Earnings call transcript Q2 2023

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Operator

Ladies and gentlemen, good morning, and welcome to the Advantage Solutions' Second 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 Sean Choksi, Investor Relations and Strategy for Advantage. Thank you, and you may begin, sir.

Sean Choksi

Thank you operator, and thank you everyone for joining us on Advantage Solutions second 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 annual company's may are are outcomes the on in statements on their law. and fully duty more predict. materially described or any uncertainties management's SEC. involve differ company statements those filed statements to call, XX-K that forward-looking laws. entirety The and based make revise due expectations results by the any number risks forward-looking this expressly federal securities report could management with within not factors. During of to including Form in undertake Actual statements does update the required assumptions, of current by except All are the These to such factors, forward-looking a qualified and as difficult

non-GAAP Please highlight remarks certain will measures. note today financial management's

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

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

Dave Peacock

the from by and for feedback evident partners, impressed positive team our joining their morning, one in in commitment passion the as heard team performance everyone market connecting Thanks, thank our strengthening Sean. have continued solid many retail remain and by time spend members work results and for our brand I've to their us. everyone, constantly for and I I this service start you hard on and Good to quarter. for for want another to care Advantage relationships and thanking the past excellence, of the quarter. with

company we performance, cash to his Furthermore, year-over-year, will of which I'm of Together, provide pleased more $X quarter strides adjusted revenue, in in on increase flow color and make another million. we performance. delivered continue X.X% billion an on of improving EBITDA report consecutive to $XXX Chris remarks.

fortify building potential and position the company's executive team Our strategy, to to maximize the profitable together continues we're for growth. the long-term business leadership full

of which The operations, talent a more part discipline, our leadership our this improve inclusive stakeholders. building technology we more investing initiatives, all team, best-in-class creating and management a modernization behind to broader more organization our to our as both time simplify deliver for and include processes is reflective a our As teammates. diverse our strengthen financial culture, company and enhance and to value strategy, workforce unified are intent of money

of path. unique Advantage at with the spanning holds the services reach a breadth entire intersection position extensive purchase brands and and retailers of

several a We operational XX scale across a serve retailers and Advantage shoppers. leader today's the strategic market gives to are largest on channels of big-box terms U.S. clients more competitive grocery most with in-store than position in insights a partnering their and perspective as trade It's exclusive of partner. us with critical in X,XXX experiential that

regularly leverage point, and any shopper lives we clients' We achieve expertise to optimize make and to help knowledge how in know this In and expectations Being where about we performance. doing pivot demands at play the to inform easier. than vantage consumers' this so, including and company both best arguably to industry. goals, more our also

to unvarnished services, our drive and that for relentless the Advantage's with next survey surveys emerging industry. the over quarterly valuable macro relationships operating in reveals dynamics we demand gain trusted unmatched the are that deep Advantage's ahead complementing while in are outlook execution brand trends, report, marketplace the the trends continue data will dozens which to latest a XX in release among retailers industry. weeks conduct example, For in insights publicly to of packed several on months. robust manufacturers six and These outlook expertise,

For face starters, labor to challenges. shortage is Retailers labor in-store for critical. continue retailers

the affecting oversight lack planogram labor top two and factors In on-shelf in-store availability. of fact, are

relationships Moving that forward, the retailers third-party saying plan labor combat to increase self-checkout to and with labor reduce issue. use we'll in-store many

is retailers. half appetite in Nearly and and top and items. in-home innovation with a indulgences innovation CPG says bullish on app for are priority focus both are a for mainstream study they focusing more premium product or our and outlook indicating at Additionally, heavy on consumer manufacturers manufacturer a premium-priced they products targeting on wellness, every than health indicate

item a innovation and new current majority since future timed on of will outside acceptance focus the expect is and window. innovation of reset Manufacturers' their well of retailers cut-ins accept increase to

with more manufacturers expect We early to exclusives launches. consider innovation retail

outlook will slate release we later the this the industry-leading full share Advantage next month. when of We insights,

realize incremental During the cases gains the well increases in believe quarter, in continued fully we where pricing. to cost necessitated areas where labor not second our services of realized, value were revenue as we inflation yet as

inflation relative the mid-single moderating consistent at and Across with prior are cost we year. to labor digits market, our businesses, experiencing

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

the margin these year better fully revenue improvements. to anticipate progresses management changes, as and expect We see reflected in

greater driving are the and our cost that yield, business, on recognizing on also way a efficiency need more and is services in precise in generates expended. the We to focused deliver a time

sharpening generation. are our more focus cash we effective on Additionally,

to increase as drive second progress has of adjusted sequential continued million leadership suggest. we're results improvement change year-to-date representing the by cash our making unlevered the and year, prior free flow, quarter, generated In Advantage basis, team significant $XXX a versus working solid approximately On our driven executive capital. a in

expect supported over and the business. XX% year-over-year, are quarter, comparable counts up new net we X,XXX Event demonstration gap reaching of in continued next XX% XXXX to levels, approximately improvements and approximately sampling our had few in close the has quarters. which We further hires the

our part-time significant Relatedly, with rates. our XX% in by enterprise, additional an turnover we across reduced improvements retention quarter-over-quarter

better and talent to to and brand to to training partners, volumes us retention We strengthen and continue talent our should costs. provide will service our which acquisition future, limit retail the allow refine practices, in enhance

our regularly and enhancements as scale service breadth performance. by levers associates we we while of and by exemplified which XXX and our operational hours our XX,XXX-plus identify offerings, million Given can continue driving simplify annual service, sheer to

Our we're invigorated the we team by base, customer is CPG for and in challenge to At that of that business. secular anchored happy long-term day, is the industries the sticky opportunities end for growth retail. see energized fragmented be is and this a this in an supports organization and two

for that, With our Chris more performance financial and over it turn on outlook. I'll to

Chris Growe

for you, to in our grow success and confident ability this strategically continue Thank all value I to position Dave. business long-term deliver increasingly to stakeholders.

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

Excluding revenues unfavorable X.X%. increased and acquisitions foreign rates, exchange and divestitures, by

of adjusted EBITDA million EBITDA X.X% $XXX $XXX decreased but segment quarter of million. were up segment million and Sales to year-over-year foreign Second revenues X.X% $XX excluding Sales exchange adjusted and year-over-year, declined X.X% driven initiatives XX.X% divestitures. and in decline our was by completed revenue growth and retail European client by The merchandising our offset services, joint intentional our declined exit, success partially year-over-year. venture. in in pricing divestiture and acquisitions growth

The discussed mix services, inflationary completed toward sales and decline calls, shift in prior is we on divestiture. of a largely result segment, the pressures in earnings as lower-margin business the adjusted EBITDA

of foreign realization and $XXX of higher stabilization. excluding services this million exchange pricing signs our revenues driven services sampling, This acquisitions show XX% as digital growth XX.X% and to divestitures. and with as demonstration starting segment in-store of were year-over-year, event up continued well primarily to by Marketing was and up counts, in return the business,

at and Marketing segment an events to pricing in down points XX% realization. up XX.X% by aggregate, EBITDA the sampling in and improvement marking the return compression. million QX's demonstration adjusted approximately aforementioned, year-over-year of adjusted the EBITDA trajectory $XX was from largely basis year-over-year, XXX-basis-point year-over-year, came XXX driven margin In

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

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

to leverage delever over and opportunities We balance our explore continue reduce sheet will ratio time. to our

conversion we continued EBITDA, For free adjusted emphasis working the on quarter, flow second approximately of of unlevered adjusted achieved reflecting capital. XXX% optimizing cash

In sheet be rate funded line and approximately the We've the meaningful with to four in prior years. total profile doubled At future interest quarter, balance and down protect stabilize billion. the healthy maturities our on our end our our risk. debt quarter, no outstanding against the $X second next initiatives of continued to with debt remains

we deploy rate debt continue deleverages a of at rate favorable to quarter, that to return. floating while the an and of discount capital we'll monitor million opportunities During attractive repurchased $XX generating the voluntarily balance sheet

As of hedged June, our XX% debt or is of interest fixed approximately at rate. a

our results posted debt and the in Investors capitalization of section the summary website. Slide of on A the quarter on our be slides found supplementary five, second equity for can

outlook. Turning our to

For the $XXX EBITDA million. adjusted reconfirming year to the XXXX, are range $XXX of full million we in

quarter well cash that and growth. remain we our and continued generation, the strengthen and financial as Our behind sampling help regards discipline closed investments management, in divestiture the accelerated early cost with second our pricing, as the to talent. realization to guidance and demonstration our continue structure growth of to of contemplates revenue fuel the We diligent as technology in-store events,

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

Dave Peacock

acknowledge pleased be both enhancing what and I remains a to Thanks, Chris. legacy company, continue work and the new that of the done. of people tremendous towards work have it our work brand the today. Advantage company serving and culture, is optimizing operations our to progress, in of there but confident who people-powered to The We're retail lot with am to growing partners. continue done our leaders our

on XX,XXX and serving than their It's employer represent more behalf job up them them every of associates wake enable to the focus others. on and so goals, have become personal our of the where with realize that to help for also choice the we and a for their we day retailers We they work. brands who efforts

where Our reflects us a live that communities workforce and to have collective we requires work. success the

efforts, solutions through retail representation to perspectives deliver partners. bring our to our are and also for We inclusion and how we we committed innovative improving diversity fresh more brand belonging as and

path to on growth passion see in I as we that daily to continuing build, commitment we're to the confident the the With growth. long-term and I'm pave company basis, sustainable a

your take Operator? now We'll questions.

Operator

a now you. ahead. we Please question-and-answer first Morgan Thank conducting comes [Operator Our from Greg and will go question session. the Parrish of with Instructions] Ladies gentlemen, Stanley. be line

Greg Parrish

Good the to want just Great. on about first quarter congratulations second to margin, here. I talk improvement results. some from and clearly, quarter morning

So, is back know the talked you And think I pricing. realization to this of the way continued here half? level about about right

And there. understandably, Does then, So, too is know be to level. any does little thoughts don't better? this you I way bit a early half helpful I XXXX some have but just and that about would potentially through? talk come if That wanted margin of get second too.

Dave Peacock

Thanks, by second this doing Dave. quarter want acknowledge very our results a we up Look, stepping our team were is and to and Yes, for really job. pleased first Greg. great

margin little right. seeing of We a pricing better improvement. bit saw You're through. We're flow exactly

probably better we'll improvements and organic In fact, our bit just half. in envision second side are being a mix some do general under the growth, revenue the one-third it to factors that. obviously just We business. second of see margins the is of and then continue driving pricing combination pricing the half. performance And year-to-date the pricing of a in of within of the Obviously,

We it a management to of six team been are relates 'XX, team, it is as And the new less early. I've A lot while members -- here including than around that. Chris, months. fairly sitting Chris

want So before 'XX. full sure, and business understanding have to any of guidance we put out we make visibility to the we

Greg Parrish

on the do the some flow Do strong half, Great. reverse about a in a question half. And again second little first then that Thinking cadence about first we sort that of conversion, second how think bit? half, the similar half? in cash free of

Dave Peacock

think free flow, on about being cash think like look it a we're a level at XX% sort of probably I is as plus seeing can basis. that Yes, unlevered sustaining we good

for him ways team acknowledge finding of I really more potentially creative a business Chris -- to want our cash little just second more the and get few as in bring less has to comments, a I call but a see activities. phenomenal good. to job I going of you're make and know it the be as cash out done out half and bit team his could yield So The --

every the pulling that second So, we optimistic half. are and of as we're lever, about kind continues

Chris Growe

are Dave And to mind, especially said to occurring it In well. here talked we that half, just investments. Greg, to that keep There tech. about second just investments in are add in the real

an as there for second so know same therefore our our we on And of -- of think think well, is there's capital. year, mind intense half keep But to I at I conversion. intense in cash that outlook just internally the focus the the time, working on focus want part I

more that little XXX% hope do that. capital So, first right plus better hope XX% call than a again, I we average. in I progress to can year. year, It's I hope the in do, even at driver key we continue the make can if there. that, working think of but it if I continue the half of let's half can to think cash some there, good being the the is we And I we generate a second

Greg Parrish

does Great. looking in the specific, updates Okay. to a slip little at? to one pay But has large us And maybe why you're you're could debt rationale I more. sales? If think as a sitting this that? sampling because then I sort get was Daymon when strategic and really I bit clearly walk opportunities was review with why does fit. retailer-preferred there's marketing And to to was like provider. coming but up, -- for a going real your that the -- of about then and through fit understand large more bought assets and that here And of been you business specifically kind business there down retail thinking sampling a Any some

Dave Peacock

as bit more where about and so Greg. our strategic year. we're No, as speak a headed actions that. November us let think standpoint importantly. for our to we Yeah, then Appreciate into results into a we and meeting, talk next get get more like even I'd we'll early little from our I

paying far. team in early to you debt balance spot. how And sheet good generation thus with And already results so and a pleased our the again, see we're for can getting discipline and trying it's focused very around and cash very and the bring we're we're where down

private good to are way that plus often of about really and finding and type you're significant share innovation at Now business you're point up consistency or XX% retailers fact and of when a will half It's a a more of manufacturers store. you're service label And the business, the is labels in total you level demand that compound so of what seeing many with receptive that you Private of interesting. sense are innovation. the part sampling demonstration there those it's see business in some that you sampling. retailers if grow especially of in for dialing certain doing

is But to on to going So we've go growth as as it see relates we and it's a but business of margin demand as capital demonstration good also opportunity our both far seen working better to realization. consistency a flow talking a that of from us one. about the strategic kind for in cash that's standpoint I'm business and and review, anything bullish remain related for a little bit or

Greg Parrish

Very helpful. on right. our Happy Congrats Friday. results. All

Dave Peacock

you. Thank

Operator

you. Thank

comes Goldman the Our ahead. Please line English with question Jason next go of Sachs. from

Dave Peacock

Jason. Hey,

Jason English

you Hey, the Thank guys. couple questions. for everyone. sorry for for A Hey, me quick having Good of delay. morning, the question. in

your still that this can really recover And tight tight mentioned you terms are business? sampling Are facing of conditions. does how You retailers gating labor conditions? still facing remain you factor in labor a quickly really

Dave Peacock

market, We're new that saw seeing we're net seeing hires. a you but continued pretty tight strong labor

think now. teammates over XX,XXX We are I

build seen -- and serving a in of shut some the businesses saw and time I back year can slowly XX%. or virtually imagine businesses, turnover of for the had down. if We last can us in really these we've we So hit the that's retain obviously you and pandemic some long those we people And then had mean more that important. down actually so. for

it's So rebuilding that.

company people have efforts is of to we successful to But to -- the key continue talent record won't we've a one I possible But the of still want lot as sugarcoat It's enablers market. advance management good of underway opportunities tight a within leverage is retention. we a many is that. give as it it. news And track had which to retaining the to people and

another unemployment You saw in added was to came down the the plus out US today. report X.X%. The that XXX,XXX jobs

we watching, one it's So with we're pleased so worth far. rate retention see our but

Jason English

Okay.

back going the you that and sampling run take that side, with no you level rate a sampling the the here there's to sampling one? to real back and to marketing forward, further is supply markets the on you're reasonable you're say on have this Brighton? of So the Should we able are come rate to the run ramp

Dave Peacock

still there's of a factors. combination And think -- a to We it's No. gap close. part

far the dealing it is you're when of especially chains availability Some with product supply-based or as supply as innovative items. and new

it of Some is personnel.

And so pockets regional we continue in you especially if will.

they parts then programs an is obviously strategy as little to example. even within of of lot relates the other our forward. a a still going their customers than getting Southeast tighter those And post-COVID as stores as just some is some back assess and of country going it their labor

number closing to event we do see as but there's count. it gap factors, So and of continued a growth relates

Chris Growe

keep add each XXXX. we're that to we're little sequential continue just going we to were quarter of in improvement a a less where And than I to XX% think Jason see sort to each would just far and of seeing points way XXXX so this our we're evidence a to back and that improve. few month level sequentially that that indicate percentage year plotting just

that think continue. I So should

Jason English

Thank they're Two Chris. there always you. questions helpful. I for numbers appreciate know the I more me.

environment margins, it's -- your margins. that inflationary environment cover ongoing retailers see of that trying of requisite impacting pricing less becoming talking How the to cost to this fact but the influence your widespread as and to to to evolving accommodative manufacturers, be fight power? see in your year about I of always not not whether kind does inflation stabilize, are forward? only as behind stuff holistically because light the terms on you or year you are catch on. next that actions In further be like we're to You more to labor know much how would and ability with is pressures I going to up price fell aren't the disciplined as aspirations great pricing not suspect that they which appear for but price restore the stabilize your that are increases they the

Dave Peacock

Yeah.

think As our we talk really how well. And obviously from need to growth to I a our about CPG a-third as come lot look a and have conversations organic year-to-date of of has inflation, that's and that retailer mentioned under where little We have refer they and price. us. labor aware And those is at those we partners. conversations I before, gone everybody customers

And we with that share cost dealing to so are in have escalation. spirit the that fact we partnership, of

same the upon us proposition innovation relative seeing incumbent And mentioned example with that side, with a realize opportunity that to and it's what see At the with need I well. private-label we're time, obviously to doing. from a we're and you steeped legacy Daymon value business the lot in what the for for private-label growth, is as we're of the demonstration business

a And you're in for bit cutting between things doing even seeing we're higher like demand the merchandising, more a are higher -- a in windows. higher resets little retailers little in because reset interest

with to need a lot the growth innovation reset. of You're seeing

business cost then real and the the pressures usually you've have conversation price. rational relative And got So have you there. demand to demand for is whenever you a can

Jason English

the in and And sense innovation. makes with the the CPG companies merchandise terms interest cut-ins that same Okay. all yes the in of

for is have overall that and at price is is What a how can you have have some context of we'll that the to exceptionally soft, segment? we side outlook point there? the What us not business. --- categories. equation of de remind And you side commission your if your commission-based sales other is big expectation look a across of the The quickly those the be business. your for in branded have minimis seem seems -- to negative a negative been as if where volumes landscape sales And do

Dave Peacock

as XX%. Yeah. Commission as side much to be about

have that we've facing. obviously in of activities got inflationary place contracts And we're not are same pressures that So commission-based. and performing the the to those rates, other negotiate we're in commission light look well in market you as the

as pretty someone's zoom a we sold small. you So provide services And have the what goods and there. of cost an from still of we total do some aggregate opportunities out be can we from

to and margins of probably market lot yes, the traffic And our have seeing get volume in for same volumes a of so that the plays more strengths do instance opportunities, which thing of at desire for a what some minimal into and well you're to you merchandising one pricing And I increased for Jason when the as volume. But impact. are out-of-aisle increased and retailers. actions the CPGs pretty look as manufacturers lot their both the think increased leads for we we seeing slip

does for doing grow our an create to business. demand more and we're opportunity it what continue to So

Jason English

Understood. Thanks, guys. I'll pass on. Thank you for time. your it

Dave Peacock

Jason. Thanks,

Operator

you. Thank

now no are hand Chief there Dave to over Peacock I Officer further comments. for would As the questions, conference Executive closing

Dave Peacock

pleased that At guys. we're was with lot results. never a our same Thanks quarter Look, we're it time, a satisfied with. the

some we balance debt. We've committed that those we're feel and demand much through about helping is focusing our things Q&A on drive can to So us where tailwinds. of future sheet bright. stronger to And position things look business are a we to some that relative the get talked remain the getting create the a in our more for

appreciative team So our optimistic again did and work great last we of months. three the remain in the really

Operator

Thank Solutions participation. The now for Advantage has Thank you. conference you concluded. your of

lines. disconnect your now You may

Advantage Solutions (ADV) 4 Aug 232023 Q2 Earnings call transcript