What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-07 · 153 added, 133 removed, 238 unchanged (55% of the section changed)

11 unchanged sentences

Business Overview

We are a leading business solutions provider to consumer goods manufacturers and retailers.

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.

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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:

Through our Branded Services segment, which generated approximately 33.5% and 36.8% of our revenues in the nine months ended September 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.

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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

shoppers into buyers through in-store and online sampling and demonstrations.

Through our Experiential Services segment, which generated approximately 39.8% and 36.3% of our revenues in the nine months ended September 30, 2025 and 2024, respectively, we help brands and retailers reach consumers and

convert 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.

Through our Retailer Services segment, which generated approximately 26.7% and 27.0% of our revenues in the nine months ended September 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.

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Executive Summary

Three Months Ended

Three Months Ended September 30,

Change Reported

Six Months Ended

Nine Months Ended September 30,

Change Reported

1 unchanged sentence

Operating income (loss) from continuing operations

Net loss from continuing operations

Net income (loss) from continuing operations

Adjusted Net Income (1)

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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.

The Company reported net income of $20.6 million in the third quarter of 2025, compared to a net loss of $37.3 million during the same period last year.

This positive shift was primarily supported by a strong performance in our Experiential segment primarily driven by strong demand and execution, reduced selling, general, and administrative expenses, a one-time gain from divesting an equity stake in a foodservice business, and favorable tax legislation.

While these results are encouraging, they were tempered by declines in the Branded and Retailer segments.

Adjusted EBITDA was $99.6 million for the third quarter of 2025 as compared to $100.9 million for the third quarter of 2024, reflecting a modest decrease compared to the same period in 2024.

Adjusted EBITDA versus the same period last year was supported by a strong performance in the Experiential Services segment driven by strong demand and execution;

however, broader macroeconomic headwinds continued to impact our Branded and Retailer Services segments negatively.

Non-GAAP Financial Measures

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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 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 divestiture, (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.

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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 from Continuing Operations.

Furthermore, the agreements governing our indebtedness contain covenants and other tests based on measures substantially similar to 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,

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 Nine Months Ended September 30, 2025 and 2024

The following table sets forth items derived from the Company’s consolidated statements of operations for the three and nine months ended September 30, 2025 and 2024 in dollars and as a percentage of total revenues.

Three Months Ended September 30,

Nine Months Ended September 30,

(amounts in thousands)

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Depreciation and amortization

Loss from equity method investments

Income from equity method investments

Gain on divestiture

Total operating expenses

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Total other expenses

Loss from continuing operations before provision for (benefit from) income taxes

Provision for (benefit from) income taxes from continuing operations

Net loss from continuing operations

Comparison of the Three Months Ended June 30, 2025 and 2024

Three Months Ended June 30,

Income (loss) from continuing operations before benefit from income taxes

Benefit from income taxes from continuing operations

Net income (loss) from continuing operations

Other Financial Data

Adjusted Net Income (1)

Adjusted EBITDA from Continuing Operations (1)

Comparison of the Three Months Ended September 30, 2025 and 2024

Three Months Ended September 30,

(amounts in thousands)

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Total revenues

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.

Branded Services segment revenues decreased $42.6 million for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024.

The decrease includes a $17.3 million reduction in revenues from reimbursable expenses.

Excluding the impact of reimbursable expenses, the decline was primarily attributable to lower volumes, client losses 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 $35.0 million during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024.

The increase includes $11.3 million of additional revenues from reimbursable expenses.

Excluding the impact of reimbursable expenses, the remaining increase was primarily driven by higher event volume on improved demand, enhanced staffing levels, favorable client and service mix, and higher average pricing, reflecting continued recovery and growth in client activation activity.

Retailer Services segment revenues decreased $16.7 million during the three months ended September 30, 2025, as compared to the three months ended September 30, 2024.

The decrease was primarily driven by lower volumes in our existing client base, partially offset by better pricing.

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.

Cost of revenues as a percentage of revenues for the three months ended September 30, 2025 was 84.9%, as compared to 84.6% for the three months ended September 30, 2024.

The net increase as a percentage of revenues was primarily attributable to an increase in variable labor costs, partially offset by lower fixed labor costs, driven by prior period restructuring events, and lower discretionary bonus.

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.

Selling, general, and administrative expenses as a percentage of revenues for the three months ended September 30, 2025 was 6.3%, compared to 10.5% for the three months ended September 30, 2024.

The decrease as a percentage of revenues was primarily driven by lower restructuring costs, reimbursement of $5.0 million of COVID-19 eligible expenses incurred in prior periods, and lower compensation costs, partially offset by higher technology spend.

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.

Depreciation and amortization expense was $50.7 million for the three months ended September 30, 2025 compared to $51.9 million for the three months ended September 30, 2024.

The net decrease was primarily due to a $1.6 million decrease in amortization expense resulting from intangible asset impairment charges incurred in fiscal year 2024, partially offset by a $0.3 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.

Operating (Loss) Income from Continuing Operations

Three Months Ended June 30,

Three Months Ended September 30,

(amounts in thousands)

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Retailer Services

Total operating loss from continuing operations

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.

Total operating income (loss) from continuing operations

In the Branded Services segment, the transition from operating loss to operating income during the three months ended September 30, 2025 as compared to the same period in the prior year was primarily due to an $8.5 million gain on the divestiture of our 7.5% equity method investment in a foodservices business, lower operating costs, partially offset by lower earnings on decreased revenues, as discussed above.

The improvement in operating expenses was primarily in reduced payroll, lower restructuring and reorganization expenses, and lower incentives.

In the Experiential Services segment, the increase in operating income during the three months ended September 30, 2025 as compared to the same period in the prior year was due to the increase in revenues as discussed above, as well as lower restructuring and reorganization costs and the result of cost reduction efforts, including reductions in payroll-related and other indirect expenses.

In the Retailer Services segment, the increase in operating income during the three months ended September 30, 2025 as compared to the same period in the prior year was primarily driven by lower restructuring and reorganization costs, and favorable cost management actions partially offset by the decrease in revenues as discussed above.

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.

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

Six Months Ended June 30,

Interest expense, net decreased by $4.0 million, or 10.3%, to $35.0 million for the three months ended September 30, 2025, from $39.0 million for the three months ended September 30, 2024.

The decrease in interest expense was primarily due to lower interest rates and 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.

” The decrease was also due to a decrease in fair value adjustments for our derivative financial instruments, partially offset by gains on the repurchase of Notes during the three months ended September 30, 2024, which did not recur during the three months ended September 30, 2025.

Benefit from Income Taxes

The Company recognized a benefit from income taxes of $15.3 million and $4.9 million for the three months ended September 30, 2025 and 2024, respectively.

Although the Company generated pretax income from continuing operations during the 2025 period, the effective tax rate reflected a tax benefit driven by the release of the valuation allowance on interest expense carryforwards resulting from OBBB.

Net Income (Loss) from Continuing Operations

Net income from continuing operations was $20.6 million for the three months ended September 30, 2025, compared to net loss from continuing operations of $37.3 million for the three months ended September 30, 2024.

The improvement from a net loss to net income was primarily driven by lower restructuring costs, reimbursement of $5.0 million of COVID-19 eligible expenses incurred in prior periods, and lower compensation costs, partially offset by higher technology spend.

Further contributing to the improvement was lower interest expense, higher income tax benefit and an $8.5 million gain on the divestiture of our 7.5% equity method investment in a foodservices business during the three months ended September 30, 2025.

Comparison of the Nine Months Ended September 30, 2025 and 2024

Nine Months Ended September 30,

(amounts in thousands)

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Total revenues

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.

Branded Services segment revenues decreased $108.9 million during the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024.

The decrease includes a $30.6 million reduction in revenues from reimbursable expenses.

Excluding the impact of reimbursable expenses, the decline was primarily attributable to lower volumes, client losses 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 $69.8 million during the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024.

The increase includes $37.0 million of additional revenues from reimbursable expenses.

Retailer Services segment revenues decreased $24.5 million during the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024.

The decrease in revenues was primarily driven by lower volumes in our existing client base, partially offset by better 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.

Cost of revenues as a percentage of revenues remained substantially consistent at 86.0% for the nine months ended September 30, 2025, as compared to 85.9% for the nine months ended September 30, 2024.

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

primarily due to lower compensation expense and lower restructuring costs, partially offset by higher shared service costs and an increase in bad debt expense.

Selling, general, and administrative expenses as a percentage of revenues for the nine months ended September 30, 2025 was 7.3%, compared to 9.4% for the nine months ended September 30, 2024.

The decrease as a percentage of revenues was primarily due to lower restructuring and reorganization expenses, reimbursement of $5.7 million of

COVID-19 eligible expenses incurred in prior periods, lower compensation costs, partially offset by higher technology spend 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,

Depreciation and amortization expense was materially consistent at $151.8 million for the nine months ended September 30, 2025, compared to $152.9 million for the nine months ended September 30, 2024.

The decrease is primarily due to a $4.2 million decrease in amortization expense resulting from intangible asset impairment charges incurred in fiscal year 2024, partially offset by a $3.1 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.

Operating Income (Loss) from Continuing Operations

Nine Months Ended September 30,

(amounts in thousands)

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Retailer Services

Total operating loss from continuing operations

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.

Total operating income (loss) from continuing operations

In the Branded Services segment, the decrease in operating loss during the nine months ended September 30, 2025 as compared to the same period in the prior year was primarily due to a $99.7 million non-cash goodwill impairment charge during the nine months ended September 30, 2024, an $8.5 million gain on the divestiture of our 7.5% equity method investment in a foodservices business during the three months ended September 30, 2025, lower operating expenses, partially offset by lower earnings on decreased revenues, as discussed above, and higher bad debt expense.

The improvement in operating expenses was primarily in reduced payroll, lower restructuring and reorganization expenses, and lower incentive compensation.

In the Experiential Services segment, the increase in operating income during the nine months ended September 30, 2025 as compared to the same period in the prior year was primarily driven by the increase in revenues, discussed above, lower restructuring and reorganization expenses, partially offset by higher compensation and staff recruiting expenses.

In the Retailer Services segment, the increase in operating income for the nine months ended September 30, 2025 was primarily due to cost management actions and workforce optimization efforts that reduced part-time labor and discretionary spending, partially offset by the decrease in revenues as discussed above and increased compensation costs.

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.

Interest expense, net decreased by $9.4 million, or 8.2%, to $105.1 million for the nine months ended September 30, 2025, from $114.5 million for the nine months ended September 30, 2024.

The decrease in interest expense was primarily due to lower interest rates and a 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.

” The decrease was partially offset by an increase in fair value adjustments for our derivative financial instruments and a decrease in gain on repurchase of Notes during the nine months ended September 30, 2025.

Benefit from Income Taxes

For the nine months ended September 30, 2025 and 2024, the Company recognized a benefit from income taxes of $3.5 million and $38.0 million, respectively.

The year-over-year fluctuation primarily reflects a change in the effective tax rate (i) due to a reduction in pretax loss compared to the prior-year period, (ii) the non-deductible goodwill impairment recognized in 2024, and (iii) the valuation allowance change on interest expense carryforwards under OBBB.

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.

Net loss from continuing operations was $66.0 million for the nine months ended September 30, 2025, compared to net loss from continuing operations of $200.5 million for the nine months ended September 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 our Branded Agencies reporting unit goodwill during the nine months ended September 30, 2024, lower reorganization and restructuring costs, lower interest expense, higher income tax benefit and an $8.5 million gain on the divestiture of our 7.5% equity method investment in a foodservices business during the three months ended September 30, 2025.

Reconciliation of Non-GAAP Financial Measures

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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,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Net loss from continuing operations

Net income (loss) from continuing operations

Impairment of goodwill

Gain on divestiture

Equity-based compensation of Karman Topco L.P.

4 unchanged sentences

Reorganization expenses (e)

Litigation expenses (f)

Litigation expenses (recoveries) (f)

Amortization of intangible assets (g)

4 unchanged sentences

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.

made to one of our equity sponsors.

Represents adjustments to the estimated fair value of our contingent consideration liabilities related to our acquisitions, for the applicable periods.

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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.

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.

Represents fees and costs associated with various internal reorganization activities, including professional fees, lease exit costs, severance, and nonrecurring compensation costs.

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Represents the amortization of intangible assets recorded in connection with the 2014 Topco Acquisition and our other acquisitions.

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.

Represents costs associated with collection and remediation activities related to the Take 5 Matter, primarily professional fees and other related costs.

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

Represents a gain associated with the repurchases of Noted and Term Loan Facility debt, 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 nine months ended September 30, 2025 and 2024.

Represents costs associated with collection activities related to the Take 5 Matter, primarily professional fees and other related costs.

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

Adjusted EBITDA

Reconciliations of Adjusted EBITDA from Continuing Operations to Net loss from continuing operations is provided in the following table:

Reconciliations of Adjusted EBITDA from Continuing Operations to Net income (loss) from continuing operations is provided in the following table:

Continuing Operations

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Net loss from continuing operations

Net income (loss) from continuing operations

Interest expense, net

Provision for (benefit from) income taxes from continuing operations

Benefit from income taxes from continuing operations

Depreciation and amortization

Impairment of goodwill

Gain on divestiture

Changes in fair value of warrant liability

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Adjusted EBITDA from Continuing Operations

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:

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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Operating loss

Operating income (loss)

Depreciation and amortization

Impairment of goodwill

Gain on divestiture

Stock-based compensation expense (a)

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Reorganization expenses (f)

Litigation expenses (g)

Litigation (recovery) expenses (g)

COVID-19 benefits received (h)

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Experiential Services segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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Retailer Services segment

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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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.

made to one of our equity sponsors.

Represents adjustments to the estimated fair value of our contingent consideration liabilities related to our acquisitions, for the applicable periods.

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Represents benefits received from government grants for COVID-19 relief.

Represents costs associated with collection and remediation activities related to the Take 5 Matter, primarily professional fees and other related costs.

Represents costs associated with collection activities related to the Take 5 Matter, primarily professional fees and other related costs.

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.

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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.

Our working capital as of September 30, 2025, included $201.1 million of cash and cash equivalents and $635.4 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 September 30, 2025, we had the ability to borrow up to $446.3 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 our working capital needs, our fixed payments and other obligations on both a short-term and long-term basis.

A summary of our cash operating, investing and financing activities from continuing operations are shown in the following table:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

Net cash (used in) provided by operating activities

Net cash provided by operating activities

Net cash (used in) provided by investing activities

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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.

Cash flows from operating activities during the nine months ended September 30, 2025 were $15.9 million, representing a decrease of $62.1 million, as compared to the same period in 2024.

The decrease was primarily driven by lower collections on a lower accounts receivable on lower sales, and payments associated with restructuring activities, particularly those related to staff reductions.

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 investing activities from continuing operations during the nine months ended September 30, 2025 primarily consisted of purchases of property and equipment of $28.7 million, primarily driven by investments in software to support the enterprise resource planning initiative, and purchases of investments in unconsolidated affiliates of $3.6 million, partially offset by $18.6 million cash received for the sale of an equity method investment.

Net cash provided by investing activities from continuing operations during the nine months ended September 30, 2024 primarily consisted of the proceeds from divestitures of $275.7 million, partially offset by the purchase of property and equipment of $50.4 million and the purchase of investments in unconsolidated affiliates of $13.9 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.

Cash flows used in financing activities from continuing operations during the nine months ended September 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 $9.9 million and payments for taxes related to net share settlement of $3.7 million.

Cash flows used in financing activities from continuing operations during the nine months ended September 30, 2024 were primarily related to repurchases of Notes of $147.1 million, repayment of principal on our Term Loan

Facility of $9.9 million, payments of contingent consideration of $5.7 million, payments for taxes related to net share settlement of $11.7 million and payments related to the share repurchase program of $34.1 million.

Credit Facilities

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(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.

As of September 30, 2025, we had unused capacity under our Revolving Credit Facility of $446.3 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.

We voluntarily repurchased an aggregate of $20.0 million principal amount of the Notes during the nine months ended September 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 Income (Loss).

We did not make any voluntary repurchases during the three months ended September 30, 2025.

From time to time, we may repurchase portions of our outstanding indebtedness under the Term Loan Facility and Notes.

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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.

As of September 30, 2025 and December 31, 2024, $37.6 million and $65.0 million, respectively, of our cash and cash equivalents were held by foreign subsidiaries.

As of September 30, 2025, and December 31, 2024, $34.0 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.

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 $0.9 million of withholding tax as of September 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.

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.

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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.

We do not have any majority-owned subsidiaries that are not included in our condensed 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.

Our critical accounting policies and estimates are included in our 2024 Annual Report and did not materially change during the nine months ended September 30, 2025.

Recently Issued Accounting Pronouncements

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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.

The adoption of this update is expected to impact only the Company’s disclosures and is not expected to have a material impact on the consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

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We are 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 its 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis