ADV - Earnings call transcript Q2 2022 | Advantage Solutions Inc.

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Operator

Good afternoon, and welcome to Advantage Solutions' Second Quarter 2022 Earnings Call. Today's call is being recorded and we have allocated 1 hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Lasse Glassen, Investor Relations. Thank you, sir.

You may begin.

Lasse Glassen

operator. you, Thank for quarter everyone, on Solutions' Advantage Thank conference joining call. second earnings XXXX you, us

On with Officer Officer; will and Officer. the Chief their open Brian Griffin, call After a Stevens, me the today call Chief question-and-answer remarks, Financial prepared and for Operating Jill Chief we are session. Executive

to expressed in results fully and or by such uncertainties factors, due remarks expressly laws. to and Management's differ of differ to Results management forward-looking with Securities Condition of and Discussion Exchange company's by company Operation more non-GAAP any revise could required whether of based will does on any and described are are the and outcomes may Actual result call, in a within involve this sections Financial implied Analysis actual including All events materially forward-looking filings information, and undertake note in statements risks duty certain the such forward-looking or factors. the qualified future from those statements difficult as the Please number current These a management's otherwise, titled expectations that meaning law. those highlight could forward-looking Risk cause During and Commission. new except make The results their entirety to materially by of predict financial and assumptions, and or federal as are of securities measures. elsewhere statements statement, not management's today statements. Factors update

on also are presentation the which company reconciliations measures issued at of release, these which presents the most can the posted non-GAAP prepared GAAP has our section to was website. The website earnings comparable which Our Investors advantagesolutions.net. measure, slides, on of be found today, financial earlier

these to the And of on to today's I'd call to also Jill like Griffin. being and is webcast, call during The may turn this now available the a slides refer website. recording call. call to will want You be over

Jill Griffin

second conference update an our important highlights of remain afternoon, begin Thanks, On as quarter quarter call, will results well financial Lasse. then area and details today's and Thank us Brian focus. Good quarter joining you activities, investment our additional to trends macroeconomic an for XXXX XXXX move call. then which second like our provide everyone. by sharing on today on year second on full update as to outlook. our on performance our I'd an

hinge we to continues success on first. at talent Our and are talent, Advantage, our

in enduring company. Our track thank cheaper day and workforce And better, day the dedication the successful faster. record continued work their retailers competitive to to current a take an They're managing associates I in large companies a would the advantage for like to remains flexible environment serve for Advantage essential, high-return and our services, they the do clients. navigate helping out and consumer goods providing and moment

lower-priced and in-store our Similar lift a year-on-year revenue pleased areas a QX standpoint, operating to Despite has strong of were delivered that remains with continue pandemic key sampling which begin result a products, Once see label, are to results in services. the to for mind and alternative trade-down in the in past XX%. Inflation in-store from that messages businesses Advantage in volatile. this From is top most channels events our impacted we offers few with consumers, to private goods demand online participates of uncertain and report we by quarter, with environment, which including started the Let's year-on-year. clearly to and quarter. we behavior both consumer first our quarter. line demonstration XX% for macro up the again, growth were expectations approximately

quarter. last QX of QX against levels, events from demonstration pre-pandemic XXXX in-store were XX% and XX% at measured level, sampling As up

with In efforts. am continued addition, M&A very our I pleased strategic

Here, brands world. help increasingly and we retailers omnichannel navigate on assets, focused an that acquiring tuck-in areas in particularly remain

completed three to sampling we our offering. further Brandshare enhance e-commerce own year, and this past complementary capabilities this far acquisitions, our So quarter. including have existing and highly Brandshare's are expertise in

declined with However, mix, consistent increases as in last wage quarter, and ongoing expected adjusted and EBITDA a to due activities. our margins investment from headwinds shift revenue

We must-have to to associates for are on significant services. wages, recruiting in market demand up of the labor spending client our new and challenging retention meet stand numbers

together improve engaging with offerings also dialogue we in company-wide new Furthermore, We pricing and invest continue to in efficiencies. higher-growth are increases. to developing partners with constantly margin-accretive infrastructure implementing and

lag persist a until pricing labor the in second actions, second we I'd the on expect this client as not a employment context, we the financial further and to discussed, see as continue dynamic lose market Within would result market of result. performance previously stabilizes. these a a timing to As like this bit the quarter quarter. to any our expand in Despite did

for in demonstration declines by second recovery driven in the continued services. As growth largely services, in-store by merchandising along up further offset were year-on-year XX% food partially third-party service sampling and retailing our noted quarter and the with earlier, retail revenues in and business, approximately selling

second the heading loss to with in business Advantage expectations, performance Despite are staffing backdrop, market and and revenue just second delivered adjusted approximately lower-margin in-store margin headwinds the a demonstration in in labor client period, mix and recruiting; and with business the position notably year the ongoing EBITDA most ongoing our contracted year quarter referenced, we the our prior quarter momentum; XXX into future. reflecting the line I the a by activities has the following: inflationary from well shift business. sampling our investment anticipated, related basis As points and investments regaining in historically foodservice making prior

a targeted productivity digital innovation, focus with improve we services to we're areas: As first, on the investment spending and and in across we enterprise; a investing finally, up data, infrastructure, renovation, making and in are in key tools wages, in are efficiencies systems three we adjacent intelligence stepping and scale second, retention; investments are talent, reminder, recruiting operational complementary and on accelerating to and offering. in

and efforts We second continue while our efficiencies future in capitalize during will strengthen growth, of on make Advantage to opportunities. our better each confident advantages areas. progress quarter franchise to enhance driving We three our improving and these competitive that the positioning remain

Let's with starting talent. each take area, a look first closer at

stay are competitive and on investing wages We activities. and to our continuing to stand up sampling in-store in demonstration workforce

also investing further are among We existing development. and retention our to key and positions new to associates our in wages in growth improve recruiting drive associates

on renovation, are productivity business move within activities in our let's enhance where investing Now cost efficiency. to we core to and

the Furthermore, expect and positive. software the are This is consolidation in investing in execution enable more us data, introduced our this end, Advantage our CPG across better a focus potential Advantage partners business digital reduce reporting growth the outcomes Here, scale we To and with company's investing that speed that a platforms quality the and intelligence while And materially this manufacturer we to the the already offering enterprise hire analytics, is combines driving organization. across internal solutions technology behind to enhancing back clients. to efficiencies. cost costs of software half enabling retail innovation, finally, new driver our is we our at of to create recruiting during future consistency for acquire of new the data and quarter, improved our has to key second Intelligence hire early results talent, in-store even for Services, and will We that capability. improve which and to efficiently believe commercial we key are believe XXXX. both

all growing Alex addition suited Kelleher, of provide managing solutions. to goods e-commerce makes and investing world-class the oversee brands and with identification, We these These who vast ideally a platform leadership services are from us drive and the award-winning services in Unified media, including Alex's in by technology to creative powered multichannel also companies a starting, Deloitte collectively in-store these activation, launch and marketing, we development consumer brick-and-mortar, across him for holistic recently data-driven Advantage and Digital. In team. announced experience joined attribution digital audience Commerce. of solution analytics,

color wanted as Starting chain our the headwinds, with a of not year, we on look to inflationary pressures quarter. also third persist As ahead which I share Supply first Advantage. to half bit in second to unique changing shared to of challenges the have cost to are are at our That and to said, remain in increase historically levels. we remains shopping scale have inflation Wage rather need than offering. retailers our continue leading and by continues advantage, nice services high behavior. delivering have, the to

tailwinds. key the at Looking

sampling We continue the services, a to were expect most which and COVID-XX. to demonstration, continued subside and in slowly anticipate heavily by rebound in-store impacted notably pandemic those disruption

over to year second additional With of guidance Taken EBITDA which to detail speak performance. to we million adjusted affirming our will are turn $XXX our $XXX I'll that, it together, quarter million, further along with full Brian on Brian. range

Brian Stevens

Jill, Jill our quarter you, second to highlights. afternoon, good Thank everyone. and spoke

revenue, XXX in by to points the in million and on technology, of and the update guidance. largely in-store wage was offset in color a adjusted from provide share EBITDA reflecting million our in In in-store in strength Sales is was segment-level partially services offset business the single-source The merchandising more decline down of XX% volumes adjusted investments mix year. loss partially margin segment. our following $XXX services basis services. EBITDA result sampling XX%, came on of driven due in and I'll reflecting food So sampling revenues EBITDA our up retail prior sales the increases were revenue segment Marketing and of margins of revenue In year-on-year. third-party in-store QX, XX% our by sales our $XX increased a year-on-year. merchandising aggregate, to at driven up by return the lower higher XXX and points a client EBITDA basis inflationary $XXX investments and and segment year-over-year, of pressures primarily segment segment from primarily results, modest a compression million due year-on-year. and and marketing points up XXX our million of X% is margin selling of in demonstration our inflationary XX% and cost demonstrated declined adjusted adjusted headwinds. increase segment the pressures. lower Sales year events, improvement costs decrease service meaningful and retail in a bit decline $XX full the an The by Marketing shift, were basis year-on-year, of retail

to of discuss sheet on some the balance items. Moving

to approximately debt EBITDA net at Our X.Xx. the second finished adjusted quarter

QX year In towards growth with years. and debt the throughout back line the weighted profile meaningful for outstanding total have Slide continue cash more free the QX, end be continue year. In equity the our supplementary debt of summary of QX, no results A to healthy, our capitalization four addition, to section X, half in next to flow the billion. we found posted our At and on website. with we ramp funded the $X.X of remains heavily slides on expect and be debt the approximately maturities can in Investors our

allocation, to In we prioritize capital continue continued long-term terms to sustainable drive organic and investment growth. M&A of

We best will our repurchase to and shares also options down pay debt stakeholders. interest based of on the consider

fiscal Now for turning XXXX. to our outlook

we highlighted, and additional XXXX reiterating of guidance $XXX $XXX are of fiscal following some Jill considerations EBITDA million. expectations of performance. to The our As the our EBITDA high-level million financial are adjusted range adjusted XXXX

stabilizes, a ongoing pricing is to in That we natural order dynamic Within discussions. to sales several-month labor the continue very far inherently in With see increases segment, of have business having proactive we employees. within market we The implementation. a elevated wages with in are pricing. discussions our remains commission inflation, lag and as offset retail are First, to the providing our fully to thus costs said, want marketing obtaining of business, we productive to protected have our positive. these segment, successful regards results being reemphasize increase, the it to we around our services offset pricing expect structure until being been price been while

Second, turning to growth.

effectively and of drive much strategy growth, against of solutions we terms organic higher-growth, beyond. XXXX XXXX investment very In in focused a fueling developing these in prototyping order long-term them fiscal our on scale and year is executing higher-margin to value to are and creation,

in and media data digital We we are analytic and innovation, making are in our investing progress where tools. retail

in Regarding important an XXXX, closed far M&A, three acquisitions. so which part continues creation to our we growth of and have be value strategy,

ahead, a Looking have attractive pipeline we opportunities. high-return of robust

align pursue will acquisitions strategic to growth be and and strengthen plans. will tuck-in continue or our future accretive capabilities We that existing with our opportunistic

remain we to consistent Third, with respect leverage, to our levels XXXX. debt expect in

regarding year deleveraging first our our net business. guidance, we our given slightly sheet. a to lastly, revenues balance we in levels as adjusted half, debt and of for by look compared back ongoing our up steadily However, our elevated XXXX ahead, XXXX, we the expect financial And EBITDA scale to the the in-store levels. it half the adjusted open EBITDA the we and be continue from we adjusted supported at With In expect call Operator? performance, to year-end of as be recovery to sampling that, demonstration the questions-and-answer stronger session. EBITDA and will will anticipate

Operator

proceed. Instructions] Toni first from Our Please Morgan Stanley. [Operator question Kaplan comes with

Toni Kaplan

Thank very you much.

staffing. First, I wanted about ask the to

other You lot a recruiting staffing retention, an are a mentioned on spending well. and as really have number and companies seeing and of for been now, you're issue it across quarters shortages we

it. thoughts Just and normalize any Really on when the there? could what - drive normalization appreciate that will

Jill Griffin

with you of our talked with improve to we get to very which to every overview candidates to passing when have Toni, number you Brian thank can speed you. of the detail. reduce add normalize. place software implementation to mitigation and - What Sure. include our hire be anybody month, situation for the I'll we've going required and is the little aggressive yes, of the bit higher. I more an more tell dramatically staffing determine But plans, will give is hard it new that about a to

our We recruiting the continue work around structure to on process and engine.

We continue an to to journey ensure as have that evolving right to we wages, the and supply demand. that to in of continues labor all well invest the be

mitigation delivery continue predict So to add is what to the every that will because I out plans normalize, when you continue improve can to day, I challenges our better my Brian, will our can't prove statistics. we predict what but response? would this despite

Brian Stevens

QX. to has QX And little all start that been is a you seen thing Thanks, game. rising us, you covered think QX. of like add bit Jill. it know, challenge The I and No, kind aspects. key as I dissipate of a and sum the for in I to turnover a only it's guess we've net would

the And of associates against positive And to it the it's in for that need turnover. needs make we but number starting see also our to the we're hire sure customers only very will that what ramp hire, goes think point, progress the net recruiting So Jill We've you, clients went about talked was of back And QX. increase year. at we speed to over which the one and remind the software quarter, the to a seen of has our that of end to implementation outpacing XX% in deliver been helpful. QX. but we're the to live that, half in continue

Toni Kaplan

about, that like our just likely And impact in high-frequency on down as commission that to great. ask how have as of a of trade inflation. And signs analysts seeing That's result like you're that continue? to of early in side you general, consumer Is wanted something the does started sales some if well? purchases, see does

Jill Griffin

Thanks again, Toni.

the monitoring also we consumer and trade-down seeing are So behavior.

we're seeing that consumers to watching us. immune something more way. say to we're that commissions, hasn't price it's to stated. sensitivity, certainly so impact you us And regard as it. The not to show far, in materially tremendously material is been negative a which not with impacting our That's We're

other We help hedges natural have in business us. our some that

and the in Some behavior brand we space, creating has down And as in March which private other the also moving well. - of in from channels to seen we it as consumers since we've is private provide brand a trade pickup services. participate

offerings service to continues of portfolio our again, So us. help

shift, As mitigate to of are the that we consumers some able shifting.

Operator

question Jason with Sachs. from proceed. Goldman next Our Instructions] [Operator English Please comes

Jason English

unified a the your actions some on I trying whether Is I you what and like you've suspect localized you tell the if profit taken restore prices out to solo of so, the mix a industry? shift the things competitive a from hoping was to front us labor raising improve of sort you this like move I what to the merchandising, on services, profitability. the sales continued stuff. try front? COVID know those it's in are recovery Or post negative more within remedial in lot are profile to of are And as seeing to you resets, in-store the profitability? you've of margins could headwind or highlighted business not

Jill Griffin

sure Thanks, Jason. you hear your me know of But impacted to all you. capture I'm absolutely make questions, don't. I margins, chime we are will let going our I from in. to to and sure price. and certainly, Good try Brian I'm to if mix has shift will our take continuing

is in our in faster we're our and take than and And our not and results is As as client our working as mix about, the areas that managing that that internal mentioned taking renovation again others. result, area we down we've serve experiencing. - must-have to some also, long lag, margin loss as price with a help very investments, client that an cost price hard reinforces experiencing I services are able prepared as yet to There spoken a impact, the shift comes we remarks, which a would on or successfully, of in price. of are where our this term part we we're say mix over and our to efficiencies

was miss questions? it in what the add. during are with to of a return of pandemic demo will might out paused. that return of like to and to I come margin what have something I Brian, the Maybe very to same And experiencing would in about adjustment some demo is our But EBITDA mix revenue being of that the with the demo. portfolio, we're adjustment we happy shift. were portion did We at have that very time, you albeit excited lower the add the when

Brian Stevens

add lower-margin that activity because really of restoration of our accounting we that everything I as international we've is well. The inherently is the retail and business, to GAAP, most us we the our marketing would covered of piece required business provide the piece are that it that revenue of makes profit. because which a require, in only talent you that think we more I heavily had under and acquisition thing to than the And the proportional - is historically. of XXX% employment we spent margins but is the spending other impacting we're recognize have then only

stabilize, labor go would we So continues to market that the down. as anticipate

perfectly. So otherwise, you covered everything

Jason English

acquiring mean profit numbers, presumably - I time. Okay. excluding It's my comp in I'm I terms know, And lowest is rate. long profit. - margin despite And that. about the the as penny one for a how account you more of stock-based that's including less at looking quarters in this of in this long, adjust the with

it's just of it. you're cost rate of on a saying talent a this penny sounds not So doing issue, recruit is going the profit. it's to to business just weigh It like lot that's

back of industry like, of are, but So to also my you relationships - the these pricing are I hear is know kind we question that sticky.

costs to could switching high. is XX switch it raise can No road. and switch but one agitate are the and the one, out price down out You them day just a going months cause

important or across I it to unified the this us industry. is for front whether a think not So is understand

Brian Stevens

Yes.

the they they costs, And having mean manufacturers, say still they gives fact those we in going that would we say what are no hard is best it's screens adjustments. are that these degradation us a can one's we're conferences best-in-class I increasing understand either services. Crossmark around I aggressively with after for that price, seen the know again, need we're needed understanding not So and of that these again, and Acosta to in about but on I it's that to of our switching or make services But because that comment discussions It have we when happy services. providing doing. that market. and have these us what

cover right the as are lag is as dynamic kind that the we So a increases because actually is X-to of real still that have wage to getting labor in increases challenge time. now we're still market X-month far price the

Operator

Griffin, questions at would in like this queue back to turn There Officer. Chief I are time. Jill over to further the no Executive call

Jill Griffin

Thank you, operator.

move continue remain right we business help them to at and evolving are forward rely successfully. upon decisions brick-and-mortar our and Advantage's to environment strategic making And to market this clients us navigate do conditions scale. While e-commerce uncertain, investment the

Our hard provide time to much labor our force ability very third the model our and all associates quarter Again, look you November. better, us Thank to I of in more remain services forward. Advantage and to business the We of to to and company our manage faster efforts their confident across sharing this work efficiently, certainly want for call push dedication want entire afternoon. I enables our all very forward in with our you. and to large enterprise thank our your thank progress and for on you a

Operator

you. Thank teleconference. does conclude today's This

day. lines participation. You at may you thank your and a your disconnect this time, for Have great

Advantage Solutions (ADV) 14 Aug 222022 Q2 Earnings call transcript