xvi) costs associated with (recovery from) the Take 5 Matter, (xvii) EBITDA for economic interests in investments and (xviii) 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) from continuing operations before (i) depreciation, (ii) amortization of intangible assets, (iii) impairment of goodwill, (iv) stock based compensation expense, (v) equity-based compensation of Karman Topco L.P., (vi) fair value adjustments of contingent consideration related to acquisitions, (vii) acquisition and divestiture related expenses, (viii) restructuring expenses, (ix) reorganization expenses, (x) litigation expenses (recovery), (xi) COVID-19 benefits received, (xii) costs associated with (recovery from) the Take 5 Matter, (xiii) EBITDA for economic interests in investments and (xiv) other adjustments that management believes are helpful in evaluating our operating performance, in each case, attributable to such segment.
We present Adjusted EBITDA from Continuing Operations 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
23
Adjusted EBITDA from Continuing Operations. Neither Adjusted EBITDA from Continuing Operations 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.
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.
Results of Operations for the Three and Six Months Ended June 30, 2025 and 2024
The following table sets forth items derived from the Company’s consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 in dollars and as a percentage of total revenues.
Three Months Ended June 30,
Six Months Ended June 30,
(amounts in thousands)
2025
2024
2025
2024
Revenues
$
873,707
100.0
%
$
873,357
100.0
%
$
1,695,499
100.0
%
$
1,734,769
100.0
%
Cost of revenues
746,932
85.5
%
751,337
86.0
%
1,469,686
86.7
%
1,503,181
86.7
%
Selling, general, and administrative expenses
68,657
7.9
%
62,858
7.2
%
133,522
7.9
%
151,939
8.8
%
Impairment of goodwill
—
0.0
%
99,670
11.4
%
—
0.0
%
99,670
5.7
%
Depreciation and amortization
50,698
5.8
%
51,317
5.9
%
101,059
6.0
%
101,065
5.8
%
Loss from equity method investments
(2,591
)
(0.3
)%
(566
)
(0.1
)%
(4,158
)
(0.2
)%
123
0.0
%
Total operating expenses
863,696
98.9
%
964,616
110.4
%
1,700,109
100.3
%
1,855,978
107.0
%
Operating income (loss) from continuing operations
10,011
1.1
%
(91,259
)
(10.4
)%
(4,610
)
(0.3
)%
(121,209
)
(7.0
)%
Other expenses:
0.0
%
Change in fair value of warrant liability
16
0.0
%
(686
)
(0.1
)%
26
0.0
%
(399
)
0.0
%
Interest expense, net
35,814
4.1
%
39,754
4.6
%
70,174
4.1
%
75,515
4.4
%
Total other expenses
35,830
4.1
%
39,068
4.5
%
70,200
4.1
%
75,116
4.3
%
Loss from continuing operations before provision for (benefit from) income taxes
(25,819
)
(3.0
)%
(130,327
)
(14.9
)%
(74,810
)
(4.4
)%
(196,325
)
(11.3
)%
Provision for (benefit from) income taxes from continuing operations
4,621
0.5
%
(17,311
)
(2.0
)%
11,760
0.7
%
(33,176
)
(1.9
)%
Net loss from continuing operations
$
(30,440
)
(3.5
)%
$
(113,016
)
(12.9
)%
$
(86,570
)
(5.1
)%
$
(163,149
)
(9.4
)%
Comparison of the Three Months Ended June 30, 2025 and 2024
Revenues
Three Months Ended June 30,
Change
(amounts in thousands)
2025
2024
$
%
Branded Services
$
295,221
$
322,340
$
(27,119
)
(8.4
)%
Experiential Services
347,706
319,508
28,198
8.8
%
Retailer Services
230,780
231,509
(729
)
(0.3
)%
Total revenues
$
873,707
$
873,357
$
350
0.0
%
Branded Services segment revenues decreased $27.1 million during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, The decrease in revenues was primarily due to market headwinds negatively impacting brokerage and omni-commerce marketing services as our clients continue to manage their costs, as well as due to certain client losses experienced in the second half of fiscal year 2024, as previously communicated.
Experiential Services segment revenues increased $28.2 million during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, of which $14.3 million of the increase is due to higher reimbursable expenses. After consideration of reimbursable expenses, the remaining increase in revenues was primarily due to higher events per day volume, primarily driven by improved staffing and higher pricing.
Retailer Services segment revenues decreased slightly, or $0.7 million during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024. Higher merchandising activity driven by improved staffing and better pricing were more than offset by lower advisory and agency services.
24
Cost of Revenues
Cost of revenues as a percentage of revenues for the three months ended June 30, 2025 was 85.5%, as compared to 86.0% for the three months ended June 30, 2024. The net decrease as a percentage of revenues was largely attributable to lower fixed labor costs, driven by restructuring events, lower discretionary bonus, partially offset by higher IT costs from transformation initiatives, and higher reimbursable expenses.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses as a percentage of revenues for the three months ended June 30, 2025 was 7.9%, compared to 7.2% for the three months ended June 30, 2024. The increase as a percentage of revenues was primarily driven by higher shared service costs, an increase in bad debt expense, partially offset by lower compensation and lower restructuring costs.
Depreciation and Amortization Expense
Depreciation and amortization expense was $50.7 million for the three months ended June 30, 2025 compared to $51.3 million for the three months ended June 30, 2024. The net decrease was primarily due to a $1.3 million decrease in amortization expense as a result of intangible asset impairment charges incurred during fiscal year 2024, partially offset by a $0.6 million increase in depreciation expense, due to an increase in software amortization as a result of our increased investment in software assets.
Operating (Loss) Income from Continuing Operations
Three Months Ended June 30,
Change
(amounts in thousands)
2025
2024
$
%
Branded Services
$
(10,540
)
$
(107,280
)
$
96,740
(90.2
)%
Experiential Services
10,859
6,453
4,406
68.3
%
Retailer Services
9,692
9,568
124
1.3
%
Total operating loss from continuing operations
$
10,011
$
(91,259
)
$
101,270
(111.0
)%
In the Branded Services segment, the decrease in operating loss during the three months ended June 30, 2025 was due to a non-cash goodwill impairment charge of $99.7 million related to the Company's Branded Agencies reporting unit goodwill during the three months ended June 30, 2024.
In the Experiential Services segment, the increase in operating income during the three months ended June 30, 2025 was due to the increase in revenues as discussed above.
In the Retailer Services segment, operating income for the three months ended June 30, 2025 was materially consistent with operating income during the three months ended June 30, 2024.
Change in Fair Value of Warrant Liability
Change in fair value of warrant liability was an immaterial non-cash expense for the three months ended June 30, 2025, as compared to $0.7 million of non-cash expense resulting from a fair value adjustment to warrant liability with respect to the private placement warrants for the three months ended June 30, 2024.
Interest Expense, net
Interest expense, net decreased by $3.9 million, or 9.9%, to $35.8 million for the three months ended June 30, 2025, from $39.8 million for the three months ended June 30, 2024. The decrease in interest expense was primarily due to lower debt balance as a result of repurchases of debt associated with the Term Loan Facility and Notes as further described in “ Liquidity and Capital Resources—Repurchases of Shares and Debt—Repurchases of Term Loan Facility and Notes, ” partially offset by a $1.6 million increase in fair value adjustments for our derivative financial instruments.
25
Provision for (Benefit from) Income Taxes
Provision for income taxes was $4.6 million for the three months ended June 30, 2025, as compared to $17.3 million of benefit from income taxes for the three months ended June 30, 2024. The fluctuation in the income tax provision was primarily attributable to a change in our effective tax rate and a decrease in the pretax loss compared to the prior period. Although we generated a pretax loss on continuing operations in the three months ended June 30, 2025, our effective tax rate results in a tax expense due to the requirement to record a valuation allowance on tax benefits associated with the deduction for interest expense. Also negatively impacting income taxes, we recorded a deferred tax liability on earnings in Canada that we repatriated in the second quarter of fiscal 2025.
Net Loss from Continuing Operations
Net loss from continuing operations was $30.4 million for the three months ended June 30, 2025, compared to net loss from continuing operations of $113.0 million for the three months ended June 30, 2024. The decrease in net loss from continuing operations was primarily driven by a non-cash goodwill impairment charge of $99.7 million related to the Company's Branded Agencies reporting unit goodwill during the three months ended June 30, 2024, lower interest expense, and lower reorganization expenses, partially offset by higher income tax expense.
Comparison of the Six Months Ended June 30, 2025 and 2024
Revenues
Six Months Ended June 30,
Change
(amounts in thousands)
2025
2024
$
%
Branded Services
$
585,062
$
651,394
$
(66,332
)
(10.2
)%
Experiential Services
661,726
626,859
34,867
5.6
%
Retailer Services
448,711
456,516
(7,805
)
(1.7
)%
Total revenues
$
1,695,499
$
1,734,769
$
(39,270
)
(2.3
)%
Branded Services segment revenues decreased $66.3 million during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, of which $13.3 million of the decrease is due to lower reimbursable expenses. After consideration of reimbursable expenses, the remaining decrease in revenues was primarily due to market headwinds negatively impacting brokerage and omni-commerce marketing services as our clients continue to manage their costs, as well as due to certain client losses experienced in the second half of fiscal year 2024, as previously communicated.
Experiential Services segment revenues increased $34.9 million during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024,of which $25.7 million of the increase is due to higher reimbursable expenses. After consideration of reimbursable expenses, the remaining increase in revenues was primarily due to an increase in our events per day volume, primarily driven by improved staffing.
Retailer Services segment revenues decreased $7.8 million during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. The decrease in revenues was primarily due to staffing challenges experienced in the first quarter of fiscal year 2025, which were substantially remediated in the second quarter, partially offset by improved pricing.
Cost of Revenues
Cost of revenues as a percentage of revenues for the six months ended June 30, 2025 was unchanged at 86.7%, as compared to the same period in the prior year with lower fixed labor costs, driven by restructuring events, lower discretionary bonus, were offset by higher IT costs from transformation initiatives, and higher reimbursable expenses.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses as a percentage of revenues for the six months ended June 30, 2025 was 7.9%, compared to 8.8% for the six months ended June 30, 2024. The decrease as a percentage of revenues was
26
primarily due to lower compensation expense and lower restructuring costs, partially offset by higher shared service costs and an increase in bad debt expense.
Depreciation and Amortization Expense
Depreciation and amortization expense was unchanged at $101.1 million for the six months ended June 30, 2025 and June 30, 2024. An increase in depreciation expense as a result of an increase in software amortization on increased investment in software assets, was effectively offset by a decrease in amortization expense resulting from intangible asset impairment charges incurred during fiscal year 2024.
Operating (Loss) Income from Continuing Operations
Six Months Ended June 30,
Change
(amounts in thousands)
2025
2024
$
%
Branded Services
$
(25,862
)
$
(129,398
)
$
103,536
(80.0
)%
Experiential Services
7,355
2,811
4,544
161.7
%
Retailer Services
13,897
5,378
8,519
158.4
%
Total operating loss from continuing operations
$
(4,610
)
$
(121,209
)
$
116,599
(96.2
)%
In the Branded Services segment, the decrease in operating loss during the six months ended June 30, 2025 was primarily due to a non-cash goodwill impairment charge of $99.7 million related to the Company's Branded Agencies reporting unit goodwill during the three months ended June 30, 2024 and the impact of lower revenues discussed above.
In the Experiential Services segment, the increase in operating income during the six months ended June 30, 2025 was primarily driven by the increase in revenues discussed above.
In the Retailer Services segment, the increase in operating income for the six months ended June 30, 2025 was primarily due to a decrease in costs associated with our internal reorganization activities, partially offset by the decrease in revenues described above.
Change in Fair Value of Warrant Liability
Change in fair value of warrant liability was an immaterial non-cash expense for the six months ended June 30, 2025 compared to $0.4 million of non-cash gain resulting from a fair value adjustment to warrant liability with respect to the private placement warrants for the six months ended June 30, 2024.
Interest Expense, net
Interest expense, net decreased by $5.3 million, or 7.1%, to $70.2 million for the six months ended June 30, 2025, from $75.5 million for the six months ended June 30, 2024. The decrease in interest expense was primarily due to lower debt balance as a result of repurchases of Term Loan Facility and Notes as further described in “ Liquidity and Capital Resources—Repurchases of Shares and Debt—Repurchases of Term Loan Facility and Notes, ” partially offset by a $7.4 million increase for fair value adjustments for our derivative financial instruments.
Provision for (Benefit from) Income Taxes
Provision for income taxes was $11.8 million for the six months ended June 30, 2025 as compared to $33.2 million of benefit from income taxes for the six months ended June 30, 2024. The fluctuation in the income tax provision was primarily attributable to a change in our effective tax rate, and a decrease in the pretax loss compared to the prior period. Although we generated a pretax loss on continuing operations in the six months ended June 30, 2025, our effective tax rate results in a tax expense due to the requirement to record a valuation allowance on tax benefits associated with the deduction for interest expense. Also negatively impacting income taxes, we recorded a deferred tax liability on earnings in Canada that we repatriated in the second quarter.
27
Net Loss from Continuing Operations
Net loss from continuing operations was $86.6 million for the six months ended June 30, 2025, compared to net loss from continuing operations of $163.1 million for the six months ended June 30, 2024. The decrease in net loss from continuing operations was primarily driven by a non-cash goodwill impairment charge of $99.7 million related to the Company's Branded Agencies reporting unit goodwill during the three months ended June 30, 2024, lower reorganization and lower interest expense, partially offset by higher income tax expense.
28
Reconciliation of Non-GAAP Financial Measures
Adjusted Net Income
A reconciliation of Adjusted Net Income to Net loss is provided in the following table:
Three Months Ended June 30,
Six Months Ended June 30,
(in thousands)
2025
2024
2025
2024
Net loss from continuing operations
$
(30,440
)
$
(113,016
)
$
(86,570
)
$
(163,149
)
Add:
Impairment of goodwill
—
99,670
—
99,670
Equity-based compensation of Karman Topco L.P. (a)
—
(872
)
(1,524
)
(480
)
Change in fair value of warrant liabilities
16
(686
)
26
(399
)
Fair value adjustments related to contingent consideration related to acquisitions (b)
—
900
—
1,678
Acquisition and divestiture related expenses (c)
57
(1,774
)
480
(1,334
)
Restructuring expenses (d)
—
—
931
—
Reorganization expenses (e)
16,434
20,291
28,674
55,343
Litigation expenses (f)
390
(993
)
913
(709
)
Amortization of intangible assets (g)
42,918
44,184
85,833
88,459
Gain on repurchases of Term Loan Facility and Notes (h)
—
(384
)
(1,624
)
(3,053
)
Costs associated with the Take 5 Matter (i)
256
456
564
696
Tax adjustments related to non-GAAP adjustments (j)
(15,153
)
(25,784
)
(29,327
)
(45,500
)
Adjusted Net Income
$
14,478
$
21,992
$
(1,624
)
$
31,222
(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 sponsors of the Company.
(b)
Represents adjustments to the estimated fair value of our contingent consideration liabilities related to our acquisitions, for the applicable periods.
(c)
Represents fees and costs associated with activities related to our acquisitions, divestitures, and related activities, including professional fees, due diligence, and integration activities.
(d)
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. Restructuring expenses include costs associated with the VERP and employee termination benefits associated with a reduction-in-force and other optimization initiatives.
(e)
Represents fees and costs associated with various internal reorganization activities, including professional fees, lease exit costs, severance, and nonrecurring compensation costs.
(f)
Represents legal settlements, reserves, and expenses that are unusual or infrequent costs associated with our operating activities.
(g)
Represents the amortization of intangible assets recorded in connection with the 2014 Topco Acquisition and our other acquisitions.
(h)
Represents a gain associated with the repurchases of Term Loan Facility and Notes, net of deferred financing fees related to repricing of Term Loan Facility. For additional information, refer to Note 4—Debt to our unaudited condensed financial statements for the three and six months ended June 30, 2025 and 2024.
(i)
Represents costs associated with collection and remediation activities related to the Take 5 Matter, primarily professional fees and other related costs.
(j)
Represents the tax provision or benefit associated with the adjustments above, taking into account the Company’s applicable tax rates, after excluding adjustments related to items that do not have a related tax impact
29
Adjusted EBITDA
Reconciliations of Adjusted EBITDA from Continuing Operations to Net loss from continuing operations is provided in the following table:
Continuing Operations
Three Months Ended June 30,
Six Months Ended June 30,
(in thousands)
2025
2024
2025
2024
Net loss from continuing operations
$
(30,440
)
$
(113,016
)
$
(86,570
)
$
(163,149
)
Add:
Interest expense, net
35,814
39,754
70,174
75,515
Provision for (benefit from) income taxes from continuing operations
4,621
(17,311
)
11,760
(33,176
)
Depreciation and amortization
50,698
51,317
101,059
101,065
Impairment of goodwill
—
99,670
—
99,670
Changes in fair value of warrant liability
16
(686
)
26
(399
)
Stock-based compensation expense (a)
6,584
7,528
13,069
16,082
Equity-based compensation of Karman Topco L.P. (b)
—
(872
)
(1,524
)
(480
)
Fair value adjustments related to contingent consideration (c)
—
900
—
1,678
Acquisition and divestiture related expenses (d)
57
(1,774
)
480
(1,334
)
Restructuring expenses (e)
—
—
931
—
Reorganization expenses (f)
16,434
20,291
28,674
55,343
Litigation expenses (recovery) (g)
390
(993
)
913
(709
)
COVID-19 benefits received (h)
(715
)
—
(715
)
—
Costs associated with the Take 5 Matter (i)
256
456
564
696
EBITDA for economic interests in investments (j)
2,697
4,634
5,752
9,737
Adjusted EBITDA from Continuing Operations
$
86,412
$
89,898
$
144,593
$
160,539
Financial information by segment, including a reconciliation of Adjusted EBITDA by Segment to operating (loss) income, the closest GAAP financial measure, is provided in the following table:
Branded Services segment
Three Months Ended June 30,
Six Months Ended June 30,
(in thousands)
2025
2024
2025
2024
Operating loss
$
(10,540
)
$
(107,280
)
$
(25,862
)
$
(129,398
)
Add:
Depreciation and amortization
31,561
32,327
63,023
64,314
Impairment of goodwill
—
99,670
—
99,670
Stock-based compensation expense (a)
2,370
2,797
4,542
6,723
Equity-based compensation of Karman Topco L.P. (b)
—
24
(95
)
522
Fair value adjustments related to contingent consideration (c)
—
900
—
1,678
Acquisition and divestiture related expenses (d)
6
30
384
104
Restructuring expenses (e)
—
—
358
—
Reorganization expenses (f)
7,741
9,248
13,196
22,904
Litigation expenses (g)
196
50
370
241
COVID-19 benefits received (h)
(245
)
—
(245
)
—
Costs associated with the Take 5 Matter (i)
256
456
564
696
EBITDA for economic interests in investments (j)
2,697
4,634
5,752
9,737
Branded Services segment Adjusted EBITDA
$
34,042
$
42,856
$
61,987
$
77,191
30
Experiential Services segment
Three Months Ended June 30,
Six Months Ended June 30,
(in thousands)
2025
2024
2025
2024
Operating income
$
10,859
$
6,453
$
7,355
$
2,811
Add:
Depreciation and amortization
10,684
11,015
21,221
20,935
Stock-based compensation expense (a)
1,847
2,170
3,639
4,098
Equity-based compensation of Karman Topco L.P. (b)
—
(458
)
(729
)
(502
)
Acquisition and divestiture related expenses (d)
67
(101
)
74
5
Restructuring expenses (e)
—
—
186
—
Reorganization expenses (f)
2,548
3,472
6,129
11,724
Litigation expenses (g)
129
60
328
233
COVID-19 benefits received (h)
(248
)
—
(248
)
—
Experiential Services segment Adjusted EBITDA
$
25,886
$
22,611
$
37,955
$
39,304
Retailer Services segment
Three Months Ended June 30,
Six Months Ended June 30,
(in thousands)
2025
2024
2025
2024
Operating income
$
9,692
$
9,568
$
13,897
$
5,378
Add:
Depreciation and amortization
8,453
7,975
16,815
15,816
Stock-based compensation expense (a)
2,367
2,561
4,888
5,261
Equity-based compensation of Karman Topco L.P. (b)
—
(438
)
(700
)
(500
)
Acquisition and divestiture related expenses (d)
(16
)
(1,703
)
22
(1,443
)
Restructuring expenses (e)
—
—
387
—
Reorganization expenses (f)
6,145
7,571
9,349
20,715
Litigation expenses (recovery) (g)
65
(1,103
)
215
(1,183
)
COVID-19 benefits received (h)
(222
)
—
(222
)
—
Retailer Services segment Adjusted EBITDA
$
26,484
$
24,431
$
44,651
$
44,044
(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 sponsors of the Company.
(c)
Represents adjustments to the estimated fair value of our contingent consideration liabilities related to our acquisitions, for the applicable periods.
(d)
Represents fees and costs associated with activities related to our acquisitions, divestitures, and related activities, including professional fees, due diligence, and integration activities.
(e)
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. Restructuring expenses include costs associated with the Voluntary Early Retirement Program (“VERP”) and employee termination benefits associated with a reduction-in-force and other optimization initiatives.
(f)
Represents fees and costs associated with various internal reorganization activities, including professional fees, lease exit costs, severance, and nonrecurring compensation costs.
(g)
Represents legal settlements, reserves, and expenses that are unusual or infrequent costs associated with our operating activities.
(h)
Represents benefits received from government grants for COVID-19 relief.
(i)
Represents costs associated with collection and remediation activities related to the Take 5 Matter, primarily professional fees and other related costs.
(j)
Represents additions to reflect our proportional share of Adjusted EBITDA related to our equity method investments and reductions to remove the Adjusted EBITDA related to the minority ownership percentage of the entities that we fully consolidate in our financial statements.
31
Liquidity and Capital Resources
Our principal sources of liquidity are cash receipts for services performed, and borrowings under the Revolving Credit Facility (as defined below). Our principal uses of cash are operating expenses, working capital requirements, interest on debt and repayment of debt. Principal uses of cash used in investing activities includes our enterprise resource planning initiative, which includes upgrading our information system platform.
Our working capital as of June 30, 2025, included $102.9 million of cash and cash equivalents and $673.3 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 June 30, 2025, we had the ability to borrow up to $400.0 million under our Revolving Credit Facility after consideration of the borrowing base limitations and outstanding letters of credit. We expect that internally generated cash and unused availability on our Revolving Credit Facility will be sufficient to support the working capital needs of the Company, the Company’s fixed payments and other obligations on both a short-term and long-term basis.
Cash Flows
A summary of our cash operating, investing and financing activities from continuing operations are shown in the following table:
Six Months Ended June 30,
(in thousands)
2025
2024
Net cash (used in) provided by operating activities
$
(47,728
)
$
44,055
Net cash (used in) provided by investing activities
(20,677
)
110,867
Net cash used in financing activities
(28,368
)
(114,533
)
Net effect of foreign currency changes on cash, cash equivalents and restricted cash
(3,775
)
(2,579
)
Net change in cash, cash equivalents and restricted cash
$
(100,548
)
$
37,810
Net Cash Used in Operating Activities
Cash flows from operating activities during the six months ended June 30, 2025 decreased $91.8 million, as compared to the same period in 2024 due to increases in accounts receivable, driven primarily by the implementation of our new global enterprise resource planning (“ERP”) system, and an increase in prepaid expenses and other assets due to an increase in prepaid payroll expenses as of June 30, 2025.
Net Cash (Used in) Provided by Investing Activities
Net cash used in investing activities from continuing operations during the six months ended June 30, 2025 primarily consisted of purchases of property and equipment of $17.2 million, primarily driven by investments in software to support the enterprise resource planning initiative, and purchases of investments in unconsolidated affiliates of $3.5 million.
Net cash provided by investing activities from continuing operations during the six months ended June 30, 2024 primarily consisted of the proceeds from divestitures of $146.8 million, partially offset by the purchase of property and equipment of $25.1 million and the purchase of investments in unconsolidated affiliates of $10.9 million.
Net Cash Used in Financing Activities
Cash flows used in financing activities from continuing operations during the six months ended June 30, 2025 were primarily related to repurchases of Notes and Term Loan Facility debt of $18.2 million, repayment of principal on our Term Loan Facility of $6.6 million and payments for taxes related to net share settlement of $3.6 million.
Cash flows used in financing activities from continuing operations during the six months ended June 30, 2024 were primarily related to repurchases of Notes of $71.7 million, repayment of principal on our Term Loan Facility of $6.6 million, payments of contingent consideration of $7.6 million, payments for taxes related to net share settlement of $11.1 million and payments related to the share repurchase program of $20.8 million.
32
Credit Facilities
Advantage Sales & Marketing Inc. (the “Borrower”), our indirect wholly-owned subsidiary, has (i) a senior secured asset-based revolving credit facility in an aggregate principal amount of up to $500.0 million, subject to borrowing base capacity (as may be amended from time to time, the “Revolving Credit Facility”) and (ii) a secured first lien term loan credit facility in an aggregate principal amount of $1.1 billion (as may be amended from time to time, the “Term Loan Facility” and together with the Revolving Credit Facility, the “Senior Secured Credit Facilities”). As of June 30, 2025, we had unused capacity under our Revolving Credit Facility of $400.0 million, after consideration of the borrowing base limitations and outstanding letters of credit of $53.7 million.
On October 28, 2020, we issued $775.0 million aggregate principal amount of 6.50% Senior Secured Notes due 2028 (the “Notes”) and may voluntarily prepay loans or reduce commitments under the Notes, in whole or in part, subject to minimum amounts, with prior notice but without premium or penalty. We voluntarily repurchased an aggregate of $20.0 million principal amount of the Notes during the six months ended June 30, 2025 and recognized a gain on the repurchase of $1.8 million, as a component of “Interest expense, net” in the Condensed Consolidated Statements of Operations and Comprehensive Loss. We did not make any voluntary repurchases during the three months ended June 30, 2025.
From time to time, we may repurchase portions of our outstanding indebtedness under the Term Loan Facility and 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.
Future Cash Requirement
There were no material changes to our contractual future cash requirements from those disclosed in our 2024 Annual Report.
Cash and Cash Equivalents Held Outside the United States
As of June 30, 2025 and December 31, 2024, $26.8 million and $65.0 million, respectively, of our cash and cash equivalents were held by foreign subsidiaries. As of June 30, 2025, and December 31, 2024, $29.4 million and $18.5 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 $0.8 million of withholding tax as of June 30, 2025 for unremitted earnings in Canada repatriated to the U.S. in the second quarter of fiscal year 2025. We continue to assert indefinite reinvestment on earnings of our foreign operations, other than Canada although 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.
33
Off-Balance Sheet Arrangements
We do not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets or any obligation arising out of a material variable interest in an unconsolidated entity. We do not have any majority-owned subsidiaries that are not included in our consolidated financial statements. Additionally, we do not have an interest in, or relationships with, any special-purpose entities.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are included in our 2024 Annual Report and did not materially change during the six months ended June 30, 2025.
Recently Issued Accounting Pronouncements
Accounting Standards Recently Issued but Not Yet Adopted by the Company
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires entities to expand their existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for our annual report for fiscal year 2025. The new standard is expected to be applied prospectively, but retrospective application is permitted. We are currently evaluating the impact of ASU 2023-09 on the consolidated financial statements and related disclosures.
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 us beginning in fiscal year 2026 and interim periods within fiscal year 2027, with early adoption permitted. The new standard is expected to be applied prospectively, but retrospective application is permitted. We are currently evaluating the impact of ASU 2024-03 on the consolidated financial statements and related disclosures.
Other new accounting pronouncements recently issued or newly effective were not applicable to us, did not have a material impact on our condensed consolidated financial statements or are not expected to have a material impact on our condensed consolidated financial statements.
34
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.