ADV - Earnings call transcript Q1 2024 | Advantage Solutions Inc.

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Operator

Greetings, and welcome to the Advantage Solutions First Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.It is now my pleasure to introduce you to your host, Ruben Mella, Vice President of Investor Relations. Thank you, Ruben.

You may begin.

Ruben Mella

Thank you, operator, and thank you everyone for joining us on Advantage Solutions' first quarter earnings conference call.On the call with me today are Dave Peacock, Chief Executive Officer; Chris Growe, Chief Financial Officer; and Sean Choksi, Senior Vice President of Strategy and M&A. the provide call remarks, call, for make statements will will which management Chris federal forward-looking the the open question-and-answer within and their after prepared we may securities Dave laws. of meaning session.During this expectations outcomes filed based uncertainties risks differ and difficult predict.It results current are note to involve is assumptions, could These statements important management's that and factors. are those to on including and that Report to more the the in materially actual the statements factors, Annual expressly entirety XX-K due company's in on Form are fully described with forward-looking SEC.All their several qualified by such The company fact remarks measures. today required revise as by or does law.We certain will want focus that update management on your not non-GAAP the any to to financial forward-looking to except duty any statements draw undertake attention

will earnings of reconciliations and comparable measure.This provides call release is the the website. these non-GAAP recording be today issued webcast most Our measures to company's Investor GAAP also detailed being Relations available on earlier financial a

call Dave to presentation I accessible Section to during also remarks, is and which Events turn the CEO, on the will our to the like IR Advantage's website.And of We would Peacock. the now, prepared refer over Presentations

David Peacock

thank Thanks, us. you Ruben. everyone, Good morning, and joining for

track bought million $XX and this million As for performance.We also down believe discontinued we quarter, debt undervalued of nearly reported of dilution an the provide X adjusted consistent we price.Our our reporting issued saw despite the performed and both on year we quarter our internal operations.We April, drivers taking a with million and shares Experiential the financial EBITDA of objective also comparison. and in revenues pass-through is you with Services the back outperformed in were timing believe our our Retailer for our and advantage offsetting $XX is shares in million $XXX and excluding our to what stock costs expectations of of Services, well X of results guidance.Experiential paid in full million approximately first in which a business in holiday morning, achieve inclusive new Services of Services line our unveiled we the remain results budget financial segment, which picture tough and our Retailer Branded quarter. and Services, clearer quarter

the softness environment.Inflation other and facings of helps and our align manufacturers to quickly new living industry realized clients unique display a survey mass, and a and opportunities, resets, efforts club can growing competitive of team retailers and in sales survey is high partner in with channels.We includes the and on-shelf efforts a consumer X grow the market in private provide us is into as and generating a trade expect market over and culture consumer will Services position engaged and to dollars, online on understanding availability they they firms means trends factors also brick positioning for as of merchandising discount insights support.Our challenging retailers displays by on this and to measured plan and expect retailers say and to and client client CPG.This XX% a growth, contributed e-commerce what We mortar Daymon, with macro to our in in For increase ensure rising retailers to our programs EBITDA.Overall, promotion orders our address adjusted stemming programs.Our costs a us entire remodels we hundreds implementing of softness of intersection in share. focused relationships due entire to adapt label division, on of leading of for X to their engage highly stores selling lower higher and Branded differentiated conduit Retail to across market retail because did from transitioning remain both in-store Services Services market advantage and be adding in our job items. items arm next in next broker expected segment emphasis to deep areas.Over team volume that half team and demand Branded at coming the promotions business also perspective to is impulse of changes.Our the drive of on-shelf the those volume brands the from executing customers' as and our increase and quarter and a to retailers, retailers our are believe private capabilities channels.Our ecosystem, surveyed unique CPGs new our the existing Services, the technology, for visit unit pressure groups' investment shelf of scores challenges of months.Retailers nearly retail believe Services manufacturers than months and for continuing the grocery seek lean the SAS increasing as behalf CPG for retailers of us prices.These at gives the the Approximately in our new valuable with and first strategies performance. the Experiential insights U.S. will to demonstration provides the into have total in displays brand while of we private decline great continues year-over-year resignation consumers. to group gain and decline digital outlook Advantage drove client our services food we months. expansion of increase headquarters.Our both Retailers cost understanding Advantage and continue regular highlighting they're depth for at frequency anticipated retailers, followed initiatives, CPG services the growing to relational. strategic their perfect perfectly in and thousands large as That to is continue benefit services tell an upcoming which return fulfillment X to top clients' over labor also drive and product prices of That and brands these on execution Branded a in XXX

heart for merchandising and high work periods to promotional great XX,XXX packaged every the earn our the has success of executing them who this multiple excited right a team This to earn well-known XXXX. and expanding industry. in client. trustworthy and return teammates will to world's Branded daily our Newsweek's retail deliver to in Building are trust juice companies working with day reputation arm delivering our trust scope, committed teammates signed that our of and retail with retail decades. we and double Our most Advantage's this product merchandising across endeavor and leading surge for duration is Services led one us return multimillion critical on plus and leader agreement for competitor. down it is during we with to a will to a of after are as longstanding We're client back serving relentlessly. this a in global a a categories relationships with tribute this to frozen will do earn average relationship required to all they provide is provider a care decision.We our that the dollar lower relationship over reflected branded our a prove deliver top company.We with us with have needed way services to time.For the trustworthy test, the clients, more time on in team and productivity, and drive personal critical the XXX center-store investment.Branded seasonal example, retention have made merchandising to goods. clients to enduring Services with flexibility They able XX% and than XX proper during company solid services is a cost lasted After execution Among investment approximately spending a years returned with distinction.The

digital Our agreement management sales, across leading and headquarter execution. includes all commerce and grocery category administration

innovations as big new retailers consumer Our Services. X major box brand leans renewed client collaboration evolving longstanding is demand.We further Experiential successfully poised our to into elevate for the meet to this

e-commerce, the of expands products advice on for a Advantage's deals digital been more for all the innovating U.S. and sampling XX in with we boxes and monthly to strategy learning United on clients, concierge proving library subscription share a One countries. to leading program.Finally, retailer big in experiential why virtual where partner business executing beauty the for States in for offerings inside continues in execute differentiating ways services across primary beauty subscribers.The decade its content, box and are us XX have other for experiences, years.We member innovative deliver lead approaches over has Experiential and a locations service relies XXX,XXX impactful we number a the a it provided Services the than experiences channel sampling the last

in fresh up opens have for to the teppanyaki to as a doors Our allow global an frozen Japan, more shoppers.It also to engage unique us way more food. exciting footprint and the food new sampling in off Canada. with opportunities.Building and we These produce such offer opportunities us new in sampling carts and gives our meat, XXX items success often carts a approach launched offerings leg experiential to than locations of opens products

lift week of we sampled. for an launch the the sales generated of Canadian average products The XXX% first over

we exploring the on our talent, partnerships more to other holds serve with energized while we commercial to are technology, is potential the road and ahead, in to we capabilities we modernized enhance of leverage capabilities, are We what technology as in by excited effectively.A look our expanding we industries the ability about as future centerpiece technology. leaders of In area into untapped Advantage's also our explore clients can invest Genpact. we focusing the tools relationship U.S.As are where

and is greater There AI investing weave functions, Competency more and aims where the come and back which as innovative competitive order advantage image much accuracy at retail using grows.Separately, to We value to provide a real-time to technology tracking AI continue it we our speed to benefits as company routing are to those within into and HR datasets.Our insights-driven evolves large relationship touch, strategic counting. unlocking needs customers and administration value us that and contract already serve with and future XXX focused, a as workflow entered of management to cash business recognition inventory capabilities will new deliver leading evolution creating analysis with in Center, recently and to our we establishing are and agreement merchandisers clients high to for that an invest generative partnerships.Advantage solutions and best requires AI like edge high office internal such high-tech be certain applications own our and from Core a serve in in provider specializing retail.

make store industry We with high days not solutions data modernized to tech proprietary to will XXX execution tools efforts the on what in on retail return capabilities. Together, co-developing overlay and smarter share with to the able our opportunities expect enhancing for that to to to insights analytic customer points and visualization point real detailed past enable what across by seconds us weeks third-party problems we or example, performance reach combining and time on to the clients fuel in to our Once significant our data omni-commerce future, faster, are often immediately analytical on of we capitalize is and we our decisions happening root expected be a pinpoint to brand are also and took will dashboards our distant potential retail inform causes tools higher capabilities.We're decisions. offer teams. category, by the of enhance visualize Competitors our too shelf. difference.For rely clients.In data their speed solve region million about complete,

technology our with begin the retailers our this are breadth to marketplace. truly and that year, modern better implementation we so differentiate relationships reach services, our phase complementing and For results, are the brands based on and these deliver the focused scale, team.We themselves capabilities, in testing can on of with

another our choice our of shoppers an will why We will edge the speed announcement the the to to of reducing performance. confident long lead the our matters. precision as more step capabilities a operating resources time, business that, Adlucent commercial towards and to evaluate recent That and to capital well will to continue financial more opportunities capabilities of Advantage's we to I core leverage leading to provider with deliver call to the over buyers. structure.With convert strategic Advantage are Aligning is now of talent that pass its as benefit continue represents to required as success.Our to and sale strategy the review simplify technology for integrated model, our into term crucial clients.With debt optimize company's vision is Chris

Christopher Growe

Thank regarding our joining to you all call operations. financial include discontinued performance My the will you, of welcome Dave, and comments today.

XX.X% Adjusted on because by $XXX clearer the joint a when was million, is Advantage X% to picture reporting were exchange excluding had on and which revenues of to similar less impact costs, impact European foreign deconsolidation first costs. excluding Foreign million, new Revenues revenue the exchange. Smollan, our line a $XX quarter minimal our increased top venture.In in excluding discuss our also approximately of $XXX margin performance, a provides representing and pass-through performance costs. of will the peers' divestitures our revenues information.Consolidated we segments, EBITDA million results our pass-through addition of pass-through

in in quarter.However, We robust offset performance good from Services. planned by expected Branded a and decline Services growth performance adjusted margin was first more the softer Services a as were Experiential drag the EBITDA Retailer in from than

on February.Our results across inflation in January cannot focus financial in quarter, business, in pressures, which our and in to improved achieving first April relation cover to performance the we inflationary did continue favorable. early especially We March fully pricing but were and the in we

and to enhance and business. and of new to investments delivery current initiatives Our clients our designed are attract the services customers

by and in focusing expected our structure the allow and collaboration Services.The duties new services model. million our structure the approximately will takes to cost and and the efficiencies year-over-year While operational $XX appropriately, the quarter, improve our benefits efficiency for Tata increased be business, on organizational and seriously cost Genpact capital has cost new further manages that us achieving Consultancy of customers. team clients optimize This shared will its by with complemented leadership under fiduciary

beginning X% these We to of EBITDA a will our X FX divestitures, to well as as segment, $XX to details minutes Branded and the Revenues, factors want Services. $XX declined with in drove share costs, review Adjusted $XXX take take the was hold.I efforts more approximately as million.There approximately million by were few excluding that pass-through impact performance million. performance.

especially a it with quarter.Second, quarter, quarter, cost Timing which absorbed to in expect of revenues, outside by orders.Third, in increased not the easy, cost million. the Adjusted ERP time impact to X the right client services. later timing year. market of in retailers nearly planned. resignations associated our is we investments over to driven First, was greater investments we well and complete Dave reduction several were of the soft prior but FX, the we transition $XX more higher conclusion Revenues, than the in the expected mentioned, year.Moving were worked also the upgrade the partially conditions early million, the of and impacted increase the of to shipment Experiential in degree. client Ideally, in to to implement initiatives the do strategic than XX% EBITDA We Services. pass-through not a of $XX as offset decline XXX% those costs, a excluding million as $XXX to expenses

reached thousands XX% event XX%. count increased in levels.Daily day by activity event measured of approximately per pre-pandemic Our XXXX

current timing drove growth the basis costs balance for to the as over our the leveraging these EBITDA million, when managing capital holiday on implementing repriced an the EBITDA the remodeling April, Adjusted term month, Last we $XXX turn able quarter.We a to our this not Services. job XX% and to year. Easter volume did reversed infrastructure a let's retailers from repeat million. of billion over completed plus in earlier in-store second We decline factors did management.Moving declined teams tough adjusted loan faced which focus of the the teams plus comparison will prior in SOFR points by also margin holiday execution. some benefit Revenues Retailer quarter, prior Our was $X.X XXX offset XXX to activities year year.Finally, in-store which increases, terrific improving points. price were approximate An SOFR quarter. activities to X% our sheet. in support The approximately improvement limited prior to basis working our that we $XX

in is and notes $XX approximately are We from interest investors we the million discount. voluntarily quarter, the expected approximately we the $X pleased with repurchased work are objectives. advance demand point basis at who save doing million reduction debt current in to support strategic secured attractive XX expense The annualized our to levels.During

was March X.Xx nearly approximately our interest of of XX% outstanding rates.Our XX, our fixed hedged was with As of ratio or debt discontinued billion, debt leverage $X.X total operations. funded approximately net inclusive

ratio our target of to in this the last price.The with $XX announced were We stock expectations, year. offset was $X repurchases what million quarter, we reduce to execute the million quarter X employee strategic is our an below take still is million and but to net nearly $XX busy about repurchased X.Xx.We million our to to incentive-related advantage in our approximately in long-term April. million which additional As an below leverage active $XXX million, was first and to undervalued with shares $XX in to dilution share we plan quarter spend line objectives. CapEx investments believe with was

the capabilities for cash due $XX adjusted and means grow to best-in-class not actions we to additional guidance core divestitures capacity low-single operations, flow at adjusted free with are our weighting discontinued XXXX to accelerated second creating This expected a capabilities, include Dave does to on further year revenue EBITDA reaffirm as the expect in technology to digits. investments, focus for capabilities quarter adjusted base the full half by adjusted we growth another announced lower EBITDA We inflation, other now conversion.We data revenues investments the and modernization, approximately the evaluate from efficiencies unlevered BarkleyOKRP, services.Our XX% the improve of with a to our for including of year's these or to XXXX solid towards impact technology opportunities EBITDA, AI people representing Adlucent core EBITDA. guidance wage earlier.Despite pay the debt.Given greater operating down future and and deliver cash of and platforms in sale inclusive cloud-based creating clients we our prioritize generated of continue and possible adjusted to to described of tools in million impact

continue Our guidance expense, of range.As book CapEx captured cash to our this remains lower We contemplates transform quarter. transformation the actions XXXX term I accomplished to unlevered lot year Progress remains free execution interest our and optimizing a and planned to investments our in grow and EBITDA the revenue place. business. lead our within on investment track, flow last guidance the efficiency.What loan The recent business on we for is mentioned underappreciated although is will of Advantage. IT interest to is to expense, in simplify refinancing our improve quarter, is and and that operational adjusted first plan

than achieve it for and now back our your include in executing relentlessly.I and insights I advance to will core to leading over year growth daily to teammates' capabilities to us for work Dave. strategic time. you of testament think a change Our to better goals.Thank our significant a with of turn enhance values can't

David Peacock

Chris. Thanks,

day worked serve us and business have in diligently we Over our retailers market. firms better to on X rely we who and the can the CPG and every so win simplify to our last capabilities our enhance consistently months,

choice.Our our objectives position become ultimately I the to of focus, we task.We our to implementing Across creation will expand for on our plans and which and in shareholders. their advantages win, value for our industry remain our growth customers' and track organization, are will year. scale, work persistence cannot enough and dedication understanding this to and competitive capabilities this the clients' deep right strategic achieve the provider on thank While continue, team drive consumer of us staying

Operator? take questions. now will We your

Operator

the from Canaccord of [Operator Vafi first question comes Instructions] with Joe line Our Genuity.

Pallav Saini

given changes Joe. like are more label for cautious, your This is still are Is programs, implementation macro. My Pallav fair strategic on here initiatives et but question on that cetera? prioritizing perhaps? is it private digital the you And cautious to of the say incrementally the to of seeing more any outlook they first these pace clients Saini are programs

David Peacock

Thanks for the question.

would overall, that revenues aggressively level movement a year. category.So standpoint dollar to think and the are for about talking saw really end a standpoint. kind the on the say we label continued client overall consumer environment entire standpoint strong destocking that period. argue the of retail business, look They especially private a Branded things going macro and short Branded you lot a the pinched economic and by movement we do lower bit being term on if consumers, product of a little the from economy. the side we in of and growth of market. in That spectrum, of see had And are couple that at over is business, think to in a as onetime there's market. a them some and a impact is I driven within inflation a unit standpoint, that's current seeing retailers that throughout uncertainty area.But unit CPG drive or just fundamentally, -- an the not when the reducing I saw the growth private retailer and economic Obviously, I our from the as the sense Services from of that a of well challenges label in we're inventory, at business this trying or point-of-sale the has continue some growth slowdown that in Services volume there.I'd And from

our retailer clients of objective actually customers. our and CPG and So there's convergence a little between bit

Christopher Growe

to I Chris that. Pallav, quick add a this Growe. comment is just might

though, to start Just see throughout that little there mentioned, the a We was -- the did softer improve, quarter. year. that as a Dave

we've volume thing you one an in that's there it part. really about, a experiential that, beyond in nice overall. the and But our and think improvement in to see increase I in secondarily, can keep execution business, just really volume talked on mind.And So just

we side. some other the if activity of our benefiting from clients So are side seeing the on we're will, from that on that you investment, experiential

Pallav Saini

embedded a your Services? for just follow-up that, type outlook And 'XX What in Experiential is to growth Chris. of

Christopher Growe

So give we're in tell have and seeing would first continued going just that we're I move business segment. price that more quarter, is realization the to segments, experiential we'll know recovery the obviously, business. would nice that. we like the really metrics by we're in on you business.I this But recovery guidance not And is seeing information I think just also a and we showing more as forward you time focusing that this and demonstration say volume, I that we're volumes profitability. XX% XXXX of in that and the on we're strong were in in denote business here

you that business, give a activity throughout in saw of rate it the increase that sequential we to the growth feel the for and in which may continue to grow expect we level So through sequentially some of year. year, do nice the

Pallav Saini

And from me. one just last

over the portfolio active X now? the or there refinement so. in see composition You've here? do last been opportunity pretty the simplifying portfolio for further you How Is months of the

David Peacock

where acceleration about core the And through you're more seeing, that openly able off management some that is. this process core even we our that more really I business will and speak on that get space. Yes. at as active there's to looking that businesses in into decisions And you making movement clear. And going.But what is businesses. to simplify portfolio, lot you the to to then are and especially the said, our a we I see sell actually think and are to be resources as There get we as focused become get I probably, devoting business. to as summer, think and some be we'll a core can simultaneously growth, it we continue and assure And we're cost

Operator

from line with comes next question Our of Faiza Bank. Alwy the Deutsche

Faiza Alwy

a like wanted the costs It I that it planned you ask to function So higher sounds about was mentioned. investments. of higher

inflation of then higher that the because I divestitures. be maybe some costs think not there there'll and absorbed in were

us So the of And year. sort you a color through course that. improving of just the I costs give bit mentioned around think more

So maybe about all that. talk how about of should we think

David Peacock

Faiza, question. appreciate I Yes, the

the So I on think you're Branded Services area. probably focused

intra-quarter, couple lot said, portfolio on -- you've some that segment, planned.And a of think had the you the And got transformation of like I think lot was as things. exits, thing So the work, I and key noted. -- going One, of then you frankly, on you not of a related and necessarily those divestitures, businesses. a think these exits.And then that of that hit so client the client you in relative we you and other largely were but intentional taking will, as client to absorption imagine, exits cost in it if people that, out can I issues that And quarter. occurred the they cost kind of because that were made timing to are the so we had

day was costs anticipate clients as taken issue. them it when forward improving your and do to already serve to organization.So well actions got the the those or we've it timing can rationalizing really, the we have that you that, do of So serve that exit. until as impact were And obviously we relates go And based taken. up on

that really reflect on the instance, early going workforce second exits, to the forward those For quarter. very client adjusted we've in

Faiza Alwy

wage mentioned you then And Okay. inflation.

reaccelerating. lot terms maybe haven't of heard from inflation We really that in of sort companies other of a

sense you because that, did to are like us you inflationary -- -- that? might know expecting wage and should pricing be are should see we do should we I inflation. we on and mentioned incremental maybe give talking persistent.So where not when you of And pressures just about price those where fully you I we -- -- cover talk realization said maybe So have you about want used a word the

David Peacock

Right.

service So look moving to if a ago, business. the transportation when actually as it And lot at to you people. it's you of have had obviously, described as we of around, we business, lot will, our a relates workforce minute a

but was higher It And quarters couple cost so It it persistent. higher -- than up to we certain that it higher to be wasn't even then than areas, more lot markets. tick inflation things you expected.And was look have of year, or was persistent kind a wage we markets than past you a expected. in last was in you've of at continued recently maybe necessarily gas seen of like prices

in One, So situations where you as those the when to the possible inflation able in is business, we're price that.And a where pricing it's said, as our commission the And managing we business, not then, as actually cost-plus situation situation efficient where be arise. two, parts we're making a those a the for areas for flow it us, are really through. issue. have just realize the that where to sure we could areas see of And contract be structured cost for obviously,

natural if a And we the the a be it's will, commission so on may situation environment clients our depending flow-through, cost facing. price the revenues of when you for there's kind cost or -- specific

Christopher Growe

first at was across inflation labor at looked X. just the the persistent, as acceleration did a to or just first the reacceleration, it, think increased we was that could with all wages happened call out than business, to the changes I'll quarter, will level. continued of, number our Those in of into guess little in call kind simply support point in I And level add it inflation a regulatory were even quarter. that an We look looking here. year that. thought. in mid-single just persistent.And quarter think we January the low I the level digit digit I bit I or were I I'd say not from make last that in year there's higher that, definitely of let's mid-single And that if digits. mid-single the that area.So a we rate would the And in year, Faiza, there a inflation it, is in we're

can we mix. to initiatives Dave important looking that. at We're at most do across mentioned costs, -- place try we're in we, to our looking we our to have Now and can our All year. So at inflation pricing things suite offset how managing manage -- we're in right? some that. attacking that use that, is that has the obviously, have looking the tools of of that we in We're obviously,

Faiza Alwy

Got Okay. just And last then one. it.

in You which mentioned April. to March, be improved appear results in continuing

are it the driving sort what's or inventory you of perspective unique something that from Is rationalization? So macro you? is done to Or else just there with else that's that? something a

David Peacock

inventories, hit on mentioned of nail the the as transitory, mean a while that operate occurring going may adjust your you it be rationalization, can Once sort bit bit, right? it forward. I you a the be think inventory base from earlier, head. I you I

shipments for shift. collectively.We we're our retailer clients that So in better seeing was there an Easter overall talked about the segment

affected that moved it part big And quarter. And that it they a -- significantly and right the be timing pretty first of -- into can business business the store. work holidays. Frankly, Easter of so of work of the by reduces do ahead some in

of the month saw so reversal And we of April. that in a

segment, reflects different then exits we really saw had client in in the the in quarter. that that I the retailer that side example cost actions taken that.And as that's earlier segment where So another we've on mentioned well we first

some that as that starting to the we're in so through quarter, second And of flow numbers early for should April. go in see the we forward

Operator

turn to no Dave like comments. this floor for further closing questions There Peacock time. at are back I'd to the over

David Peacock

your We in your morning this Solutions. operator. appreciate time you, interest and Thank Advantage

partner you We competitive clients and a and with year for our are on prospects today. as customers. time to of excited about your again to our Thanks look expand progress the this forward choice updating advantages

Operator

concludes today's teleconference. This

your your participation. disconnect lines you this for time. may at Thank You

Advantage Solutions (ADV) 9 May 242024 Q1 Earnings call transcript