Earnings call transcript Q1 2023

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Operator

Good morning, and welcome to the Advantage Solutions First Quarter 2023 Earnings Call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Kimberly Esterkin, Investor Relations for Advantage. Please go ahead.

Kimberly Esterkin

Thank you, operator, and thank you, everyone, for joining us on Advantage Solutions' First Quarter 2023 Earnings Conference Call.

me Growe, Dave Chief with Officer; Chief call Chris and Financial the today Peacock, are Executive On Officer.

After open their the will call for prepared a question-and-answer remarks, we session.

meaning may are statements on uncertainties management's involve statements call, that laws. and based make expectations risks this federal securities management including on within During the the assumptions, of current are the These forward-looking and and due the to XX-K of factors, to company's with materially a in fully report differ predict. those results Actual SEC. more could Form outcomes filed annual difficult described number

are qualified any management's financial will highlight duty statements to forward-looking by statements, entirety measures. All any company remarks today revise or required expressly note, forward-looking by The such Please non-GAAP factors. update undertake certain except their not does as in law.

this earnings to call Our financial being a non-GAAP today, which measure. earlier available This GAAP of issued will release, of and is presents these reconciliations on the was call the webcast, also website. comparable be most measures recording

turn like CEO, Advantage's Peacock. now Dave I'd to over the call And to

David Peacock

and revenue you performance the Thanks, the minutes. morning, our on everyone, outlook business. a for provide our to strong in to including am report be EBITDA few thank Kimberly. a start I for joining Solutions, year more color Advantage and pleased Good adjusted to stronger-than-expected us. able I'll for performance and

solid hard work our the been in the many for I've to results, quarter. with to and the heard thanking Advantage, clients impressed feedback of which we're our the stakeholders. talented is quarter. performance customers, Advantage their past I for teams, everyone by service, this commitment by our I've connecting start their in heart delivering my business and and the their of I've from market, winning, want evident time new days unwavering the for caliber first on In considerable spent at consistently XXX team

and performance cash plan formed team, led capabilities performance, with of with adjusted free were newly Together along we've working and well. Specifically, our that EBITDA a assessing flow stronger focus as ahead potential. leadership our and been improved our services, revenue capital an executive our on business to

the setting reach the position for that uniquely services months. and growth. positioned Advantage of We'll Advantage plan profitable long-term business the long-range this to will a plan share purchase. breadth stage retailers coming of and intersection path entire at We're extensive with for in that span is brands the

strategic exclusive trade competitive is Advantage scale gives most spanning regarding X,XXX unmatched channels of grocery of retailers operational as XX in-store Our their with to pivot clients critical partner. including we in and make us experiential It's largest both help U.S. nearly a that insights the optimize play goals, position how and client's to easier. lives consumers' achieve doing and a best also performance. our inform where In perspective to so, to

culture differentiate execution. people-powered create data-driven Our and our insights collective intelligence that

innovation my fact, challenges with all accelerating at have meetings closer evolving levels. supply the a our In work. of up reminded behavior, and consumer against many of been CPGs while the pre-COVID through value repeatedly chain to constraints, clear labor They're pace clients, are I

are As ever. than needed a result, offerings Advantage's now more

as necessitated During a of incremental the value not our the services continued to we in where cases fully we yet cost inflation where increase labor first quarter, pricing successfully realized were as believe change. well areas

that benefit take the price from those to time. it's are we While beginning remember initiatives increases, important to see

quickly. the of EBITDA in year the as adjusted of revenue as with Advantage We'll existing winning changes also reflected our better compared our result a increases margin very $XX to value We've of quarter to in management provide these of work realized often CPG clients first in of our business the the industries see and generating and we price a on implemented nature in and where successful billion price contract-based and fully year-over-year delivered retail Overall, can the scope or sales The business, customers. increases strong progresses million. side been business, lag be we results implement more and demonstrating increasing $X active improvements. revenue, new XX.X% to increase while anticipate an

flow profitable in seeing our action operational I formed early our to we am to progress. adjusted approximately a some drive confident growth. generated In our balance strong for free to in versus by It deep performance million potential. solid capacity leadership capabilities taking invest flow, cash a our in excellence the and significant working position favorable yield Together driven with Advantage cash of the leverage capital a increase of decisive unlevered $XX team, executive to Advantage strengths prior newly growth. QX, year-over-year. sheet and long-term We're create takes representing expertise and the are year,

retention hires counts experienced With as XX% segment we for growth reduced the turnover thanks to by talent, retention XXX marketing new to in in top people, the we experiential roads again recognized all up back #X We approximately our leading continue growth Event top the supported agency in sampling We'll quarter. have improvements efforts. once XX% our fuel Age year. practices levels, helped which quarter, demonstration refine recruitment our Ad our in talent XX% promotion enterprise. now last our and reached approximately approximately future. XXXX by the and notable to comparable to consecutive XXth has net year-over-year continued from in We across had were strengthen sales business. and And agency our and our of

and has new right ways win. is team identifying to the space exploring white Our Advantage where executive enhancements, collaborating of leadership operational

value innovation competencies we our stakeholders. and capabilities to to core our sheet. is strength while invest critical, confident that will Financial aligning to capacity are and deliver balance enhancing build our We intend improve more in

investments our improve make do reporting. the enhancing enabling debt core and we will strategic in company. reduce this technology, strength, cash generation, investing more We our modernize in areas to by financial our while our us our right of With can systems,

generate positioning of our unique amounts marketing given data, sales the platforms massive Our retail consumer within ecosystem. and

infrastructure, improve of In our our to able the be leadership so, processes simplify faster Digital and to doing our we'll efficiently. tech work strategic working Officer, our this offerings. service we and Under new more calibrate assess smarter, are Chief data our expand analytics to

We're and easier HR, holistic of on people. We for talent do us as this associates our retailers. strong will to strategy make associate of us. Chief to to continuing growth drives that of fuels implementing differentiated jobs new exceptional clients positions services experience of by an inclusive we their employer retention, deliver to a possible it also and for our build our choice. with record providing business do track without None and to are competitive an is Led

new to working with We continue this part to our penetration our effectively. service grow business enhance and retailers offerings more of grow businesses to help existing while create their them

I'll over on Chris for Officer, Chief many new earnings financial turn Growe, have first your it Advantage the welcome it's more our to team calls. our Chris, With performance Financial to and outlook. and you of to that, on great

Christopher Growe

you, in Thank my familiarity of to at look experience consistent a my and joining and and enduring has tremendous with high at quickly have you, this of recently into of short level conviction I for although establishing time am on role. here team this succeed Advantage. only getting of rest will sell-side Dave. believe that amount these aiding well as working I'm the excited me a grown all Stifel, for to positioned years and I are of to unlock here. I is in Advantage side I there's believe and the the in to finance in over and sector the in and consumer holistically. with XX with the position Dave calls organization value this after Advantage retail growth the research, me great early me in of and And forward benefit be team more I it stakeholders. CFO company. most entire serve the business days, is who my assimilation in the other working

XX.X% first quarter to $X revenues for grew a Now get the On quarter. into the total consolidated let's performance year-over-year basis, billion.

foreign exchange unfavorable XX.X%. revenue rates, by Excluding increased

quarter EBITDA on retail Sales initiatives. million X.X% continued First Top pricing The along year-over-year. by Sales is declined segment with X.X% EBITDA driven decline year-over-year. million our in to EBITDA segment pressures increased inflationary calls. toward of discussed adjusted $XXX were joint earnings revenues segment our in success in adjusted million is lower merchandising million. year-over-year. in services XX.X% Market the shift growth prior in the sales X.X% $XX year-over-year growth services $XX declined of we up adjusted a as mix result of venture, margin segment line of business $XXX revenues and largely European

and Marketing sampling adjusted driven was points of demonstration the in XXX well by business, of higher-margin aggregate, realization return by continued sales marketing the as partially the higher growth decline demonstration points counts basis X.X%, segment. offset to In down and basis flow-through this at in driven headwinds basis the segment and of in segment by in-store primarily as event was pricing digital events. came in our softness a by sampling EBITDA the year-over-year, in services, of services our digital X% the million services. largely year-over-year, $XX in return offset EBITDA This the XX aforementioned adjusted partially of points margin XXX reflecting down

items. sheet to on discuss move Let's balance some

approximately adjusted X.Xx. our Our to over remains debt and EBITDA adhere net the continue It we and our balance various at time, goal our that initiatives, first which sheet to delever quarter goal. reduce to leverage ratio to finished explore

quarter, our amount deploy debt of the of of the and attractive quarter, a end our a the the the to as a and to We've also improvement first have a with We to we risk no taken at be we voluntarily rate sheet For continue down ago an adjusted capital profile of capital continued rate meaningful prior monitor In outstanding in opportunities discount, billion. approximately improvements. maturities steps working same EBITDA, floating the the while next years. adjusted balance promote of of At that unlevered tangible total significant deleverages conversion approximately result cash quarter, X free healthy line small favorable year paid debt XX% to flow first achieved $X debt a generating reflecting healthy, sheet. balance we'll period future mitigate and remains from funded return.

collar rate term debt initiated capture our our to million it the and or also at resulting a downside a of fixed favorable allowing we should being In loan, of hedged on most in rates of April, XX% us interest $XXX occur. interest

website. we a cash on slides supplementary the that be for A further end divestiture small summary balance found results posted generated capitalization quarter equity first our X our debt the of sheet. strengthen in Investors to can completed and section subsequent Slide to Additionally, our on of the quarter

our to outlook. Turning

full the XXXX, to $XXX the For adjusted million the completed divestiture. range of in reconfirming $XXX are the year from inclusive we million, of EBITDA impact

ancillary Looking pricing ahead, will offset preserve and we to continue pursue initiatives to margin. increases spend to wage

has to noted, elevated inflation historical levels. moderate, relative While as wage begun remains the they to rate

management As labor regard with our costs increased, remain structure. to and we diligent cost revenue

now I'll to time, your and for turn you Thank it back over Dave.

David Peacock

Thanks, Chris.

just the with confident our start. a work clients one opportunity do. getting do for and legacy, of uncovering day in new both that are lot leaders but are for quarter both customers. capitalizing have define I and believe own who and am on to the started pleased We our not in operations success, our and every company, and We our we're

businesses force that powerful retail our We in and and associates a tens incredible market are thousands have gives optimism for me consumer seen the visits commitment future. and of in confidence of I've and who passion

We will Operator? your questions. now take

Operator

[Operator Instructions].

Bank. The Deutsche of from Alwy question is first Faiza

Faiza Alwy

I cycle first start Congrats, pricing year? of customers? guess think And areas, hear where I Chris. about you we how the wanted Can you right to getting other now? are talk should around to better the you for in you're the where about Where that side. on Nice rest are pricing. the specific from the

David Peacock

business success Peacock. multiple Thanks This going right question. the of areas some seeing We're our is in for now. well. Dave Pricing is

outlook last government the of labor maybe about there's the a our that experiencing a bit strong from And plus. weeks year it. pricing saw we Everybody obviously experienced we ago, think a labor recognition from we while the inflation I good business. obviously feel inflation still a ago. is were few just moderating over But for the the year information

our strong packaged goods our We've retailers directly more on in well directly as area both a their also with as in retail-funded of activity, strong innovations desire And lot behalf as we off-shelf if more in seen that those of to partners. companies areas as those all of you see funded product resets are a service the consumer as There's a working retailers private both label will, from for innovation leverage of some they we merchandising. it from retail and well products it consumer where do the the branded products coming on business coming side. demand

Faiza Alwy

a but Understood it. of a you Talk give you've us been And this a What your they lot sales from your what wins in then, customers? Dave, hearing of touched bit mentioned customers. you're from time for within spending new your more comments, I know on color some in I bit of some with you looking you? terms the business And believe segment. are --

gaining in areas So maybe the talk new some of are where you're some about business what traction wins. these

David Peacock

products branded our -- and broken kind of as customers of think consumer had the in two, And retailers. absolutely. we mention to companies No,

retail consumer a are branded And strong items The to innovation actually our many retail with now survey top new and on as back which products a of we I they're which coming performance to tool a see. seeing is segment. mentioned, clients, great that kind well the at into obviously is drive right using You and with merchandising merchandising the lot back side, of our engines had off-shelf innovation, to companies. CPG serves of And move market. positioning, just are manufacturers our

what but just, label so of lot in media you overall, seeing think, the labor well. spending more continued a hear side, for partners. over optimism the constrained optimism of pockets challenging consumer cautious be the from is down cases, a it right debt continue products, hearing both growth I funds what branded dollar about you looming our many to units but a far, being to recession now about you're obviously the or year visits standpoint, hearing the the and markets from to Obviously, so the and is concern I we're From in as We're lot I the retail growing ceiling, relates private going the think, us, are can outpacing in consumer. Well, think, obviously drive, CPG in-stores. seeing,

actually meetings is X -- feedback. optimistic in I'd last pretty been So XX great cautiously in had in person, X few And the you've many out cautious reports that been companies. optimism the business for tracking think And I of months discussions days. for as I've over last the quarter see this they year, going. and say first just some I around the said, client where the there's we've come for obviously the have

Faiza Alwy

how one, last on because some I working developments. a like sounds this may. had you just then And if conversion free Great. Give us cash capital thinking of about for It good you're conversion quarter flow year. sense the

of how help So for of terms just about us we should bit course the a think that the year. in

Christopher Growe

to really We unlevered a is be And working quarter. Growe. it's in really free So get rest Chris Faiza, quarter. pleased just free capital intent are working drivers I free growth. one we're flow with would the flow. would first quarter, is our I best of but of the improvements to profit our year. this where side. to cash you saw for going the the the good improvement was to keep capital of It's right? strong focus, involved, it's obviously, force quite while cash great -- speak This from flow say I driving in the improvements cash driving through

key our here, goal. our that's So

improvement better the So driver of capital better the DSOs. was main working and receivables

of And was year-over-year and was our do comparison work some internally to that. this of the some it

customers. stable, So Cash large cycles overall. have and stable financially to accomplish that, are midsized we

performance it year. it's continue the [indiscernible] So and quarter should in the throughout

Operator

from from Stanley. is The Greg Morgan next question Parrish

Gregory Parrish

quick. on pricing real just to as I wanted Welcome to circle well. back Chris

achieve in also then guidance I of I kind more your out schedule how think And execute do both pricing or sort versus related, to guess, that guidance? you at in of in you order how behind? -- ahead segments. terms initial plan? was but Are on realization of and to you you called have of much sort of pricing point are this it's your

David Peacock

see realizing I'd because need and say things vary. so our contracts we expected the into the schedule. of plan we're far, we're on move through year. renewed, unfold But the we to effectively on the when and timing coming how Obviously, year we they're pricing as

Gregory Parrish

And debt I capital sort enough. about Fair towards talk Prior its paydown. of to wanted then management Okay. focus allocation. shifted

Now or divestitures. further helpful. quarter, the you're something that sort confirm could your then both maybe would your can of seat, that sales focus you were are if in then potential asset you too? it's was you And confirm at looking that you be at what And looking that asset in previously,

allocation give then of So I a sort near-term it. on execute your broadly, you capital can sort guess, plan and also to high-level of philosophy

David Peacock

Yes. is debt. reduce to I mean our capital allocation our policy

really portfolio also more let So achieving obviously, divestiture. team, well relates -- to of the determine recent resource and hasn't and our a down as we're and our you company. internal a market the what of if the can as but both But position as also to to of just on paying value, new goal funding in bit our us form will, both expound relates allocation that it changed. management of I'll what in divisions merits and internal strategically, fit it people, Chris the the assessing kind looking debt

in I release sense don't the some that through my going come detail a want comments how probably get much to we're pretty expect will So to talk a months place. leverage in in little ratio XX-page about we in we specifically our better a to will the more document world, coming review. plan but the we're in oversell rigorous to that about that mentioned I a going forward.

Christopher Growe

that, working you. I Yes. with forward I'll to just Greg, add look Dave. on

say The less We than on offer and revenue specifics can't that. EBITDA. it, can X% way I me it's Let of divestiture. best with start the

It now, is sequentially, debt debt, reseller, increase that and debt I that's debt-to-EBITDA right? gross net a our it a e-commerce So in So net an repayment, driven a out we think business and the and And focus as non-core terms our cash. in overall. slight in we as had we're our said, down and debt, our overall well of divested now all of business. third-party went that's Dave business in by was quarter, reduction that as

focus back in we're amount We continue to did of year. our the our priorities list on balance in That's and improving sheet going sheet. for debt small top a in our kind of balance to general buy of and the quarter,

Just debt allows to point We million any downside one upside XX% collar we actually rates capture other put our of to in debt. another on that add of allows us control to rates here, this from us hedged. And had fixed in is $XXX or in here. recent place and the

like So of fixed I nature kind improved of our the balance sheet.

David Peacock

necessitates more in in comes thing And our will. it we reinforce to see grows. business, want do be back or one it the and as support that. of Greg, business can when in that the may I areas that we business area, on too technology the opportunities demonstration invest to in be

So want reinforce to I do that.

We growth. will debt prioritizing invest in do we are our for business because also opportunities the obviously see we But repayment.

Gregory Parrish

update the just Okay. then very give numbers don't I you're helpful. just That's I if on you seeing. to maybe of it's on wages. could labor all there's for know an get labor Obviously, last what but change, out availability, and lastly color. there, us update no maybe tight I Great. -- want if still you week, but me, very And an appreciate hot kind

David Peacock

a I'd it's say shifting think I bit.

right. You're

a net saw you kind numbers it the job and creation. unemployment labor you new hires obviously participation had bit at We dipped in XXX of as to If And quarter. the month-over-month. relates rates look

And of X new had area. quarters seeing continue what people hire of enroll, included new see HR success workforce consecutive that from to And Officer partnering in and to of our will. this if you and finding we've in management to hires new I and quicker Digital is Chief our like So is net Chief get kind better ways ways. and our group also

less quicker this what when you seen, in things we've but going more funnel, you're working grocery I longer I get both the keeping call the I of you through, them in and company. One also to hiring attracting make people success just saw candidates, the was retail, difficult to because join it can term that the have the

it's little So recruiting And off better paying focus seeing reduction one bit turnover much seeing right we're that's of as a now we our well. as areas, are efforts. in of and a

the with So we're force. starting to see current some stickiness labor

Operator

Goldman question next from of is English The Jason Sachs.

Jason English

Chris, apologize much different of I the I your I'm must X missed new morning. juggling Congrats, calls this in earnings prepared on remarks. role. advance.

industry apologize labor the if I'm delve I it's you progress progress redundant. just mentioned. front I hear in pricing the if front. So There's deeper price ask the of we you now manufacturers on on the But something back brokers cetera. pushing to but that polling on on the businesses, great curious commission could et with tension and between in a get threatening lot increased not about to chatter manufacturers, down right and just dollars actually trying

are concerns actually the interplay negotiated those think And you yourself the progressing? if how and manufacturing clients curious it your price seeing out? play and between sensationalized? If between is I'm interactions you're

David Peacock

you push experienced period. months, experienced but what actions sort it's whether and always the as of that you meetings Thanks, last client of there's pull over you a a I've couple time, may tension, the I've period will. our Clearly, and not sort Yes, I it minor Jason. in But not pricing an not in with referenced any to I've yes, been clients. inflationary have person at deflationary if of relates heard and mentioned or it, and XX

for you companies, have what speak to a as of lot want but our delivering CPG the with well, really doing end in we're of one mean, there's more That to things the said, of retailers of sure I well as day, responsibility the and we the that behalf retailers and as and more actually make And I services more we do efficiently. our reiterate, have we directly. clients, at on we're a

through what into of talking the results and we are if and desired the if their be the, about of end bodies are the less to the because the getting a more And can day, are and what trying objectives lot what we at will, many achieve results how sort and -- are perform, some what good and pricing. tasks in functions technology our pressure takes But we reasonable I that or just we've controls and it do, think, off pricing better we discussions retailer efficient CPG the as both relates to and it partners whether process that's thus far, had, very within with we're side. you

Jason English

of sampling, that and some meaning maybe pulled rebase in they're your good They level they good the Okay. continued to and need see in retail demand, media a it's commitments. how lot of discovered spending they on of these other of much a terms in manufacturers, in That's And showing you're progress Are hear. I levels. didn't more much the below sampling, slides, view? progress we well back is is your that the Still labor see constraints lost to XXXX at and How there. it.

David Peacock

growth are plus innovation. -- over can they're And XX% X/X our That pursuing both a of time -- just, it demand have performed enhancing sampling. innovation in say with I'd label I private as over just And survey constraint. we mentioned we Any up. is you getting have the an net earlier, No. like lot hires environment increased to the their now, with labor the CPG those have lead efforts. innovation partners said X/X can for aggressively

sort them jobs ability rate So us And in as because to say, there. our is an it's trained. focus and so from shorten for bring get is and people in execution I'd to demand that of say, we and time the filled hire these cart, get really get period what that we people

Operator

like I the for turn remarks. This back Peacock closing over conference to concludes session. Dave question-and-answer our to would

David Peacock

provide team Thank We got uncovering and The you. X lot No, customers We've quarter. very employee we every clients I work obviously declare and we're experience after can't the don't our enhancing is the services very victory reiterate of both opportunities We're our pleased to to improve a quarter. day committed. enough to the orientation. that within with do.

remain critical business, the associate to we because business, have and We that. remember people-powered a to is people-based success a that experience on we're our focused

and your we again. you you thank forward for time, look We speaking to to

Operator

has Thank attending conference for today's concluded. The now presentation. you

may now You disconnect.

Advantage Solutions (ADV) 10 May 232023 Q1 Earnings call transcript