Advantage Solutions Inc.: Form 10-Q for the period ended Mar 31, 2026

Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Quarterly Report”), including the section titled “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) including statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, our beliefs and our management’s assumptions. Such words as “expect,” “anticipate,” “outlook,” “could,” “target,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “should,” “may,” “assume” and “continue” as well as variations of such words and similar expressions are intended to identify such forward-looking statements, although not all forward-looking statements contain such terms. These statements are not guarantees of future performance and they involve certain risks, uncertainties and assumptions that are difficult to predict. We have based our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecasted by our forward-looking statements. More information regarding these risks and uncertainties and other important factors that could cause actual results to differ materially from those in the forward-looking statements is set forth in “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Annual Report”). Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. Except as required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission (the “SEC”), we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise.

Business Overview

We are a leading omni-commerce business solutions provider to consumer goods manufacturers and retailers. We have a strong platform of essential, business critical services like headquarter sales, retail merchandising, in-store sampling, digital commerce, and shopper marketing. We generate demand for brands and retailers of all sizes, helping get the right products on the shelf, whether physical or digital, and into the hands of consumers in every way they shop. We use a scaled platform to innovate as a trusted partner with our clients, solving problems to increase their efficiency and effectiveness across a broad range of channels.

We report financial results for the following three reportable segments. Through our Branded Services segment, which generated approximately 29.6% and 35.3% of our revenues in the three months ended March 31, 2026 and 2025, respectively, we provide services to branded consumer goods manufacturers through three main categories: brokerage, branded merchandising and omni-commerce marketing services. Through our Experiential Services segment, which generated approximately 44.3% and 38.2% of our revenues in the three months ended March 31, 2026 and 2025, respectively, we help brands and retailers reach consumers and convert shoppers into buyers through in-store and online sampling and demonstrations. Through our Retailer Services segment, which generated approximately 26.1% and 26.5% of our revenues in the three months ended March 31, 2026 and 2025, respectively, we provide end-to-end advisory, retailer merchandising and agency services to retailers.

Our quarterly results are seasonal in nature, with the fourth fiscal quarter typically generating a higher proportion of our revenues than other fiscal quarters, as a result of higher consumer spending. We generally record slightly lower revenues in the first fiscal quarter of each year, as our clients begin to roll out new programs for the year, and consumer spending generally is less in the first fiscal quarter than other quarters. The timing of our clients’ marketing expenses, associated with marketing campaigns and new product launches, can also result in fluctuations from one quarter to another.

Recent Developments

Refinancing. During the first quarter of 2026, we completed a refinancing designed to extend maturities, enhance liquidity, and simplify our capital structure. The transaction was effected through a series of interrelated financing actions, comprising (i) an exchange offer and consent solicitation with respect to our outstanding senior secured notes,

(ii) a refinancing and amendment of our term loan facility, and (iii) amendments to our asset‑based revolving credit facility. Collectively, these actions extended the weighted-average maturity of our term debt, senior secured notes, and revolving credit facility by approximately two years and were accompanied by a $131.3 million principal paydown during the quarter, reflecting our ongoing commitment to deleveraging the balance sheet. See Note 4–Debt–Refinancing in the Notes to the Company’s condensed consolidated financial statements.

Divestitures. Consistent with our strategy to focus the portfolio on markets where we have differentiated capabilities, we entered into a series of agreements to reduce our ownership interest in our European joint venture. Under those agreements, we sold a portion of our interest in the joint venture for total consideration of £20 million (approximately $28 million), comprised of £10 million (approximately $14 million) received in cash at closing and £10 million of deferred consideration. The Company retained a minority interest of 49.6% in the remaining portion of its ownership interest in the European joint venture.

Year-over-year comparisons are affected by divestitures completed after the first quarter of 2025. The divested businesses contributed approximately $5 million of revenues and $3 million of adjusted EBITDA to our first quarter 2025 results, which are not reflected in the first quarter of 2026.

Transformation. Also during the first quarter of 2026, we advanced our transformation strategy by initiating a restructuring of our Branded Services segment and transitioning certain back-office functions to a third-party service provider. These actions resulted in $2.2 million of restructuring charges in the quarter. The transition of services to the third-party provider is expected to be completed in 2027.

Executive Summary

(amounts in thousands)

(1) Adjusted Net Loss and Adjusted EBITDA are financial measures that are not calculated in accordance with GAAP. For a discussion of our presentation of Adjusted Net Loss and Adjusted EBITDA and reconciliations of Net loss to Adjusted Net Loss and Adjusted EBITDA, see “Non-GAAP Financial Measures.”

In the first quarter of 2026, revenues were $869.6 million, which represented a $47.8 million or 5.8% increase as compared to the same period last year. Reimbursable expenses accounted for $20.0 million or 2.4% of the increase with the remaining increase driven by growth in Experiential and Retailer services of $49.4 million and $8.1 million, respectively, partially offset by declines in Branded of $30.7 million.

We reported a net loss of $71.8 million in the first quarter of 2026, compared to a net loss of $56.1 million during the same period last year. The $15.7 million increase in net loss occurred despite a year-over-year improvement in operating performance, and was driven by two non-operating items: $20.4 million of third-party debt issuance costs related to the refinancing completed during the quarter, and a $16.2 million increase in income tax expense.

We generated operating income of $18.8 million in the first quarter of 2026, compared to an operating loss in the prior year period. The improvement reflected stronger results in Experiential Services, improvement in Retailer Services, and lower reorganization and restructuring costs, partially offset by weaker performance in Branded Services driven by lower revenues.

Adjusted EBITDA was $67.7 million for the first quarter of 2026 as compared to $58.2 million for the first quarter of 2025, reflecting an increase compared to the same period in 2025. The year‑over‑year increase was driven primarily by strong performance in our Experiential Services segment, reflecting continued client demand and effective execution, as well as the timing of certain holidays during the first quarter of 2026 relative to the prior‑year period in our Retailer Services segment. These improvements were partially offset by macroeconomic headwinds and client losses that impacted our Branded Services segment.

Results of Operations for the Three Months Ended March 31, 2026 and 2025

The following table sets forth items derived from the Company’s consolidated statements of operations for the three months ended March 31, 2026 and 2025 in dollars and as a percentage of total revenues.

(amounts in thousands)

Comparison of the Three Months Ended March 31, 2026 and 2025

Revenues

(amounts in thousands)

Branded Services segment revenues decreased $32.8 million for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The decrease includes a $2.1 million reduction in revenues from reimbursable expenses. Excluding the impact of reimbursable expenses, the decline was primarily attributable to lower volumes, client losses experienced in 2025 and reductions in scope of services, which exceeded new business wins. These trends reflect continued macroeconomic uncertainty, as clients continue to manage their brand support spending with heightened scrutiny during the period.

Experiential Services segment revenues increased $71.5 million during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase includes $22.1 million of additional revenues from reimbursable expenses. Excluding the impact of reimbursable expenses, the remaining increase was primarily driven by higher event volume on improved demand and higher average pricing, reflecting continued recovery and growth in client activation activity.

Retailer Services segment revenues increased $9.2 million during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase was driven primarily by higher product volumes due, in part, to the timing of certain holidays during the first quarter of 2026 relative to the prior‑year period.

Cost of Revenues

Cost of revenues as a percentage of revenues for the three months ended March 31, 2026 was 87.6%, as compared to 87.9% for the three months ended March 31, 2025. The decrease was driven primarily by lower fixed labor costs resulting from restructuring actions implemented in prior periods, as well as reduced discretionary bonus and professional services expenses. These favorable impacts were partially offset by higher variable labor and employee benefits costs

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses as a percentage of revenues for the three months ended March 31, 2026 was 6.1%, compared to 7.9% for the three months ended March 31, 2025. The decrease as a percentage of revenue was primarily driven by lower compensation costs and lower stock-based compensation expense.

Depreciation and Amortization Expense

Depreciation and amortization expense was $51.6 million for the three months ended March 31, 2026 compared to $50.4 million for the three months ended March 31, 2025. The net increase was primarily due to a $1.8 million increase in depreciation expense as a result of an increase in software amortization on increased investment in software, primarily due to the implementation of our new global enterprise resource planning system, partially offset by a $0.6 million decrease in intangible asset amortization expense.

Operating Income (Loss)

(amounts in thousands)

In the Branded Services segment, the increase in operating loss during the three months ended March 31, 2026 as compared to the same period in the prior year was primarily due to lower revenues, as discussed above, partially offset by lower operating costs, primarily due to lower stock-based compensation expense, lower restructuring and reorganization expense, and a decrease in expected credit loss expense.

In the Experiential Services segment, the improvement from operating loss to operating income during the three months ended March 31, 2026 as compared to the same period in the prior year was primarily due to the increase in revenues as discussed above, as well as lower restructuring and reorganization costs and lower stock-based compensation expense.

In the Retailer Services segment, the increase in operating income during the three months ended March 31, 2026 as compared to the same period in the prior year was primarily due to the increase in revenues as discussed above, as well as lower restructuring and reorganization costs and lower stock-based compensation expense.

Interest Expense, net

Interest expense, net increased by $0.4 million, or 1.3%, to $34.8 million for the three months ended March 31, 2026, from $34.4 million for the three months ended March 31, 2025. The increase was driven primarily by higher interest rates associated with the refinancing completed during the first quarter of 2026, partially offset by lower average principal balances resulting from principal payments made in connection with the refinancing. Additional information regarding the debt refinancing is included in “Liquidity and Capital Resources—Credit Facilities”

Provision for Income Taxes

The Company recognized provision for income taxes of $23.3 million and $7.1 million for the three months ended March 31, 2026 and 2025, respectively. The year‑over‑year change primarily reflects an increase in the valuation allowance recorded against deferred tax asset related to interest expense limitation carryforwards during the 2026 period.

Reconciliation of Non-GAAP Financial Measures

Non-GAAP Financial Measures

We manage and assess our performance through various means including the use of the financial measures of Adjusted Net Loss, Adjusted EBITDA and Adjusted EBITDA by Segment. A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP measure is provided below. These financial measures are not presented in accordance with U.S. generally accepted accounting principles (“GAAP”). These non-GAAP financial measures are derived from our consolidated and segment financial information but exclude or adjust for certain items that are included in the most directly comparable GAAP measures. We believe these non-GAAP (“Non-GAAP”) financial measures provide investors with additional insight into our operating performance, underlying business trends, and period-over-period comparability. However, these measures are not in accordance with GAAP, and should not be considered in isolation or as a substitute for the most directly comparable GAAP measures.

We define Adjusted Net Loss, which is a non-GAAP financial measure, as net (loss) income before (i) net income attributable to noncontrolling interest, (ii) impairment of goodwill and indefinite-lived assets, (iii) equity-based compensation of Karman Topco L.P., (iv) changes in fair value of warrant liability, (v) acquisition and divestiture related expenses, (vi) restructuring expenses, (vii) reorganization expenses, (viii) litigation expenses, (ix) amortization of intangible assets, (x) gain on repurchases of senior secured notes and Term Loan Facility, (xi) costs associated with (recovery from) with collection efforts involving Take 5 Media Group, (xii) other adjustments that management believes are helpful in evaluating our operating performance, and (xiii) related tax adjustments. We present Adjusted Net Loss because we use it as a supplemental measure to evaluate the performance of our business in a way that also considers our ability to generate profit without the impact of items that we do not believe are indicative of our operating performance or are unusual or infrequent in nature and aid in the comparability of our performance from period to period. Adjusted Net Loss should not be considered as an alternative for Net (loss) income, our most directly comparable measure presented on a GAAP basis.

Adjusted EBITDA and Adjusted EBITDA by Segment are supplemental non-GAAP financial measures of our operating performance.

Adjusted EBITDA means net loss before (i) interest expense, net, (ii) income tax expense, (iii) depreciation and amortization of capitalized software, (iv) amortization of intangible assets, (v) changes in fair value of warrant liability, (vi) stock-based compensation expense, (vii) equity-based compensation of Karman Topco L.P., (viii) acquisition and divestiture related expenses, (ix) (gain) loss on divestiture, (x) restructuring expenses, (xi) reorganization expenses, (xii) litigation expenses, (xiii) costs associated with (recovery from) with collection efforts involving Take 5 Media Group, (xiv) EBITDA for economic interests in investments and (xv) other adjustments that management believes are helpful in evaluating our operating performance.

Adjusted EBITDA by Segment means, with respect to each segment, operating income (loss) before (i) depreciation and amortization of capitalized software, (ii) amortization of intangible assets, (iii) impairment of goodwill, (iv) stock based compensation expense, (v) equity-based compensation of Karman Topco L.P., (vi) acquisition and divestiture related expenses, (vii) restructuring expenses, (viii) reorganization expenses, (ix) litigation expenses, (x) costs associated with (recovery from) with collection efforts involving Take 5 Media Group, (xi) EBITDA for economic interests in investments and (xii) other adjustments that management believes are helpful in evaluating our operating performance, in each case, attributable to such segment.

We present Adjusted EBITDA and Adjusted EBITDA by Segment because they are key operating measures used by us to assess our financial performance. These measures adjust for items that we believe do not reflect the ongoing operating performance of our business, such as certain non-cash items, unusual or infrequent items or items that change from period to period without any material relevance to our operating performance. We evaluate these measures in conjunction with our results according to GAAP because we believe they provide a more complete understanding of factors and trends affecting our business than GAAP measures alone. Furthermore, the agreements governing our indebtedness contain covenants and other tests based on measures substantially similar to Adjusted EBITDA. Neither Adjusted EBITDA nor Adjusted EBITDA by Segment should be considered as an alternative for Net (loss) income or operating income (loss), our most directly comparable measures presented on a GAAP basis.

Non-GAAP financial measures are subject to inherent limitations as they reflect the exercise of judgments by management about which expense and income are excluded or included in determining these non-GAAP financial measures. Additionally, other companies may calculate non-GAAP measures differently, or may use other measures to calculate their financial performance, and therefore our non-GAAP measures may not be directly comparable to similarly titled measures of other companies.

Adjusted Net Loss

A reconciliation of Adjusted Net Loss to Net loss is provided in the following table:

(in thousands)

(a) Represents expenses related to equity-based compensation expense associated with grants of Common Series D Units of Karman Topco L.P. made to one of the Company's private equity sponsors.

(b) Represents fees and costs associated with activities related to our divestitures and related reorganization activities, including professional fees, due diligence, and integration activities.

(c) Restructuring charges, including programs designed to integrate and reduce costs intended to further improve efficiencies in operational activities and align cost structures consistent with revenue levels associated with business changes.

(d) Represents fees and costs associated with various internal reorganization and transformational activities, including professional fees, lease and other contract exit costs, severance, and nonrecurring compensation costs.

(e) Represents legal settlements, reserves, and expenses that are unusual or infrequent costs associated with our operating activities.

(f) Represents the amortization of intangible assets recorded in connection with acquisitions.

(g) Represents a gain associated with the repurchases of senior secured notes and Term Loan Facility, net of deferred financing fees.

(h) Represents the tax provision or benefit associated with the adjustments above, taking into account our applicable tax rates, after excluding adjustments related to items that do not have a related tax impact

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Adjusted EBITDA

Reconciliations of Adjusted EBITDA to Net loss are provided in the following table:

(in thousands)

Financial information by segment, including a reconciliation of Adjusted EBITDA by Segment to operating income (loss), the closest GAAP financial measure, is provided in the following table:

(in thousands)

(in thousands)

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(in thousands)

(a) Represents non-cash compensation expense related to performance stock units, restricted stock units, and stock options under the 2020 Advantage Solutions Incentive Award Plan and the Advantage Solutions 2020 Employee Stock Purchase Plan.

(b) Represents expenses related to equity-based compensation expense associated with grants of Common Series D Units of Karman Topco L.P. made to one of the Company's private equity sponsors.

(c) Represents fees and costs associated with activities related to our divestitures and related reorganization activities, including professional fees, due diligence, and integration activities.

(d) Represents costs associated with the Company’s Digital Operating Model Restructuring Initiative, primarily related to workforce transition activities, including employee rebadging, retention‑related compensation, and other qualifying exit or disposal costs.

(e) Represents costs associated with the Company’s Transformation Strategy, including non‑routine, one‑time expenses incurred in connection with internal reorganization and transformation activities.

(f) Represents legal settlements, reserves, and expenses that are unusual or infrequent costs associated with our operating activities.

(g) Represents adjustments to reflect the Company’s proportional share of Adjusted EBITDA related to its equity method investments. For these investments, the adjustment reflects the Company’s proportional share of Adjusted EBITDA rather than reported earnings, consistent with how management evaluates operating performance.

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Liquidity and Capital Resources

Operating cash flow, as supplemented by the divestiture of non-core businesses identified over our transformation period, provides the primary source of cash to fund operating needs and capital expenditures. Excess cash is used to fund debt repurchases and share repurchases.

Our working capital as of March 31, 2026, included $143.9 million of cash and cash equivalents and $572.6 million of accounts receivable, net of allowance for expected credit losses, both of which will be a significant source of ongoing liquidity. Additionally, as of March 31, 2026, we had the ability to borrow up to $385.8 million under our 2030 ABL after consideration of the borrowing base limitations and outstanding letters of credit.

We believe our cash on hand, cashflows from operations and current and possible future credit facilities will be sufficient to satisfy our working capital requirements, purchase commitments, interest payments, transformation initiatives, capital expenditures, and other financing requirements for the foreseeable future.

Cash Flows

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

(in thousands)

Net Cash Provided by (Used in) Operating Activities

Cash provided by operating activities during the three months ended March 31, 2026 was $23.7 million compared to cash used in operating activities of $39.6 million during the three months ended March 31, 2025, representing an increase of $63.4 million. The increase primarily reflects favorable movements in working capital, including lower prepaid expenses and other current assets and a smaller decrease in accrued compensation and benefits. Operating cash flows for the three months ended March 31, 2026 also benefited from increased collections of accounts receivable on higher sales. These increases were partially offset by unfavorable changes in our working capital balances, including a larger increase in accounts payable, a decrease in deferred revenue and a decrease in other accrued expenses, which was primarily driven by a decrease in accrued interest payable due to the timing of interest payments at the end of the first quarter of 2026 compared with the fourth quarter of 2025.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities during the three months ended March 31, 2026 primarily consisted of $27.5 million in deferred proceeds from the sale of Jun Group completed in 2025 and $13.4 million cash received for the partial sale of an equity method investment joint venture. These cash inflows were partially offset by purchases of property and equipment of $11.4 million, primarily driven by investments in software, including our enterprise resource planning systems, and purchases of investments in unconsolidated affiliates of $2.0 million.

Net cash used in investing activities during the three months ended March 31, 2025 primarily consisted of the purchase of property and equipment of $15.1 million, primarily driven by investments in software, including our enterprise resource planning systems, which includes upgrading our information system platform, and the purchase of investments in unconsolidated affiliates of $3.3 million.

Net Cash Used in Financing Activities

Cash flows used in financing activities during the three months ended March 31, 2026 were primarily related to $124.9 million for repayment of the 6.5% Senior Secured Notes (as defined below) and First Term Loan Facility (as defined below) debt in connection with the Refinancing (as defined below), $13.7 million payment of deferred financing fees in connection with the Refinancing (as defined below), $6.5 million quarterly principal payment for the 2026 Term Loan Facility (as defined below), and $2.3 million for payments related to the share repurchase program.

Cash flows used in financing activities during the three months ended March 31, 2025 were primarily related to repurchases of Notes of $18.2 million, repayment of principal on our Term Loan Facility of $3.3 million, payments for taxes related to net share settlement of $0.7 million, payments for taxes related to share settlement under the 2020 Incentive Award Plan and payments related to the share repurchase program of $0.9 million.

Credit Facilities

During the first quarter of 2026, we completed a refinancing transaction (the “Refinancing”) designed to extend maturities and modify our capital structure, which is more fully described in Note 4—Debt to the condensed consolidated financial statements. As of March 31, 2026, we had $385.8 million of unused availability under the revolving credit facility after giving effect to borrowing base limitations and $62.0 million of outstanding letters of credit.

From time to time, we may repurchase portions of our outstanding indebtedness under the 2030 Term Loan Facility and 2030 Notes. Such repurchases, if any, will depend upon prevailing market conditions, our liquidity and capital position, contractual limitations and other factors. The amounts and timing of any such repurchases will be at our discretion and we are under no obligation to repurchase any specific amount of indebtedness.

Share Repurchases

On November 9, 2021, we announced that our board of directors authorized a share repurchase program (the “2021 Share Repurchase Program”) pursuant to which we may repurchase up to $100.0 million of our Class A common stock.

The 2021 Share Repurchase Program does not have an expiration date, but provides for suspension or discontinuation at any time. The 2021 Share Repurchase Program permits the repurchase of our Class A common stock on the open market and by other means from time to time. The timing and amount of any share repurchase is subject to prevailing market conditions, relevant securities laws and other considerations, and we are under no obligation to repurchase any specific number of shares.

During the three months ended March 31, 2026, we executed open market purchases of $2.3 million of our Class A common stock under the 2021 Share Repurchase Program. During the three months ended March 31, 2026, we retired 566,408 treasury shares that had been previously purchased under the 2021 Share Repurchase Program. As of March 31, 2026, there remained $43.8 million of share repurchase availability under the 2021 Share Repurchase Program.

Future Cash Requirement

Other than the extension of debt maturities resulting from the Refinancing and an increase in required quarterly principal payments under the 2030 Term Loan Facility to approximately $6.5 million from $3.3 million under the First Term Loan Facility, there were no material changes to our contractual future cash requirements from those disclosed in our 2025 Annual Report.

Cash and Cash Equivalents Held Outside the United States

As of March 31, 2026 and December 31, 2025, $2.2 million and $14.0 million, respectively, of our cash and cash equivalents were held by foreign subsidiaries. As of March 31, 2026, and December 31, 2025, $68.1 million and $37.9 million, respectively, of our cash and cash equivalents were held by foreign branches.

We expect existing domestic cash and cash flows from operations to continue to be sufficient to fund our domestic operating activities and cash commitments for investing and financing activities, such as debt repayment and capital expenditures, for at least the next 12 months and thereafter for the foreseeable future. Nonetheless, we assessed our determination as to our indefinite reinvestment intent for certain of our foreign subsidiaries and branches and recorded a deferred tax liability of approximately $1.7 million of withholding tax as of March 31, 2026 for unremitted earnings in

Canada. We continue to assert indefinite reinvestment on earnings of our foreign operations, other than Canada and the United Kingdom. No deferred tax liability is required for the United Kingdom unremitted earnings. However, we may change our assertion if we identify a higher return on this capital in the U.S. and we are able to repatriate the income in a tax-efficient means.

Off-Balance Sheet Arrangements

The Company does not have any off‑balance‑sheet financing arrangements or liabilities, including guarantee contracts, retained or contingent interests in transferred assets, or obligations arising from material variable interests in unconsolidated entities that would require disclosure under applicable accounting guidance. The Company does not have any majority‑owned subsidiaries that are not included in its condensed consolidated financial statements and does not have material interests in, or relationships with, special‑purpose entities.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are included in our 2025 Annual Report and did not materially change during the three months ended March 31, 2026.

Recently Issued Accounting Pronouncements

Accounting Standards Recently Issued but Not Yet Adopted by the Company

In November 2024, the FASB issued ASU 2024-03, *Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“*ASU 2024-03”), and in January 2025, the FASB issued ASU 2025-01, *Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“*ASU 2025-01”). ASU 2024-03 requires public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03, as clarified by ASU 2025-01, is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted on a prospective or retrospective basis. The Company is currently evaluating the impact of ASU 2024-03 on the consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025-06, *Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“*ASU 2025-06”), which modernizes the accounting for internal-use software costs to reflect incremental and iterative development methods. The amendments remove prescriptive development stages and require capitalization of software costs once management has authorized and committed to funding the project and it is probable the project will be completed and the software will be used as intended. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, including interim periods within those years, with early adoption permitted and application on a prospective, modified retrospective, or retrospective basis. The Company is currently evaluating the impact of ASU 2025-06 on the consolidated financial statements and related disclosures.

Other new accounting pronouncements recently issued or newly effective were not applicable to the Company, did not have a material impact on the condensed consolidated financial statements or are not expected to have a material impact on the condensed consolidated financial statements.

Foreign Currency Risk

Our exposure to foreign currency exchange rate fluctuations is primarily the result of foreign subsidiaries and foreign branches primarily domiciled in Canada. We use financial derivative instruments to hedge foreign currency exchange rate risks associated with our Canadian operations.

The assets and liabilities of our foreign subsidiaries and foreign branches, whose functional currencies are primarily Canadian dollars, are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at the average exchange rates prevailing during the period. The cumulative translation effects for subsidiaries using a functional currency other than the U.S. dollar are included in accumulated other comprehensive loss as a separate component of stockholders’ equity. We estimate that had the exchange rate in each country unfavorably changed by ten percent relative to the U.S. dollar, our consolidated loss before taxes would have decreased by approximately $1.2 million for the three months ended March 31, 2026.

Interest Rate Risk

Interest rate exposure relates primarily to the effect of interest rate changes on borrowings outstanding under the 2030 Term Loan Facility, the 2030 ABL and 2030 Notes.

We manage our interest rate risk through the use of derivative financial instruments. Specifically, we have entered into interest rate collar agreements to manage our exposure to potential interest rate increases that may result from fluctuations in SOFR. We do not designate these derivatives as hedges for accounting purposes, and as a result, all changes in the fair value of derivatives, used to hedge interest rates, are recorded in “Interest expense, net” in our condensed consolidated statements of operations and comprehensive loss.

We have interest rate collar contracts with an aggregate notional value of principal of $700.0 million as of March 31, 2026, from various financial institutions to manage our exposure to interest rate movements on variable rate credit facilities. Interest rate collar contracts with notional value of principal of $300.0 million matured on April 5, 2026 with the remaining interest rate collar contracts maturing on April 5, 2027 and 2028. In July 2024, we entered into two interest rate collar contracts with a notional value of principal of $200.0 million each. The interest rate collar contracts are effective December 16, 2024 and will mature on April 5, 2027 and 2028. The aggregate fair value of our interest rate caps and collars represented an outstanding net liability of $0.2 million as of March 31, 2026.

In April 2026, we entered into one interest rate collar contract with a notional value of principal of $100.0 million. This interest rate collar will mature on April 8, 2029.

Holding other variables constant, a change of one-eighth percentage point in the weighted average interest rate above the floor of 0.75% on the 2030 Term Loan Facility and 2030 ABL would have resulted in an increase of $0.5 million in interest expense, net of gains from interest rate caps and collars, for the three months ended March 31, 2026.

In the future, in order to manage our interest rate risk, we may refinance our existing debt, enter into additional interest rate cap agreements or modify our existing interest rate cap agreement. However, we do not intend or expect to enter into derivative or interest rate cap transactions for speculative purposes.

Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of March 31, 2026, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and (2) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control Over Financial Reporting

During the quarter ended March 31, 2026, the Company continued enhancements related to the phased implementation of its global enterprise resource planning (“ERP”) system. These activities primarily related to ongoing configuration, integration, and preparatory work in advance of future phases of deployment. The initial deployment was completed in fiscal year 2025, and additional phases are expected to be implemented over time, including enhancements to support more complex transaction flows and reporting requirements, with a subsequent phase anticipated during fiscal year 2026.

The Company evaluated the impact of these activities as part of its ongoing assessment of internal control over financial reporting and will continue to monitor the design and operating effectiveness of relevant controls as additional phases of the ERP system are implemented. Except for the foregoing, there were no changes in the Company’s internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There have been no material changes to the risk factors disclosed under Part I, Item 1A “Risk Factors” in the 2025 Annual Report, the current effects of which are discussed in more detail in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. These risks are not the only risks that may affect us. Additional risks that we are not aware of or do not believe are material at the time of this filing may also become important factors that adversely affect our business.