Advantage Solutions (ADV) Q2 2026 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Wednesday, Aug. 5, 2026, at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer - Dave Peacock
• Chief Financial Officer - Chris Growe

TAKEAWAYS

• Total Revenue -- $889.5 million, an increase of 1.8% compared to the prior year period.
• Net Revenue (Excluding Reimbursables) -- $757 million, reflecting 3% growth year over year, or 4% growth excluding the effect of divestitures.
• Adjusted EBITDA -- $75.8 million, a decline of 12.2% year over year driven by project timing and execution costs in the Retailer Services segment.
• Net Loss -- $62.7 million, compared to a net loss of $30.4 million in the second quarter of 2025.
• Experiential Services Revenue -- $416.3 million, representing 19% growth year over year due to accelerating demand for product demonstrations.
• Experiential Services Adjusted EBITDA -- $34 million, an increase of 32% year over year supported by higher event volumes and operational execution.
• Experiential Event Volume -- 18% growth year over year, with management reporting high demand across both existing and new customer relationships.
• Retailer Services Revenue -- $237 million, an increase of 3% year over year supported by solid performance in the private label business.
• Retailer Services Adjusted EBITDA -- $20 million, a decline of approximately 25% year over year reflecting project timing and costs associated with early-stage project execution.
• Branded Services Revenue -- $236 million, a decline of 20% year over year, as constrained spending by consumer-packaged goods clients persisted.
• Branded Services Adjusted EBITDA -- $22 million, representing a 36% year-over-year decline attributed to client in-sourcing and select client losses.
• Merchandising Project Growth -- 20% increase year over year, with merchandising projects now representing nearly 25% of the total work in the Branded Services segment.
• Adjusted Unlevered Free Cash Flow -- $18.7 million, representing a 25% conversion of adjusted EBITDA despite incremental working capital pressure from a technology implementation.
• Cash and Cash Equivalents -- $102.3 million at the end of the second quarter.
• Net Leverage Ratio -- 4.5x trailing adjusted EBITDA.
• Share Repurchases -- $15 million in the second quarter, primarily executed to offset dilution from stock grants and exercises.
• Divestiture Impact -- $5 million in revenue and $3 million in adjusted EBITDA headwinds during the second quarter.
• Full-Year Divestiture Outlook -- $20 million in revenue and over $10 million in adjusted EBITDA headwinds projected for 2026.
• Interest Expense Guidance -- Approximately $160 million for the full year, a reduction from the previous forecast of $160 million to $170 million.
• Capital Expenditures Guidance -- $45 million to $55 million for the full year, updated from the previous range of $50 million to $60 million.
• Full-Year Revenue Guidance -- Flat to up low single digits, excluding reimbursable expenses.
• Full-Year Adjusted EBITDA Guidance -- Flat to down mid-single digits, reflecting ongoing business mix pressure and internal investments.
• Second Half Earnings Cadence -- 53% of full-year adjusted EBITDA is expected in the second half of 2026, with the fourth quarter projected to be higher than the third quarter.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Peacock stated, "the recovery is taking longer than expected, and we are impacted by the same persistent challenges as our CPG clients," regarding the ongoing revenue declines in Branded Services.
• Growe stated, "Performance was impacted by... higher costs related to execution issues on a new project in the quarter," resulting in a 25% decline in Retailer Services adjusted EBITDA.

SUMMARY

Management at Advantage Solutions (NASDAQ:ADV) reported a period of mixed segment performance, highlighted by accelerating growth in Experiential Services and continued pressure in Branded Services. The company is nearing the completion of a multiyear technology transformation, with the final phase of its SAP implementation impacting working capital during the quarter. While overall revenue grew, profitability was weighed down by project timing in Retailer Services and constrained spending among consumer-packaged goods clients. Management indicated that value-seeking consumer behavior is broadening across income groups, reinforcing demand for measurable retail programs that drive trial and discovery. Looking ahead, the company expects earnings to be weighted toward the second half of the year as it shifts focus from technology deployment to operational leverage.

• CEO Peacock noted that international regions provide "a useful blueprint for what can be achieved in the U.S." due to even higher daily event volumes in those markets.
• The company established a Chief AI Officer role and is piloting several tools, including an event manager compliance tool and photo verification, to improve execution rates.
• Management reported an experiential execution rate of approximately 95% in the quarter, which they attributed to a centralized labor model.
• CEO Peacock reported that the merchandising team consists of roughly 5,000 employees with an average tenure of over nine years.
• The company is deploying an alert-based execution model that identifies out-of-stocks and distribution voids in nearly real time to target resources more precisely.
• CEO Peacock described the current macro environment as a "K-shaped economy" where lower-income households are focused on price while higher-income households seek value through better-for-you options.

INDUSTRY GLOSSARY

• CPG: Consumer-packaged goods, which are items consumed every day by the average consumer that require routine replacement.
• EBITDA: Earnings before interest, taxes, depreciation, and amortization, used as a measure of core operating profitability.
• DSO: Days sales outstanding, a measure of the average number of days it takes a company to collect payment after a sale.
• ROI: Return on investment, a performance measure used to evaluate the efficiency or profitability of an investment.
• SAP: An enterprise resource planning software platform used to manage business operations and customer relations.
• Syndicated Business: A field services model where a single workforce executes tasks for multiple clients during a single store visit to share costs.
• K-Shaped Economy: An economic environment where different segments of the population experience divergent financial recovery or growth.
• Alert-Based Execution Model: A retail service methodology that uses real-time data to identify store-level issues and triggers immediate field intervention.

Full Conference Call Transcript

Operator: Welcome to Advantage Solutions Second 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. And now I would like to turn the call over to Dave Peacock.

David Peacock: Thanks, operator. Good morning, and thank you for joining us. First, I want to acknowledge our teammates. We have over 60,000 people who spend the majority of their days in service of our clients and customers, from our retail merchandising reps moving between stores to ensure our clients' products are on shelf, to samplers delighting our retail partners' customers with a pleasant experience and great products, to our key account managers calling on retailers in an effort to add a little more push behind the great brands that we represent. These and thousands of others work in pursuit of exceeding client expectations, and I appreciate the energy and effort they bring each day.

Second quarter net revenues of $757 million were up 3% year-over-year and 4% excluding the effect of divestitures, while adjusted EBITDA of $76 million declined 12% and declined 9%, excluding divestitures, reflecting several onetime factors and mixed performance across our segments. Experiential Services delivered another very strong quarter and both demand signals and execution continue to improve across this business, giving us confidence in second half growth. Retailer Services revenues increased 3% year-over-year, but adjusted EBITDA was down approximately 25% year-over-year, reflecting project timing and costs associated with early-stage project work that we do not anticipate repeating. We expect growth in the second half of the year.

In Branded Services, revenue declined 13% year-over-year and was down 11%, excluding divestitures, as the recovery is taking longer than expected, and we are impacted by the same persistent challenges as our CPG clients. Cash generation remains solid with $19 million in adjusted unlevered free cash flow despite an incremental working capital impact from our SAP final phase implementation. We ended the quarter with $102 million in cash. Turning to our growth initiatives. Clients continue to prioritize programs that can demonstrate clear ROI, support trial and discovery and convert demand into purchases. That trend aligns directly with the capabilities we have built across Advantage. Experiential Services is the clearest proof point.

Demand for product demonstrations continues to exceed our expectations, with meaningful opportunities to expand event volume across existing customers and support growth with new customers. We are adding capacity where demand signals are strongest, and remain confident in our ability to recruit and staff as needed. We have seen strong growth across the spectrum of customers we serve, both in the U.S. and internationally, with even higher daily event volumes in our international regions. We believe this provides a useful blueprint for what can be achieved in the U.S. as programs mature and as we continue to improve labor readiness and execution. In our CPG-facing work, Branded Services merchandising projects were a relative bright spot.

We are focused on scalable, high-return opportunities that can become durable long-term relationships as we deploy a highly trained and experienced team against what we see as recurring issues in out-of-stocks at retail. In addition, our Pulse selling system is improving visibility into on-shelf availability, item velocity and distribution gaps, allowing our teams to target resources more precisely and helping clients connect spending to measurable returns. Finally, we continue to develop our alert-based execution model, allowing Advantage to see out-of-stocks, distribution voids and missing displays in almost real time. Turning to our productivity initiatives. Our productivity agenda spans labor planning, process standardization, technology and operating visibility.

Together, these initiatives are designed to manage costs prudently, improve execution quality and create capacity to support growth. Our centralized labor model continues to enhance labor planning and execution, which is critical as Experiential Services demand and Retailer Services project activity increase. Experiential execution rates of approximately 95% in the quarter demonstrate the efficacy of this model. We are also in the final stages of our enterprise technology transformation, and these new systems will help us support improved data integrity, process discipline and operating visibility. We plan to complete the heavy lifting of this transformation this year.

And in 2027, we expect to fully leverage these platforms and realize the benefits of the investments we've made to drive better decision-making and efficiency. While many companies are grappling with the existential risks from AI, we are focused on the opportunities to enhance our physical network that was built over decades. We continue to prioritize integrating AI across Advantage in pursuit of better service levels, a better teammate experience and greater efficiency. We have established a governance structure, including a newly created Chief AI Officer role that is tightly aligned with our tech and data teams. We are prioritizing training and fluency across our organization and the deployment of the right tools to our teammates.

We remain focused on empowering our people to opportunistically employ a wide variety of AI tools that best fit their respective use cases, and to find efficiencies in everything they do. We are making sure our teams are educated on the potential of these AI models, how to use them effectively and encouraging them to find opportunities for efficiency, speed or enhanced service quality. Our priorities range from personal productivity to enterprise-wide initiatives that deliver faster insight and more precise resource deployment. We have several pilots we have developed across our workforce operations that we expect to increase efficiency, including a new event manager compliance tool, photo verification tool, cartless automation and a supervisor intelligence dashboard.

We continue to develop new AI-led opportunities to bring both efficiency and operational excellence to our business. Turning to the macro environment. The core consumer themes and K-shaped economy we discussed last quarter have persisted. Lower and middle-income households remain highly focused on value, with purchases increasingly planned around promotions and price points. Higher-income consumers continue to shift portions of their baskets toward healthier and better-for-you options, but they are also becoming more deliberate about the value they receive. Emerging brands continue to also gain share of the industry in many categories as consumers seek variety and gravitate to product discovery. Value-seeking behavior is broadening across income groups.

We are also seeing greater price competition among large retailers seeking market share gains and traffic. These trends reinforce the need for highly measurable, cost-effective programs that can drive trial, discovery and conversion. Advantage is well positioned to help clients navigate this volatile operating environment by supporting their growth plans and helping them gain market share in as efficient a manner as possible. We have adapted our business accordingly by emphasizing execution quality, disciplined staffing and measurable ROI. As a scaled outsourced labor provider, we are well positioned to support clients seeking flexible capacity and greater efficiency. We continue to monitor energy prices, tariffs and geopolitical developments, which are affecting consumer behavior.

Our outlook does not incorporate a major change in underlying consumer health. Now turning to our segment results. Experiential Services delivered another very strong quarter. Event volumes increased 18%, with strong incremental margins supported by healthy demand across existing customer relationships and new vendor activity. With revenue growing at a healthy rate, improving profitability remains a priority even as we invest in infrastructure to support higher long-term demand. We are focused on labor efficiencies, stronger training and safety protocols, consistent execution and a shift toward higher return demos. We expect continued momentum in the second half of the year. In Branded Services, the recovery is taking longer given constrained CPG spending, procurement-driven dynamics, client in-sourcing and select client losses.

Our focus is on stabilizing the revenue base while protecting profitability. That means strengthening client retention and executive engagement, improving pipeline conversion, hiring and retaining the right talent and demonstrating measurable ROI through our data, analytics and execution capabilities. CPG merchandising projects performed well this quarter, and we are hopeful this is a leading indicator for the rest of the business. While we are not assuming a near-term inflection, we do expect modest improvement in the second half of 2026. Retailer Services had a softer quarter, primarily due to project timing, a difficult comparison with an unusually strong prior year period and higher execution costs on merchandising projects.

We view these as factors as temporary and largely specific to the second quarter. We expect performance to improve sequentially through the second half as larger projects ramp up. The pipeline remains encouraging, and we expect project-related earnings volatility to moderate in the second half. Our priorities in Retailer Services are clear: align staffing with demand, improve execution discipline and operating consistency and better match costs with associated revenue streams. Cash generation remains a structural strength of our business and a core priority. We saw unlevered free cash flow of $19 million or 25% of adjusted EBITDA in the quarter. For the first half, unlevered free cash flow was 79% of adjusted EBITDA.

We have seen some expected pressure on cash flow from working capital, which we believe will improve in the second half as we have moved past our final SAP implementation phase. Our capital allocation priorities remain unchanged. We intend to direct free cash flow primarily toward debt reduction, while maintaining the liquidity and strategic flexibility required to operate the business. Turning to our outlook. We are taking a balanced view of the remainder of the year. That view reflects 3 dynamics: continued strength in Experiential Services, improving Retailer Services performance with a more normalized earnings cadence in the second half and a more gradual recovery time line in Branded Services.

We are reiterating our full year 2026 revenue and adjusted EBITDA guidance ranges, reflecting the successful execution of our growth initiatives and in consideration of the investments we are making into our business and our teammates. We are also reiterating full year guidance of adjusted unlevered free cash flow of $250 million to $275 million and net free cash flow conversion of 25%, excluding debt refinancing costs. We are encouraged by the strength of our Experiential Services demand and the progress across our growth agenda. At the same time, we are clear-eyed about the work required to stabilize Branded Services and reduce margin pressure driven by business mix.

We remain focused on delivering for clients, generating cash and building a more durable and profitable Advantage. I'll now turn it over to Chris for more detail on our financial performance.

Christopher Growe: Thank you, Dave, and welcome to everyone joining us today. I will review our second quarter performance by segment, discuss our cash flow and capital structure and provide additional detail on our outlook. I will outline our business results on a reported basis and also on an adjusted basis for divestitures, which weighed on our year-over-year performance. In the second quarter, businesses we have divested represented a year-over-year headwind of approximately $5 million to revenues and approximately $3 million to adjusted EBITDA. And for 2026, we still expect divestitures to represent a year-over-year headwind of approximately $20 million to revenues and over $10 million to adjusted EBITDA. So turning to our divisional performance and starting with Branded Services.

In the second quarter, we generated $224 million of revenues and $22 million of adjusted EBITDA, down 13% and 36% year-over-year, respectively. Excluding divestitures, revenues were down 11% and adjusted EBITDA was down 30%. The segment continues to face pressure from ongoing client in-sourcing, softer CPG spending and client losses. However, we saw encouraging activity in CPG merchandising projects, which contributed positively to results in the quarter. Our focus remains on stabilizing the revenue base, improving pipeline conversion, client retention and maintaining disciplined cost management. We continue to expect gradual improvement through the balance of the year. Turning to Experiential Services. We generated $296 million of revenues and $34 million of adjusted EBITDA, up 19% and 32% year-over-year, respectively.

Results were driven by accelerating demand for product demonstrations, higher event volumes and strong operational execution. Demand remained healthy across both existing and new customers, and we continue to see opportunities to further increase event volumes in the second half of the year. We are confident in our ability to recruit and staff to meet this increased demand. Finally, in Retailer Services, we generated $237 million of revenues and $20 million of adjusted EBITDA, up 3% and down approximately 25% year-over-year, respectively. Performance was impacted by project timing, a difficult comparison with unusually high project activity in the prior year and higher costs related to execution issues on a new project in the quarter.

We view these as unique and temporary factors and expect sequential improvement in the second half versus the first half performance. We also have a stronger project pipeline in the second half and expect project-related earnings volatility to moderate as these programs ramp. Offsetting some of these headwinds, our private label business delivered a solid quarter as the industry backdrop became more favorable and the channel mix drag eased again modestly. Our focus remains on execution, staffing alignment and operational discipline to better align costs with project activity and drive more consistent earnings growth. From a cost perspective, during the quarter, we saw more favorable health insurance cost trends, which have been a meaningful pressure point over the last year.

Moving to the balance sheet and liquidity. We ended the quarter with $102 million in cash, reflecting our continued focus on disciplined capital management and strong cash generation. Our net debt level stood at approximately 4.5x trailing EBITDA. Turning to cash flow and working capital. Cash generation remains a core strength of the business, and we view it, along with working capital discipline, as important long-term shareholder value creation drivers. Our days sales outstanding, or DSO, remained elevated during the second quarter, primarily due to the impact of our final SAP implementation and customer payment timing, both of which we continue to view as temporary.

We expect DSOs to improve steadily through the remainder of the year, including in the third quarter, supporting strong full year cash flow generation. Adjusted unlevered free cash flow was $19 million in the second quarter, with a conversion rate of 25%. The performance this quarter was negatively affected by an increase in DSO, as expected. We expect strong working capital improvement in the second half, which will contribute to free cash flow generation and support our cash flow outlook. Moving on to capital allocation. This year, we have focused on debt reduction, particularly during the first quarter around our refinancing. In the second quarter, we repurchased approximately $15 million of our shares.

These repurchases were primarily intended to help offset dilution from stock grants and exercises. As we look ahead, free cash flow will primarily be directed toward debt reduction. Finally, turning to our outlook. We are encouraged by our second quarter performance and continue to maintain a balanced outlook for the remainder of the year. We are reiterating our full year 2026 revenues and adjusted EBITDA guidance ranges given a solid first half of the year. However, we've updated our guidance for interest expense and capital expenditures, which are now slightly lower than previously forecasted. Our free cash flow outlook remains unchanged.

From a business perspective, we continue to see strength in Experiential Services, sequential improvement in growth in Retailer Services and a more gradual recovery in Branded Services on its path towards stabilization. Key factors influencing our outlook include Experiential Services demand and execution, Retailer Services project timing and second half project ramps and the pace of recovery in Branded Services. Overall, we've taken a prudent view of the second half of the year. Regarding quarterly cadence, given a stronger first half performance, our guidance implies that second half adjusted EBITDA will represent approximately 53% of the full year total. We expect fourth quarter adjusted EBITDA to be higher than third quarter adjusted EBITDA.

Our focus remains on improving execution, raising profitability and delivering consistent cash generation. Thank you for your time. I'll now turn it back over to Dave.

David Peacock: Thanks, Chris. We remain encouraged by the momentum in the Experiential Services and the expected improvement in Retailer Services as larger projects are ramping up. At the same time, we continue to focus on stabilizing Branded Services while protecting profitability. We are also advancing our productivity initiatives across labor planning, process standardization, technology and operating visibility while integrating AI to support stronger service levels, a better teammate experience and greater efficiency. Together with our focus on disciplined capital allocation and strong cash generation, we believe these efforts position Advantage to build a more durable and profitable business over the long term.

I want to thank everybody for joining us today, and we look forward to speaking with you again next quarter. Operator, we're now ready for questions.

Operator: [Operator Instructions] Your first question comes from the line of Greg Parrish with Morgan Stanley.

Gregory Parrish: Maybe just on Branded, I know you called out maybe a more gradual recovery in second half. But thinking ahead to 2027 and beyond, in your view, what's the catalyst that really gets this business stabilized?

David Peacock: I think if you think about it, Greg, we're coming off a few kind of larger client losses, and there's various reasons for those. But as we move into '27 -- and let's talk about Branded Services first, we're seeing parts of that business demonstrate growth, which is kind of giving us some optimism. And then you're lapping, like I said, if you go back in 3 years, we had some resignations we talked about and then a couple of key client losses, which has actually put us in a position to have a more kind of balanced, and I'll call it, more fragmented client base. And if I look at our top 25, 30 clients, year-over-year, they're growing.

And so all these things are signs to us that things are moving towards stabilization. It's just in a long lead contracted business. You have to get through kind of these quarterly cycles until you can realize that shift or that pivot. And then you just heard our results in Retailer, which really are driven primarily by a tough comp. We had a pretty large, what I'll call, onetime project in the second quarter of last year that did not repeat this year, but the underlying business remains strong. And we're never going to turn away significant project work and we get it from time to time.

But that business has been kind of a consistent low -- slower grower than Experiential, but consistent growing business for us. And we see opportunity with new lines of service that we can bring to our retail partners to give us optimism. And then Experiential, the demand signals continue to be very strong, both from large clients, but also new business acquisition that we've been working on and we've realized as recently as the second quarter. So all of those things give us optimism as we look at '27.

Gregory Parrish: Great. That's helpful. And then maybe just on the other side of the coin, just Experiential. Obviously, a lot of strength, 3 quarters in a row here, 20% growth. I feel like we sort of talked about this a lot, but there's new demand, you had some new clients come on board, better labor availability. I'm not sure if I missed anything there. But maybe zooming out, thinking about next year beyond, I mean, how durable is this outsized strength that you've been seeing in Experiential?

David Peacock: I think it's very durable. Like I mentioned, that the demand signals are very strong from our clients, but also -- and think of it too, from a macro standpoint. I mean the growth of emerging brands in the industry and the growth of innovation and new products, even from more established or larger brands, is not slowing down. And so that stimulates the need for sampling and trial. And I think retailers, justifiably so, are realizing that sampling and experiential and in-store demo and retail payment, all those things are really important for the customer as they come into the store. And so they compete on that level and that works to support that business.

And I want to give our team a shout out because they've done a really good job on the execution front. And if I think about when we are deploying AI, and I know it's a buzzy term and everybody wants to talk about it, we only really do so when we think there's real tangible benefits and where we see AI as an enabler to the business. I'd say Experiential is a good example of that, where we're really speeding up our time between application and when they actually are working at a [ cart ]. We're compressing that. So we're getting people through the funnel much quicker. Photo verification, which is important in this business.

We found ways to really streamline that process. I rattled off with you in the prepared remarks. Those are just a few of the things that we're doing that -- where AI is bringing real advantage. And when you put it all together, it's just driving better execution rates and efficiency.

Christopher Growe: Greg, I would just add to that, that we talked about this really at the start of the year and after last quarter as well, just the investments we're making in that business to sustain the growth. So you're seeing that here in Q2, you'll see it in the second half of the year. Really proud of the team to be able to put up nearly 20% revenue growth and that degree of incremental margin improvement. But I think -- I will make sure we just reiterate that we're preparing and getting the business in a place where we can continue to sustain this rate of growth, do it in a very high-quality way.

And as you saw this quarter, we hit that 95% execution. So it puts us in a great place to be able to really grow in the second half of the year and into 2027.

Gregory Parrish: Yes. Okay. Great. Congrats on the quarter. I'll pass it on.

Operator: Your next question comes from the line of Luke Morison with Canaccord.

Lucas Morison: So I think you called out CPG merchandising projects as a relative bright spot, possibly a leading indicator for the rest of Branded. Can you just help me understand sort of like the underlying mix there? Is client spend rotating within that segment? Are you seeing mix shift? Like help me understand what's happening with that comment?

David Peacock: So if you think about that business, 2 of the big drivers within Branded Services are kind of headquarter selling or where we represent a client at headquarters and then retail merchandising, where we are sending folks in to execute in-store. And you're seeing persistent challenges with in-stock in a lot of category, not every category, but probably a majority of categories across the store, and there's a lot of reasons for that at retail. And you're not going to sell them if it's not on the shelf, and I think our clients understand that. So you're seeing an increase in project work so that you've got contracted continuity work.

And if you look back maybe a year ago, projects were, call it, maybe 15% of our total work in this space in the first half. Now they're close to a little under 25%. And so we saw a pretty nice lift in project work of a little over 20% year-over-year, which is telling us that sort of unplanned need and/or opportunity to either get more the display space on the floor or remediate out of stocks. And we see -- as we look forward and have conversations with clients in both current and prospective, we see an opportunity to lean into this business. And it's a syndicated business.

We have some direct teams, but obviously, we can see realized pretty decent margins when you're utilizing an existing force out there against multiple clients to solve problems. And then we've also put some investment into this area in becoming more alert-based and more, how do I say, just bring more efficacy to the work. These folks were typically allocated by time. So going into stores every week, every 2 weeks, every 4 weeks on behalf of clients.

We're starting to pilot and realize great results in making it more alert based, where we get a scan or a read from a store and we actually just go and address whatever that issue is, a drawn-down display, out of stocks, whatever that might be. So that's allowing us to deploy resources more efficiently as well. And it's a great labor force. I mean it's a team of roughly 5,000 folks, average tenure with the organization over 9 years, a lot of dedicated folks that both sell and remediate problems for our clients in stores.

Lucas Morison: Yes. Yes. Okay. Super helpful. And maybe just a follow-up. You've said reducing mix-driven margin pressure is obviously a priority here. As I look at Experiential, it's both your fastest grower and your lowest margin segment. So help me just think through like what closes that gap? Is it labor efficiency? Is it event mix? Is it pricing? Is it -- is there something else there?

Christopher Growe: Yes. Luke, it's Chris. Just to kind of address that in a couple of different ways. Overall, when you have this, call it, mix modeling that's occurring this year, with Branded Services down and Experiential up, you're going to have that kind of weight on the margin profile of the business. We couldn't help but reinvest back in the business this year as well. So you're seeing a little less incremental margin in Experiential this quarter, but it's all deliberate. And I would just say, again, puts us in a great place to be able to sustain the growth going forward. As I look ahead, we talk about a path towards stabilization for Branded Services.

So that's what we -- we still see us on that path. Just maybe it's a little a little slower. But I think you're going to see that slow and gradual improvement in the rate of decline there. You're seeing really good growth in Experiential. And then Retailer, we talked about that being able to grow in the second half of the year. So you've got -- you're going to have some equalization, if I can say it that way, of the margin across the businesses as one grows and one declines, and you're going to have -- you've got investments that are influencing that.

And then you've got the benefit of the stabilization of Branded Services that will allow us to achieve that kind of margin stability, and hopefully, margin growth next year.

Operator: There are no further questions at this time. I will now turn the call back to Dave for closing remarks.

David Peacock: We want to thank everybody for joining, and we look forward to connecting with this group next quarter.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.