Advantage Solutions Q3 EBITDA Falls as Restructuring Begins

Advantage Solutions Inc. (Nasdaq: ADV) reported nearly flat third-quarter net revenue and lower adjusted earnings as continued weakness in Branded Services offset growth in its Experiential and Retailer businesses. The outsourced services provider reaffirmed its full-year 2026 revenue, Adjusted EBITDA and cash-flow guidance while announcing restructuring actions expected to generate about $25 million in annualized savings, net of planned investment.

For the quarter ended September 30, total revenue was $913.7 million, compared with $915.0 million a year earlier. Revenue net of reimbursable expenses, a non-GAAP measure, increased 0.1% to $781.9 million. Excluding divestitures, net revenue grew 1%, marking the fourth consecutive quarter of growth on that basis.

Adjusted EBITDA declined 14.2% to $85.4 million, while the Adjusted EBITDA margin narrowed to 10.9% from 12.7%. On a pro forma basis excluding divestitures, Adjusted EBITDA fell 12%, with the decline in Branded Services outweighing growth in the other two operating segments.

On a GAAP basis, Advantage posted a net loss of $25.1 million, compared with net income of $20.6 million in the prior-year quarter. The latest result included an $8.1 million non-cash impairment charge related to capitalized Workday implementation costs after the company paused the program and began reassessing its scope, design and timing.

Branded Services weighs on profitability

Branded Services remained the main drag on third-quarter results. Segment net revenue fell 12.8% to $225.1 million, while Adjusted EBITDA dropped 57.7% to $17.6 million. Its adjusted margin contracted to 7.8% from 16.1%.

Excluding divestitures, Branded Services net revenue declined 11% and Adjusted EBITDA fell 55%, reflecting client losses and an unfavorable business mix. Growth in supply-chain and retail project work provided a partial offset. The company said new-business wins improved during the quarter and expects sequential profitability improvement in the fourth quarter.

Experiential Services net revenue rose 11.5% to $305.9 million, supported by healthy demand and higher event volumes. Events per day increased about 13.5% from a year earlier. Adjusted EBITDA was nearly unchanged at $35.4 million, and the segment margin decreased to 11.6% from 12.9% as wage, recruiting and staffing investments limited near-term profit growth. Advantage said pricing actions had begun to take effect and expects double-digit revenue and Adjusted EBITDA growth, along with margin expansion, for both the fourth quarter and full year.

Retailer Services net revenue increased 1% to $251.0 million, while Adjusted EBITDA rose 43.3% to $32.3 million. The margin expanded to 12.9% from 9.1%. Project demand, improved execution and growth at the Daymon private-brand business supported the results. Adjusted EBITDA also grew at a double-digit rate when tariff refunds were excluded. Management cautioned that the segment faces a more difficult year-over-year comparison in the fourth quarter.

Restructuring targets cost base and capital efficiency

Advantage said its changing business mix requires a realignment of costs and processes. The company has identified approximately $25 million of near-term annualized savings, net of investment, with most actions planned for the fourth quarter of 2026. More than $5 million of additional annualized net savings is planned over time as the program extends into 2027.

The measures include organizational delayering, consolidation of support functions and reductions in vendor, real-estate and discretionary spending. Cost actions will be weighted toward Branded Services and selected shared-service functions. Advantage said it intends to protect the two organizational layers closest to clients and customers while reinvesting some savings in client-facing talent. Incremental restructuring charges are expected, but their amount and timing have not yet been finalized.

The Workday reassessment also reduced expected capital spending. Advantage now forecasts 2026 capital expenditures of $40 million to $45 million, down from its previous range of $45 million to $55 million. Capital expenditures for 2027 are still expected to be about $35 million to $40 million. The company plans to continue targeted upgrades to existing systems and investments in new artificial-intelligence capabilities.

Guidance reaffirmed as cash remains focused on debt

Advantage maintained its 2026 outlook for net revenue to range from flat to up low-single digits, excluding divestitures. Adjusted EBITDA is still expected to range from flat to down mid-single digits on the same basis. Management said the outlook reflects strength in Experiential Services and improvement in Retailer Services, offset by pressure in Branded Services, and incorporates increased market uncertainty and a relatively wide range of possible fourth-quarter outcomes.

Full-year Adjusted Unlevered Free Cash Flow guidance remains $250 million to $275 million, while net free cash flow conversion is expected to be approximately 25% of Adjusted EBITDA, excluding incremental debt-refinancing costs. Expected net interest expense was reduced to about $155 million from approximately $160 million.

Third-quarter Adjusted Unlevered Free Cash Flow was $98.7 million, or 115.6% of Adjusted EBITDA, compared with $51.0 million of GAAP operating cash flow. The company attributed its cash performance in part to disciplined working-capital management. Days sales outstanding improved sequentially to 60 days, and management expects further progress toward about 55 days in the fourth quarter.

Advantage ended September with $131.3 million in cash and cash equivalents and $1.45 billion of net debt. Net leverage was 4.6 times last-12-month Adjusted EBITDA, essentially unchanged from the second quarter. Cash and free cash flow will be directed primarily toward debt reduction, with a long-term net leverage target below 3.5 times. Share repurchases are expected only to offset dilution.

The company identified several uncertainties that could affect its outlook, including wage and labor-rule changes, retailer developments outside its control, tariffs, client procurement and industry consolidation, changes in client sales and marketing programs, technological shifts, substantial indebtedness and refinancing conditions. Restructuring and reorganization payments will also affect reported cash flow, and the company has not yet specified the full cost or timing of its latest restructuring program.