Advantage Solutions(US:ADV)2025-08-07 20:06markdown PART I—FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining the company's organization, accounting policies, discontinued operations, goodwill, debt, fair value measurements, related party transactions, income taxes, segment information, commitments, stock-based compensation, and earnings per share [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets | (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Total assets | $3,028,790 | $3,106,517 | | Total liabilities | $2,345,216 | $2,357,782 | | Total stockholders' equity | $683,574 | $748,735 | | Cash and cash equivalents | $102,869 | $205,233 | | Accounts receivable, net | $673,258 | $603,069 | | Long-term debt, net of current portion | $1,663,700 | $1,686,690 | - Total assets decreased by **$77.7 million** from December 31, 2024, to June 30, 2025, while total liabilities also saw a slight decrease of **$12.5 million**. Stockholders' equity decreased by **$65.1 million** over the same period[11](index=11&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This section presents the company's financial performance, including revenues, operating income, and net loss over specific periods Condensed Consolidated Statements of Operations and Comprehensive Loss | (in thousands, except share and per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $873,707 | $873,357 | $1,695,499 | $1,734,769 | | Operating income (loss) from continuing operations | $10,011 | $(91,259) | $(4,610) | $(121,209) | | Net loss | $(30,440) | $(100,835) | $(86,570) | $(103,950) | | Basic loss per common share from continuing operations | $(0.09) | $(0.35) | $(0.27) | $(0.51) | | Diluted net loss per share | $(0.09) | $(0.35) | $(0.27) | $(0.51) | - For the three months ended June 30, 2025, revenues remained stable year-over-year, while operating income from continuing operations significantly improved from a loss of **$91.3 million** to an income of **$10.0 million**. Net loss also decreased substantially from **$100.8 million** to **$30.4 million**[13](index=13&type=chunk) - For the six months ended June 30, 2025, revenues decreased by **2.3%** compared to the prior year. Operating loss from continuing operations improved from **$121.2 million** to **$4.6 million**, and net loss decreased from **$104.0 million** to **$86.6 million**[13](index=13&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in the company's equity, reflecting transactions with owners and comprehensive income or loss Condensed Consolidated Statements of Stockholders' Equity | (in thousands, except share data) | Balance at January 1, 2025 | Balance at June 30, 2025 | | :-------------------------------- | :------------------------- | :----------------------- | | Common Stock (Amount) | $32 | $33 | | Additional Paid-in Capital | $3,466,221 | $3,474,653 | | Accumulated Deficit | $(2,641,612) | $(2,728,182) | | Total Stockholders' Equity | $748,735 | $683,574 | - Total stockholders' equity decreased by **$65.1 million** from January 1, 2025, to June 30, 2025, primarily due to a net loss of **$86.6 million**, partially offset by foreign currency translation adjustments and stock-based compensation expense[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 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 change in cash, cash equivalents and restricted cash | $(100,548) | $37,810 | - Net cash used in operating activities was **$47.7 million** for the six months ended June 30, 2025, a significant decrease from **$44.1 million** provided in the same period of 2024, mainly due to increases in accounts receivable and prepaid expenses[18](index=18&type=chunk) - Net cash used in investing activities was **$20.7 million** in 2025, compared to **$110.9 million** provided in 2024, primarily due to proceeds from divestitures in 2024 not recurring in 2025[18](index=18&type=chunk) - Net cash used in financing activities decreased to **$28.4 million** in 2025 from **$114.5 million** in 2024, driven by lower debt repurchases and share repurchase payments[18](index=18&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Organization and Significant Accounting Policies](index=9&type=section&id=1.%20Organization%20and%20Significant%20Accounting%20Policies) This section outlines the company's business segments, revenue recognition practices, and the impact of recently issued accounting pronouncements - The Company reorganized its business portfolio into three new operating and reportable segments as of January 1, 2024: Branded Services, Experiential Services, and Retailer Services[21](index=21&type=chunk) - Revenue recognition is primarily based on the transfer of service control to clients over time, with contracts often involving a series of distinct services[23](index=23&type=chunk) - The FASB issued ASU 2023-09 (Income Tax Disclosures) effective for fiscal year 2025 and ASU 2024-03/2025-01 (Expense Disaggregation Disclosures) effective for fiscal year 2026, which the Company is currently evaluating for impact[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) [2. Discontinued Operations](index=11&type=section&id=2.%20Discontinued%20Operations) This section details the financial impact and status of business segments that have been divested or are planned for divestiture - As part of a Divestiture Plan initiated on January 1, 2024, the Company sold a collection of foodservice businesses for approximately **$91.0 million** and retained a **7.5%** equity method investment[32](index=32&type=chunk) - During the three months ended June 30, 2024, the Company sold four agencies across its segments for **$65.2 million**, recognizing a gain of **$13.2 million**[34](index=34&type=chunk) - The sale of the Jun Group business was completed on July 31, 2024, for approximately **$185.0 million**, with **$130.0 million** received in cash upon completion and remaining installments due in 2025 and 2026[35](index=35&type=chunk) Discontinued Operations | (in thousands) | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :--------------- | :------------------------------- | :----------------------------- | | Revenues | $28,874 | $73,508 | | Net income from discontinued operations, net of tax | $12,181 | $59,199 | | Net cash provided by operating activities from discontinued operations | N/A | $6,368 | [3. Goodwill and Intangible Assets](index=12&type=section&id=3.%20Goodwill%20and%20Intangible%20Assets) This section provides information on the company's goodwill and other intangible assets, including their carrying amounts and impairment charges - The carrying amount of goodwill was **$477.0 million** as of June 30, 2025, and December 31, 2024, with accumulated impairment losses of **$2.3 billion**[38](index=38&type=chunk) - A non-cash goodwill impairment charge of **$99.7 million** was recognized in the Branded Agencies reporting unit during the three months ended June 30, 2024, due to a triggering event related to a pending business sale[39](index=39&type=chunk) Goodwill and Intangible Assets | (in thousands) | June 30, 2025 Net Carrying Value | December 31, 2024 Net Carrying Value | | :--------------- | :------------------------------- | :--------------------------------- | | Client relationships | $615,517 | $696,831 | | Trade names (finite-lived) | $21,817 | $26,247 | | Trade name (indefinite-lived) | $609,500 | $609,500 | | Total other intangible assets | $1,246,834 | $1,332,578 | - Amortization of intangible assets was **$42.9 million** and **$85.8 million** for the three and six months ended June 30, 2025, respectively[40](index=40&type=chunk) [4. Debt](index=13&type=section&id=4.%20Debt) This section details the company's debt obligations, including term loans and senior secured notes, and related interest rate management strategies Debt | (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Term Loan Facility due 2027 | $1,099,370 | $1,105,995 | | 6.5% Senior Secured Notes due 2028 | $595,087 | $615,087 | | Total long-term debt | $1,694,457 | $1,721,082 | | Long-term debt, net of current portion | $1,663,700 | $1,686,690 | - The Term Loan Facility's interest rate margin was reduced in April 2024 to **4.25%** for SOFR loans or **3.25%** for base rate loans[43](index=43&type=chunk) - The Company voluntarily repurchased **$20.0 million** principal amount of Senior Secured Notes during the first quarter of 2025, recognizing a gain of **$1.8 million**[45](index=45&type=chunk) - As of June 30, 2025, the Company had no borrowings under its **$500.0 million** Revolving Credit Facility[46](index=46&type=chunk) [5. Fair Value of Financial Instruments](index=14&type=section&id=5.%20Fair%20Value%20of%20Financial%20Instruments) This section presents the fair value measurements of the company's financial instruments, including derivatives and long-term debt Fair Value of Financial Instruments | (in thousands) | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :--------------- | :----------------------- | :--------------------------- | | Derivative financial instruments (liabilities) | $1,197 | N/A | | Derivative financial instruments (assets) | N/A | $796 | - The Company uses interest rate collar contracts with an aggregate notional value of **$700.0 million** to manage exposure to interest rate movements, maturing between April 2026 and 2028[50](index=50&type=chunk) - Changes in the fair value of derivative instruments resulted in a loss of **$0.4 million** for the three months ended June 30, 2025, and a loss of **$2.0 million** for the six months ended June 30, 2025[52](index=52&type=chunk) Fair Value of Financial Instruments | (in thousands) | June 30, 2025 Fair Value (Level 2) | December 31, 2024 Fair Value (Level 2) | | :--------------- | :--------------------------------- | :------------------------------------- | | Term Loan Facility | $1,122,812 | $1,153,346 | | Notes | $592,932 | $612,533 | | Total long-term debt | $1,715,744 | $1,765,879 | [6. Related Party Transactions](index=16&type=section&id=6.%20Related%20Party%20Transactions) This section discloses transactions between the company and its related parties, including officers, directors, and unconsolidated affiliates - The Company recognized **$1.2 million** in revenues from a client with an officer serving on its board for both the three months ended June 30, 2025 and 2024[54](index=54&type=chunk) - Revenues from unconsolidated affiliates were **$2.6 million** for the six months ended June 30, 2025, down from **$11.3 million** in the prior year[56](index=56&type=chunk)[57](index=57&type=chunk) [7. Income Taxes](index=17&type=section&id=7.%20Income%20Taxes) This section provides an overview of the company's income tax provisions, effective tax rates, and the impact of new tax legislation Income Taxes | Period | Effective Tax Rate | | :----- | :----------------- | | Q2 2025 | (17.9)% | | Q2 2024 | 13.3% | | H1 2025 | (15.7)% | | H1 2024 | 16.9% | - The effective tax rate for Q2 and H1 2025 was negative due to additional tax expense from a valuation allowance on disallowed interest expense carryforwards, non-deductible stock-based compensation, and withholding tax on repatriated Canadian earnings[59](index=59&type=chunk) - The effective tax rate for Q2 and H1 2024 was impacted by a non-deductible goodwill impairment[60](index=60&type=chunk) - The Company is evaluating the impact of the newly signed H.R. 1 – One Big Beautiful Bill Act (OBBB) on its financial statements and estimated annual effective tax rate for fiscal year 2025[61](index=61&type=chunk) [8. Segments](index=17&type=section&id=8.%20Segments) This section presents financial information by the company's operating segments, detailing revenues and operating income for each - The Company's reportable segments are Branded Services, Experiential Services, and Retailer Services, with performance assessed by the Chief Operating Decision Maker (CODM) using segment operating income[62](index=62&type=chunk)[63](index=63&type=chunk) Segments | (in thousands) | Q2 2025 Revenues | Q2 2024 Revenues | H1 2025 Revenues | H1 2024 Revenues | | :--------------- | :--------------- | :--------------- | :--------------- | :--------------- | | Branded Services | $295,221 | $322,340 | $585,062 | $651,394 | | Experiential Services | $347,706 | $319,508 | $661,726 | $626,859 | | Retailer Services | $230,780 | $231,509 | $448,711 | $456,516 | | Total Company | $873,707 | $873,357 | $1,695,499 | $1,734,769 | Segments | (in thousands) | Q2 2025 Operating (Loss) Income | Q2 2024 Operating (Loss) Income | H1 2025 Operating (Loss) Income | H1 2024 Operating (Loss) Income | | :--------------- | :------------------------------ | :------------------------------ | :------------------------------ | :------------------------------ | | Branded Services | $(10,540) | $(107,280) | $(25,862) | $(129,398) | | Experiential Services | $10,859 | $6,453 | $7,355 | $2,811 | | Retailer Services | $9,692 | $9,568 | $13,897 | $5,378 | | Total Company | $10,011 | $(91,259) | $(4,610) | $(121,209) | [9. Commitments and Contingencies](index=19&type=section&id=9.%20Commitments%20and%20Contingencies) This section outlines the company's legal matters, contractual obligations, and other potential liabilities - The Company is involved in various legal matters, including potential class/representative actions and disputes related to acquisitions, with accrued amounts for certain matters[69](index=69&type=chunk) - The 'Take 5 Matter' involves misconduct identified in 2019, leading to termination of operations and client refunds. An arbitrator made a final award in favor of the Company in October 2022, which the Company is actively pursuing to collect[70](index=70&type=chunk) - Outstanding surety bonds as of June 30, 2025, and December 31, 2024, were **$15.0 million**[71](index=71&type=chunk) [10. Stock-Based Compensation](index=19&type=section&id=10.%20Stock-Based%20Compensation) This section details the company's stock-based compensation plans, including performance share units, restricted stock units, and stock options Stock-Based Compensation | (in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--------------- | :------ | :------ | :------ | :------ | | Total stock-based compensation before tax | $6,584 | $7,528 | $13,069 | $16,082 | - PSUs granted in fiscal years 2025 and 2024 are subject to Adjusted EBITDA margin and cash earnings performance conditions, with a peer group total stockholder return adjustment, and cliff-vest on the third-year anniversary[73](index=73&type=chunk)[74](index=74&type=chunk) - RSUs generally vest over three years, with **$28.2 million** in total remaining unrecognized compensation cost as of June 30, 2025, expected to be amortized over **2.4 years**[80](index=80&type=chunk)[81](index=81&type=chunk) - Stock options outstanding at June 30, 2025, totaled **25.8 million**, with **$7.8 million** of unrecognized compensation expense expected to be recognized over approximately **2.4 years**[82](index=82&type=chunk) [11. Earnings Per Share](index=21&type=section&id=11.%20Earnings%20Per%20Share) This section presents the company's basic and diluted earnings per share from continuing operations Earnings Per Share | (in thousands, except share and earnings per share data) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------------------------ | :------ | :------ | :------ | :------ | | Basic loss per common share from continuing operations | $(0.09) | $(0.35) | $(0.27) | $(0.51) | | Diluted loss per common share from continuing operations | $(0.09) | $(0.35) | $(0.27) | $(0.51) | - During periods of net loss, diluted loss per share equals basic loss per share because the antidilutive effect of potential common shares is disregarded[83](index=83&type=chunk) - **18.6 million** warrants to purchase Class A common stock at **$11.50** per share were excluded from diluted EPS calculation as the market price did not exceed the exercise price[84](index=84&type=chunk) - Stock-based awards of **7.2 million** (Q2 2025) and **8.4 million** (H1 2025) weighted-average shares were antidilutive and excluded from diluted EPS[85](index=85&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three and six months ended June 30, 2025, compared to the same periods in 2024 [Business Overview](index=23&type=section&id=Business%20Overview) This section provides an overview of the company's business model, services offered, and market positioning within the consumer goods industry - The Company is a leading business solutions provider to consumer goods manufacturers and retailers, offering services like headquarter sales, retail merchandising, in-store sampling, digital commerce, and shopper marketing[90](index=90&type=chunk) - Quarterly results are seasonal, with the fourth fiscal quarter typically generating higher revenues due to increased consumer spending[91](index=91&type=chunk) Business Overview | Segment | H1 2025 Revenue Contribution | H1 2024 Revenue Contribution | | :-------- | :--------------------------- | :--------------------------- | | Branded Services | 34.5% | 37.5% | | Experiential Services | 39.0% | 36.1% | | Retailer Services | 26.5% | 26.3% | [Executive Summary](index=24&type=section&id=Executive%20Summary) This section summarizes the company's key financial performance highlights and significant factors influencing results for the reporting period Executive Summary | (amounts in thousands) | Q2 2025 | Q2 2024 | Q2 Change ($) | Q2 Change (%) | H1 2025 | H1 2024 | H1 Change ($) | H1 Change (%) | | :--------------------- | :------ | :------ | :------------ | :------------ | :------ | :------ | :------------ | :------------ | | 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 | $14,478 | $21,992 | $(7,514) | (34.2)% | $(1,624) | $31,222 | $(32,846) | (105.2)% | | Adjusted EBITDA from Continuing Operations | $86,412 | $89,898 | $(3,486) | (3.9)% | $144,593 | $160,539 | $(15,946) | (9.9)% | - The decline in revenue for the six months ended June 30, 2025, was predominantly due to clients prioritizing cost optimization and a reduction in order volume amidst an uncertain macro-economic environment, along with client losses in the second half of 2024[96](index=96&type=chunk) - Adjusted Net Income decreased due to the incurrence of tax expense in fiscal 2025 versus a tax benefit in fiscal 2024, and lower Adjusted EBITDA, partially offset by lower interest expense and higher equity earnings[97](index=97&type=chunk) - Adjusted EBITDA from Continuing Operations decreased primarily due to lower order volume and reduced client sales and marketing investments, partially offset by lower fixed compensation costs and discretionary bonus[98](index=98&type=chunk) [Non-GAAP Financial Measures](index=25&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and explains the company's non-GAAP financial measures, such as Adjusted Net Income and Adjusted EBITDA, and their utility - Adjusted Net Income is defined as net (loss) income adjusted for specific non-operating or unusual items, used to evaluate business performance without their impact[100](index=100&type=chunk) - Adjusted EBITDA from Continuing Operations and Adjusted EBITDA by Segment are supplemental non-GAAP measures that adjust net (loss) income or operating income (loss) for interest, taxes, depreciation, amortization, impairment, and other non-recurring or non-cash items[102](index=102&type=chunk)[103](index=103&type=chunk) - These non-GAAP measures are used to assess financial performance and are subject to inherent limitations due to management's judgments and potential incomparability with other companies' measures[104](index=104&type=chunk)[107](index=107&type=chunk) [Results of Operations for the Three and Six Months Ended June 30, 2025 and 2024](index=27&type=section&id=Results%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) This section provides a detailed analysis of the company's financial performance for the reported periods, comparing revenues and operating results year-over-year [Comparison of the Three Months Ended June 30, 2025 and 2024](index=27&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030,%202025%20and%202024) This section analyzes the company's financial performance for the three months ended June 30, 2025, compared to the same period in the prior year Comparison of the Three Months Ended June 30, 2025 and 2024 | (amounts in thousands) | Q2 2025 Revenues | Q2 2024 Revenues | Change ($) | Change (%) | | :--------------------- | :--------------- | :--------------- | :--------- | :--------- | | 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 revenue decreased by **$27.1 million** due to market headwinds impacting brokerage and omni-commerce marketing services, and client losses in H2 2024[111](index=111&type=chunk) - Experiential Services revenue increased by **$28.2 million**, with **$14.3 million** from higher reimbursable expenses and the remainder from increased events per day volume and higher pricing[112](index=112&type=chunk) - Operating income from continuing operations improved significantly from a loss of **$91.3 million** in Q2 2024 to an income of **$10.0 million** in Q2 2025, primarily due to the absence of a **$99.7 million** goodwill impairment charge in Branded Services[117](index=117&type=chunk) - Net loss from continuing operations decreased by **$82.6 million** to **$30.4 million**, driven by the absence of the goodwill impairment charge, lower interest expense, and lower reorganization expenses, partially offset by higher income tax expense[122](index=122&type=chunk) [Comparison of the Six Months Ended June 30, 2025 and 2024](index=29&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) This section analyzes the company's financial performance for the six months ended June 30, 2025, compared to the same period in the prior year Comparison of the Six Months Ended June 30, 2025 and 2024 | (amounts in thousands) | H1 2025 Revenues | H1 2024 Revenues | Change ($) | Change (%) | | :--------------------- | :--------------- | :--------------- | :--------- | :--------- | | 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 revenue decreased by **$66.3 million**, with **$13.3 million** attributed to lower reimbursable expenses, and the rest due to market headwinds and client losses[124](index=124&type=chunk) - Experiential Services revenue increased by **$34.9 million**, with **$25.7 million** from higher reimbursable expenses and the remainder from increased events per day volume due to improved staffing[125](index=125&type=chunk) - Operating loss from continuing operations improved from **$121.2 million** in H1 2024 to **$4.6 million** in H1 2025, primarily due to the absence of the **$99.7 million** goodwill impairment charge in Branded Services[131](index=131&type=chunk) - Net loss from continuing operations decreased by **$76.6 million** to **$86.6 million**, driven by the absence of the goodwill impairment charge, lower reorganization, and lower interest expense, partially offset by higher income tax expense[136](index=136&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=32&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section provides detailed reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures Reconciliation of Non-GAAP Financial Measures | (in thousands) | Q2 2025 Adjusted Net Income | Q2 2024 Adjusted Net Income | H1 2025 Adjusted Net Income | H1 2024 Adjusted Net Income | | :--------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss from continuing operations | $(30,440) | $(113,016) | $(86,570) | $(163,149) | | Total Adjustments | $44,918 | $134,998 | $84,946 | $194,371 | | Adjusted Net Income | $14,478 | $21,992 | $(1,624) | $31,222 | Reconciliation of Non-GAAP Financial Measures | (in thousands) | Q2 2025 Adjusted EBITDA | Q2 2024 Adjusted EBITDA | H1 2025 Adjusted EBITDA | H1 2024 Adjusted EBITDA | | :--------------- | :---------------------- | :---------------------- | :---------------------- | :---------------------- | | Net loss from continuing operations | $(30,440) | $(113,016) | $(86,570) | $(163,149) | | Total Adjustments | $116,852 | $202,914 | $231,163 | $323,688 | | Adjusted EBITDA from Continuing Operations | $86,412 | $89,898 | $144,593 | $160,539 | Reconciliation of Non-GAAP Financial Measures | (in thousands) | Q2 2025 Branded Services Adjusted EBITDA | Q2 2024 Branded Services Adjusted EBITDA | H1 2025 Branded Services Adjusted EBITDA | H1 2024 Branded Services Adjusted EBITDA | | :--------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Operating loss | $(10,540) | $(107,280) | $(25,862) | $(129,398) | | Total Adjustments | $44,582 | $150,136 | $87,849 | $206,589 | | Adjusted EBITDA | $34,042 | $42,856 | $61,987 | $77,191 | Reconciliation of Non-GAAP Financial Measures | (in thousands) | Q2 2025 Experiential Services Adjusted EBITDA | Q2 2024 Experiential Services Adjusted EBITDA | H1 2025 Experiential Services Adjusted EBITDA | H1 2024 Experiential Services Adjusted EBITDA | | :--------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Operating income | $10,859 | $6,453 | $7,355 | $2,811 |\ | Total Adjustments | $15,027 | $16,158 | $30,600 | $36,493 | | Adjusted EBITDA | $25,886 | $22,611 | $37,955 | $39,304 | Reconciliation of Non-GAAP Financial Measures | (in thousands) | Q2 2025 Retailer Services Adjusted EBITDA | Q2 2024 Retailer Services Adjusted EBITDA | H1 2025 Retailer Services Adjusted EBITDA | H1 2024 Retailer Services Adjusted EBITDA | | :--------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Operating income | $9,692 | $9,568 | $13,897 | $5,378 | | Total Adjustments | $16,792 | $14,863 | $30,754 | $38,666 | | Adjusted EBITDA | $26,484 | $24,431 | $44,651 | $44,044 | [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's sources and uses of cash, capital structure, and ability to meet its financial obligations - Principal sources of liquidity are cash receipts from services and borrowings under the Revolving Credit Facility; principal uses are operating expenses, working capital, interest, and debt repayment[153](index=153&type=chunk) - As of June 30, 2025, the Company had **$102.9 million** in cash and cash equivalents, **$673.3 million** in accounts receivable, and **$400.0 million** in unused capacity under its Revolving Credit Facility[154](index=154&type=chunk) - Net cash used in operating activities for the six months ended June 30, 2025, was **$47.7 million**, a decrease of **$91.8 million** year-over-year, primarily due to increases in accounts receivable from a new ERP system implementation and prepaid expenses[156](index=156&type=chunk) - Net cash used in investing activities was **$20.7 million**, mainly for property and equipment purchases (**$17.2 million**) and investments in unconsolidated affiliates (**$3.5 million**)[157](index=157&type=chunk) - Net cash used in financing activities was **$28.4 million**, primarily for debt repurchases (**$18.2 million**), Term Loan Facility principal payments (**$6.6 million**), and tax payments related to net share settlement (**$3.6 million**)[159](index=159&type=chunk) - The Company repurchased **$20.0 million** principal amount of its **6.50%** Senior Secured Notes during the six months ended June 30, 2025, recognizing a gain of **$1.8 million**[162](index=162&type=chunk) - As of June 30, 2025, **$46.2 million** remained available under the **$100.0 million** 2021 Share Repurchase Program[198](index=198&type=chunk) - As of June 30, 2025, **$26.8 million** of cash and cash equivalents were held by foreign subsidiaries and **$29.4 million** by foreign branches[167](index=167&type=chunk) [Critical Accounting Policies and Estimates](index=38&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the company's accounting policies and estimates that require significant management judgment and could materially impact financial results - There were no material changes to the Company's critical accounting policies and estimates during the six months ended June 30, 2025, from those disclosed in the 2024 Annual Report[171](index=171&type=chunk) [Recently Issued Accounting Pronouncements](index=38&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section outlines new accounting standards issued by the FASB and their potential impact on the company's financial statements - ASU 2023-09 (Income Taxes: Improvements to Income Tax Disclosures) is effective for the Company's annual report for fiscal year 2025, requiring expanded income tax disclosures[173](index=173&type=chunk) - ASU 2024-03 (Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures) and ASU 2025-01 (Clarifying the Effective Date) are effective for the Company beginning in fiscal year 2026, requiring additional expense category disclosures[174](index=174&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the Company's exposure to market risks, specifically foreign currency risk and interest rate risk, and the strategies employed to manage these exposures, including the use of derivative financial instruments - The Company's foreign currency risk primarily stems from Canadian operations, with financial derivative instruments used to hedge exchange rate risks[177](index=177&type=chunk) - A hypothetical **10%** unfavorable change in exchange rates relative to the U.S. dollar would have decreased consolidated loss before taxes by approximately **$2.1 million** for the six months ended June 30, 2025[178](index=178&type=chunk) - Interest rate risk is managed through interest rate collar agreements on variable rate credit facilities (Term Loan Facility, Revolving Credit Facility), with an aggregate notional value of **$700.0 million** as of June 30, 2025[180](index=180&type=chunk)[181](index=181&type=chunk) - A one-eighth percentage point increase in the weighted average interest rate above the **0.75%** floor on the Term Loan Facility and Revolving Credit Facility would have increased interest expense by **$0.7 million** for the six months ended June 30, 2025[182](index=182&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the Company's disclosure controls and procedures and details changes in internal control over financial reporting, specifically related to the phased implementation of a new global enterprise resource planning (ERP) system - Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely and accurate reporting[184](index=184&type=chunk) - During Q2 2025, the Company deployed a new global ERP system for operations outside North America, leading to modifications of existing internal controls and implementation of new controls over financial reporting[187](index=187&type=chunk) PART II—OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and other miscellaneous information relevant to the company's operations [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) This section outlines the various legal proceedings the Company is involved in, including commercial disputes, employment-related class actions, and ongoing matters related to the Take 5 Media Group misconduct - The Company is involved in various legal matters, including commercial litigation with clients, vendors, and third-party sellers of businesses[191](index=191&type=chunk) - Employment-related matters include purported class or representative actions under the U.S. Fair Labor Standards Act and California Labor Code, alleging wage and break violations[192](index=192&type=chunk) - The 'Take 5 Matter' involves misconduct identified in 2019, leading to termination of operations and client refunds. The Company is actively pursuing collection of an arbitration award in its favor from October 2022[193](index=193&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section identifies and describes potential risks and uncertainties that could materially affect the company's business, financial condition, and results of operations - There have been no material changes to the risk factors disclosed in the 2024 Annual Report[195](index=195&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides an update on the Company's share repurchase program, including authorized amounts and remaining repurchase availability - The board of directors authorized a **$100.0 million** share repurchase program in November 2021[196](index=196&type=chunk) - No Class A common stock was repurchased during the three months ended June 30, 2025[198](index=198&type=chunk) - As of June 30, 2025, **$46.2 million** of share repurchase availability remained under the program[198](index=198&type=chunk) [Item 3. Defaults Upon Senior Securities](index=37&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms the absence of any defaults on the company's senior securities during the reporting period - No defaults upon senior securities were reported[199](index=199&type=chunk) [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable[200](index=200&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) This section reports on Rule 10b5-1 trading plans, confirming no adoption or termination by directors or executive officers during the quarter - No directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[201](index=201&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications, XBRL documents, and the cover page interactive data file - The report includes certifications from the Chief Executive Officer and Chief Financial Officer, as well as Inline XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents[202](index=202&type=chunk) [Signatures](index=39&type=section&id=Signatures) This section contains the duly authorized signatures of the Chief Executive Officer and Chief Financial Officer, confirming the filing of the report - The report is signed by David Peacock, Chief Executive Officer, and Christopher Growe, Chief Financial Officer, on August 7, 2025[205](index=205&type=chunk)