Earnings call transcript: Advantage Solutions Q1 2026 results show resilience

Advantage Solutions reported a solid performance for the first quarter of 2026, with net revenues reaching $723 million, marking a 4% year-over-year increase. The company’s stock price showed a 2% rise in aftermarket trading, closing at $44.43. The stock has demonstrated exceptional momentum with a 20% gain over the past week and a remarkable 102% return year-to-date, according to InvestingPro data. Analysis suggests the stock remains undervalued at current levels, trading below its Fair Value estimate. Despite challenging market conditions, Advantage Solutions demonstrated strong growth in its Experiential Services segment, contributing to an adjusted EBITDA increase of 16% year-over-year.

Advantage Solutions showcased resilience in Q1 2026, achieving a 4% year-over-year growth in net revenues to $723 million. This growth was driven by the Experiential Services segment, which reported a 22% increase in revenue. The company faced headwinds in its Branded Services segment but managed to maintain overall positive momentum due to strategic operational improvements.

Advantage Solutions reiterated its full-year 2026 guidance, expecting flat to low single-digit revenue growth and adjusted EBITDA ranging from flat to a mid-single-digit decline. The company anticipates continued strength in Experiential Services and improved performance in Retailer Services, despite ongoing macroeconomic challenges.

Advantage Solutions’ management highlighted the success of their Experiential Services, with CFO emphasizing, "Our operational leverage in Experiential Services is a key driver of our strong EBITDA growth." The company’s CEO noted, "We are seeing significant benefits from our technology transformation, which is enhancing our service delivery and operational efficiency."

Advantage Solutions’ Q1 2026 performance underscores its ability to navigate a challenging economic landscape, with strategic investments in technology and operational improvements positioning the company for future growth. For investors seeking deeper insights, InvestingPro offers 11 additional ProTips for ADV, along with comprehensive Pro Research Reports that transform complex financial data into actionable intelligence for smarter investment decisions.

Operator: Greetings, and welcome to the Advantage Solutions 1st quarter 2026 earnings call. After the speaker’s remarks, there will be a question-and-answer session. If you would like to ask a question at during this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question press star one again. Thank you. As a reminder, this conference is being recorded.

Welcome to Advantage Solutions first quarter earnings conference call. Dave Peacock, Chief Executive Officer, and Chris Growe, Chief Financial Officer, are on the call today. Dave and Chris will provide their prepared remarks after which we will open the call for a question-and-answer session. During this call, management may make forward-looking statements within the meaning of the Federal Securities laws. Actual outcomes and results could differ materially due to several factors, including those described more fully in the company’s annual report on Form 10-K filed with the SEC. All forward-looking statements are qualified in their entirety by such factors. Our remarks today include certain non-GAAP financial measures, which are reconciled to the most comparable GAAP measure in our earnings release. As a reminder, unless otherwise stated, the financial results discussed today will be from continuing operations and revenues will exclude reimbursable expenses.

Now, I would like to turn the call over to Dave Peacock.

Dave Peacock, Chief Executive Officer, Advantage Solutions: Thanks, operator. Good morning, and thank you for joining us. I want to first acknowledge our team for a solid start to the year. We have a lot of work ahead of us, but I am grateful for the resilience our people are showing in this uncertain time. Our first quarter was solid and ahead of our internal expectations, reflecting strong growth in Experiential Services, improvement in Retailer Services, and continued headwinds affecting Branded Services. In the first quarter, total company net revenues of $723 million were up 4% year-over-year and up 4.7% on a pro forma basis, excluding divestitures. Adjusted EBITDA of $68 million was up over 16% and up 22% on a pro forma basis, excluding divestitures, driven by strong incremental margins in Experiential Services and improved profitability in Retailer Services.

Our results reflect continued progress on the growth and productivity initiatives outlined last quarter, especially our centralized labor model, which is driving improved retail execution and profitability. Our technology investments also continue to enhance our workforce productivity and improve our ability to drive sales for clients. We are still in the early stages of realizing the benefits of these initiatives. We recently launched the last phase of our SAP implementation, and we continue to advance the rollout of our human capital management system. First quarter cash flow was strong. We generated $74 million in adjusted unlevered free cash flow and ended the quarter with $144 million in cash after a meaningful debt paydown in March. While we remain focused on cash generation and productivity, we have increased our efforts to drive growth across our platform. Technology will enable this push.

Faster insights to action using AI built on top of our data lake will enable us to better meet increasing demand for experiential and other in-store services and drive demand for clients’ brands through a better understanding of product-level performance. In experiential and retailer services, we are using AI tools integrated with legacy systems as well as process redesign to increase our hiring speed to better meet in-store labor needs. Our Branded Services team continues to advance our analytic architecture, driving faster action, increasing the likelihood of accelerating brand performance, and routing in-store brand merchandisers dynamically. We leverage partnerships like our alliance with Instacart to help drive better retail pricing and assortment decisions on behalf of clients. We’re collaborating to leverage proprietary data and an alert-based model to more effectively deploy retail reps to the highest yielding in-store opportunities.

Our retail pilot with Instacart is expanding. Initial results have been positive. We’re also expanding into new markets and services and see a meaningful opportunity to expand beyond grocery retail. We are in active discussions with several non-food retailers to perform similar services that we’ve been doing with grocers and in other food channels for years. While growth is our focus, we continue to pursue several productivity initiatives. First, our centralized labor model is improving service quality and supporting long-term margin expansion, particularly in Experiential Services. We also see an opportunity to extend some of these capabilities into our Retailer Services segment as we execute product resets and store remodel work in approximately 80% of the U.S. grocery channel. Second, we are in the final stages of our enterprise technology transformation.

Our SAP and Oracle platforms have strengthened our data integrity, improved our reporting capability, reduced duplicative systems, and are improving our ability to deliver insight-driven services while our Workday implementation will further improve our talent management. The heavy lifting of this transformation will be mostly complete by year-end. Beginning in 2027, we expect to more fully realize the efficiency benefits of these investments. Finally, we are integrating AI across our operations. Today, AI-enabled staffing and scheduling tools are already improving our speed and labor utilization. We are leveraging AI to drive further efficiency across our businesses and expect it to play a large role in improving execution, forecasting, and labor productivity.

This includes a use case-based approach to AI tool selection and development and accelerating the fidelity and maturity of our data to ensure accuracy. I am proud of our execution in the quarter, controlling what we can amid ongoing consumer softness. Several enduring trends impacted our business in the consumer sector more broadly. Lower and middle income consumers remain highly focused on value, while higher income consumers are shifting spending towards healthier options and also beginning to look for savings opportunities. Rising gas prices are constraining consumer spending and have contributed to the lowest consumer sentiment since tracking began in 1952. We do not expect these dynamics to change in the near term, but we are adapting our business accordingly and helping our manufacturing clients and retailer customers also adjust their strategies.

Additionally, our exposure to the fast turning consumer packaged goods sector provides less volatility in this environment compared to other sectors, and our heavier focus on the food category, which represents the majority of Branded Services revenues, provides a degree of built-in resilience as consumption patterns in food tend to be relatively stable or shift more slowly over time. Finally, as a scaled outsource labor provider, we are well-positioned to support clients as they seek greater efficiency and return on their investment at retail. Hiring remains competitive, but it is consistent with recent quarters, and we are investing in our workforce and training to support the durable demand growth we are seeing. As I stated at the outset of this call, our segment results were mixed. Experiential Services delivered very strong first quarter results. Events grew over 19% and execution rates improved on both an annual and sequential basis.

As we build top line momentum, we are focused on increasing profitability by