ADV - Earnings call transcript Q4 2024 | Advantage Solutions Inc.

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Operator

Greetings, and welcome to the Advantage Solutions Fourth Quarter and Full Year 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce Ruben Mella, Vice President of Investor Relations. Thank you, Ruben, you may begin.

Ruben Mella

Thank you, operator. Fourth Full Solutions' Conference XXXX Advantage Call. to Quarter Year and Earnings Welcome Executive Chief M&A, Chris Sean Peacock, Officer; Dave Chief Growe, call Vice of the Choksi, President Financial Strategy on and are today. Senior and Officer; and which, will after question-and-answer open prepared a we for will their call Dave Chris session. remarks, provide the

fully management materially forward-looking securities more statements call, qualified outcomes and the due such Actual those by laws. several in results the including meaning factors. this statements their in report XX-K During differ annual within may make could to factors, entirety SEC. are federal on of with filed company's the All described Form forward-looking the

our Our non-GAAP reconciled measures, remarks the are include which financial certain release. earnings measures most today in to comparable GAAP

unless results As from otherwise will be financial operations. stated, today the continuing discussed a reminder,

Our [ the during costs discussion deconsumption which exclude fourth ] quarter revenues about happened pass-through venture, XXXX. of the joint and will [indiscernible]

Peacock. over would I like now Dave And the to call to turn

David Peacock

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

Before to in work we and of thousands other teammates clients our year. year. past challenging teams my want am how I of thank I dedication this hard served and each their our for a started, get proud

we of by strides I'm solid caliber our to our growth. progress the and In as strengthening XXXX, we position resilience made our profitable multiyear to transformation, ourselves progress long-term encouraged operating business. efforts continue team. on difficult well have environment, a and macro making These improve for our while efficiency, our as endured during

Focusing on results first.

$XX our EBITDA discipline of the of was were and realize the cost prior adjusted benefits while compared million efficiency revenues X% we million to Our quarter across $XXX as fourth up business. X% to more year, down

in XXXX, client nearly and adjusted a and For to year our versus also was market with and prior had that in billion reached the of our year the fourth exits. flat revenues given up quarter note It EBITDA $XXX our X% we which line expectations X% revenues the $X investments. trend to million, were drag year is transformation full intentional important on broader related full

on macro saw a in at cost-conscious significant regional Club mass we Starting stores merchandisers significant the environment channels the in from benefited grocery and some behavior. have shopping expense where consumers our with in observations other value-seeking and industry and we of exposure. increase others XXXX,

pressure in labor debt Furthermore, particularly While and challenging, levels. have wage consumer XXXX. supported has spending headwinds income to at price promotions a muted market management, growth performance. levels companies our overall consumer vendor resiliency, behavior and and addressing innovation, CPG further with impacted became cost spending low habits from which could retailers continue disciplined which tighter rise, these increasingly growth been

consumer and in behavior We cyclical of retaining have clients. our these XX% navigating record moments shifts of a while key over track

workforce. result We in have and provide historically of is client service This meet infrastructure certainty a been environment. critical set both this talented diverse to cost and needs data them timely able execution, a and of technology of and offerings, broad our with

roughly establish prior performance our to business our capabilities, XXXX more better centralized to and simplification a we completed The streams, work have on in the year. work years while on leadership resegmented of after last consistent largely services year in And the business our core divestitures alignment shared a business We EBITDA built our decline for several way. improve declines of all efficient streams with journey. XXXX we our a stemming was transparency. transformation in execute units evidenced better base XX% those support began team for find to X in been to a in customer and adjusted X focus XXXX, transformation flat by and beginning earnest. the we in In the a priority as

laid also advancements change, we of Despite in XXXX. grew data this and adjusted all significant for groundwork We IT the EBITDA.

made In Branded by significant on services, progress while consumer we the backdrop, key results were initiatives. our impacted challenging

we data teams and response the and and to on better, business We behalf a During serve CPG served our our we while workflows areas that streamlined our deploying approach rightsized ensure with have new year, of clients. to our best operations, retailers the standardized processes sales faster the saw clients. we upskilling positive for

labor wage an discipline mitigate results was in execution segment in to in per through efforts strong meeting events talent. had market. while execution effectively a with able while In and to our labor The Experiential Services, objectives XXXX, rate, utilization we price by and improvements attract part-time discipline experiential retain Services, cost improve day increase Retailer In managing to we inflation safety. higher XXXX, labor delivered optimization a driven and and tight managing wages and persistently solid

decision-making enhance These Looking service year and optimizing and is delivery. utilization. implement on ahead, are focused and XXXX labor infrastructure systems, to changes the technology client processes we

We've Our yield to multipronged business go-live benefits. technology for data ERP architecture over approach our many the of will operational anticipated initiated time. benefits our investment and significant system among

see in time DSO shorten our to management to improvement tools by invoice timing. over AR system's expect leveraging We the

updating phases to We look We ERP into on XXXX execute forward progress. will and throughout continue in to you the our migration XXXX.

far, implementation is our well. so And going

forecasting system, processes scenario and and management driver cycle We enhancing for modeling while reporting. significantly our and decision-making close, times streamlines as performance such financial planning, reporting trend-based analysis, enterprise upgrade improving have agility. our This and financial upgraded key reducing

make continue and cloud. capabilities on and We services progress to migrating modernizing critical the to

customer is from data storage to key tools, business in will disparate our for data servers with efficient more and data and support lake data including that to enabling at eliminating CRM allow silos. service the on-premise sales, cloud-based us marketing while Our a build investment any data to access cloud need time the in teams efficient anywhere

and scoring informed self-audits will optimization route insights, recommendations. such capabilities learning generate in as response will information Machine analysis to needs. that us lead help AI merchandising predictive and query quickly sentiment customer analytics, AI-driven more client programs and

also HR our our and tools these is are we processes drive Workday, capital of will management experience. glimpse workflow the improve This of integrating by stages which with a we excited are doing, We efficiency just of throughout and prospect what our into the system are and early in in human help a implementation teammate beyond. XXXX

transformation Another our focus XXXX labor is of improving our in utilization.

record talent join us is Operations. at enhancing We pleased as Johnson labor Workforce have such are employee optimizing the proven George Chief while experience of right time to of at created role has newly joining Aramark. AI-assisted in including as us track George system George a Services, Experiential companies and Cisco to a great of a to execute associates leverage we we is and defined across our sharing completed initiatives, radius. proof staffing lead within client with banners a efforts program our as geographic key which showing several concept a Separately, several of geographic-based potential.

location. been employees mapped single retail a to reference, historically For have

on up Based of capability pilot retention this positive uplift to per leverage our the for continuing across but labor stores company, our internal several a increasing in days, us, rate, labor, XXXX. best enrich key in serve teammates labor. challenged If in staff hundred utilizing employee early focus goal still reduction work the will a our for teammates available are across costly we and more frontline train officially of part-time This a week seeking company. greater with hours We're of better lower the expanding XX% by yielding experience and to significantly key successful, hours in utilization and the additional currently parts this and in environment. talent third-party to costs would result customers the to area execution we teammates, third-party in for the use is particularly improvements macroeconomic acquisition lower

and their ways across is to headquarters year, CPG integrate As our at branded and strategy merchandising. I segments think finding go-to-market our about representation this retailer services adapting expertise

rightsize As results enabled with part decision-making selling clients we key The navigate facing. individuals group they upskill are account the managers. process, single which help customer-facing appropriate serve client that more the to to next-generation our headwinds best the and model, rapid and are and them launched of us

frontline market-leading We to with teammates equipping to faster. differentiation offer problems technologies clients are our solve real-time enhanced increasing our analytics by

retailer distribution, them order Power latest live and shopper benefit. aisle dashboards geography interactive clients Our optimize impact data for by promotion in and BI price, to provide to

significant General the has pleased selling excited full us team. across are joining to wealth categories experience a spectrum are CPGs Henkel branded run teams, to organizations retail across connectivity of services landscape, to and that successful businesses Brands we will have U.S. be the with effective the and different management. and Consumer led P&L him from from on with him large We announce Dean He brings Dean and go-to-market XX. March and

insights backdrop He dedication. remaining transforming ensure transition, competitive with again. we Jack position. and pursue to and the the elected grateful the stabilizing partner a process Advantage we be Jack amidst to Branded to smooth to we leadership be for with a confident trusted has and and depart order are Jack April Advantage retail Services will Pestello the been segment through has of and a his in working industry are return a will in

and coming strengthened years, of we pandemic X Services, positioning the Experiential the for In on business the the executing business growth. have out sustainable successfully recovery past over the

continue we clients securing our focus and with traditional excellence on will new banners. Going to forward, for sampling operational existing

with large-format digital club in also shop. ease increasing the in brand will expand and of to online, activation see are reach where clients looking And services to which retailers consumers our we We than our the sampling, presence market. currently our premium expand venues opportunity help biggest they other ordering stores

Retailer to Services. Turning

product to continuing across with start priorities effective Our in-store for types. merchandising retailers deliver

[indiscernible] of while private between ways contract growth enable to brand participation point difference manufacturers grocers we online in drove regional X,XXX and side, strategies box We for On in approximately to offer our in-store cost-conscious XXXX. a private XXXX, of and consumers. retailers. sit will their execute business clients dozens help in North This the brand expect that consumers American big retailers increase with

personalized remain experience will the shopping also services. We on retail enhancing through focused media

physical enhance companies will us campaigns partnerships be like for channels, growing a with from and Swiftly. traditional [ and which Inmar ] our campaign we in-store for expect blend offers a tailwind to advertising support digital We data-driven with digital shift that as

ensure are retailers a labor our we save experience future a in-store money in help expanding services find growth. retailers are to on adjacencies channels and in focused to struggling our for addition, difficult solutions market. shopper many positive tasks market episodic In across pursue more and

targeting single-digit continues implementing focused While XXXX line in growth to related with revenue and be to this, largely rate EBITDA technology just of remain offset adjusted to more in transformation-related use EBITDA adjusted transformation. we growth efficiency CPG enhance I OpEx with affected initiatives our of we mentioned, temporal growth by subdued and will Revenue the influenced delivery increases in on XXXX. are low increased the our focus costs help investments. Despite ongoing be will service environment, our us the by on labor will while the

Pivoting discuss. to items which several year, performance will are impact cash that flow, will onetime there our this Chris

Excluding items, to unlevered cash around flow and closer XX% see net we'd free free cash XX%. these flow

cash that we begin pleased years am Given to well initiatives sustainable, I We Overall, XXXX, to organization, the be nuances our in with will the over us to are normalized growth come. the growth expect around believe generation making us to for term. medium higher strengthen position achieving next year. and these pursuing we levels accelerated to long of more the this progress positions

our uncertainty in for is customers strategy, backdrop, to our against are our lot the we shareholders. of foundation macroeconomic of our continuing there and a improving execute business efficiently While the

emerge will transformation disciplined, cycle in business. agile as current our more We a market the from

it Chris guidance. to details for performance our on and over more now I'll pass

Christopher Growe

XXXX focus structure you, in experiential discuss remarks and retailer will I call Dave, performance to our you our guidance. Thank XXXX the our services, branded, of cover year capital and my full on all joining today. welcome and

Brand Market with impacted Branded most start headwinds Let's Services. Services.

slides. driver the quarter to was performance adapt result, strong restructuring in reorganization to $X.X margins XX to significant referenced for fourth by and quarterly EBITDA million, were XX% and and $XXX expense reduction basis revenues XXXX in the down a our recognized down conditions were soft taken as the X% market The resulted supplementary in actions points. approximately declined by Adjusted As billion.

to term. reactive to cautious We be the continue about market dynamics and in near

X%. approximately delivered drivers XX% increase XX%. Services well of and per events rate results traditional business basis announced the of ramp-up a execution and at points was large year, increase to full approximately rate. EBITDA year in a The and retailer a early base strong with revenues performed from XX%. we last activity with a expanded XX% $XX million, XXX $XXX nearly Experiential of and Adjusted margins increase The included million, an day sampling an slower-than-expected benefited but of

mentioned, the Dave performance inflation loss client quarter, discipline the efficiencies and a us through due onetime was and pricing expenses. our talent fourth As In increase helped to softer operating better navigate deployment. wage

navigated XX to year. EBITDA softness and million, execution. approximately Services strong decision million, decline, and channel $XXX market early through XX%. X% by a was with driven was were regional the in headwinds customer points Retailer a decline to basis $XX up by year grocery over margins the expanded Full The market revenues in revenue relationship X% exit the while the intentional adjusted

drag noting Our teammates effectively quarter. which adjusted into the third part also Overall, worth Performance the fourth margin. foreign that improved EBITDA in in X% exchange talent on managed were deployment the EBITDA of increase to adjusted shift an quarter. due impacts timing and and a it helped activity soft, costs, performance approximately also quarter in was is dollars

in balance continued and levels. a our proceeds from and million and used with portion We the $XXX capital X Moving $XXX of sheet. we for voluntarily cash our generation year made Interest million progress approximately the divestitures expense of shares. XXXX, million, We reducing discipline our was guidance. line to to the In debt internal did debt approximately quarter. repurchase the or in repurchase shares fourth debt not

including ratio continuing approximately net Our EBITDA, leverage was discontinued adjusted X.Xx and operations.

cash generation. to Turning

Our days, to the days prior XX million XX over in reduced expectations down cash XXXX. nearly teammates to led of and from which in net year, generating about capital, working $XX exceeded DSOs

into pushed last XXXX. of As quarter, capital timing discussed cash we the expenditures payments

we free with flow of $XXX million, unlevered $XXX $XX EBITDA, As on generated Based of to adjusted well XX% the divestitures million. capital the adjusted strong and million CapEx We in of management, ahead nearly cash XX% of ended XX% XXXX from cash guidance. proceeds a was on XXXX result, working hand.

XXXX our to Moving outlook.

adjusted XXXX revenue to of to growth be growth the of in EBITDA We higher. the growth similar pace rate with expect slightly

half XXXX with adjusted comments from could of to consumer exacerbated seasonality and be by cadence half further and be quarterly EBITDA inventory similar contribution. the first consistent terms contribution retailer expect the many second may We between of to patterns in heard you split weather companies. have poor This

said, we are fees, initiatives, to in our systems increase staffing in continue focus executing needs below-the-line certain with discipline cost on the as implement expected in XXXX. expenses new That to licensing to related initiatives, we and are decline operating While IT associated these costs expected transformation including being areas. meaningfully

Turning to cash flow in XXXX.

primarily free cash over items. We XX% of by expect to driven adjusted EBITDA, certain onetime unlevered be adjusted flow

drag there in result repeat a that X First, capital. on is not extra shift payroll working will will in approximately XXXX. $XX million This

Additionally, given of place anticipated collections those take won't known and XXXX. a our new business wins, of the until amount timing significant

of will restructuring On slightly XXXX. significant We a basis, unfavorable which cash with the net by should SAP, offset on partially also impacts impacts implementation these DSOs improve in be short-term in reduction flow expect year-over-year a costs.

hedge the of interest to from Assuming expect market expect expense million opportunistically in rates. interest We is CapEx do $XX and XXXX, offset of to IT to to in in to $XXX cash across and $XXX debt This the rate only due initiatives being partially cash X-year subject level reduce XXXX. debt any we conditions. repurchase the be to by interest should sheet XXXX lower to million. was to million. $XXX that Because a debt, We balance the timing payments XXXX, to plan to business million $XXX we not use $XX reinvest be be million CapEx million still unwound, XXXX

tracking our than expect less in leverage to bit target long-term the net XXXX the higher towards X.Xx. a XXXX ratio before We be of

turn I over for it Dave. will back to you time. Thank now your

David Peacock

multiyear XXXX on our the Thanks, Chris. with progress we made pleased in transformation. I'm

remain and We our of customers. to position while operating provider our on these XXXX, as business our efficiency fundamentals. enabling confident strengthening we In improve focused are continue choice initiatives are they for cost-leading the

in While tailored labor the of time. remains the we with helping and uncertain, challenging are retailers climate goals by their for solutions CPGs excited achieve them prospect a

to to come, confident focus with generation sustainable continue are accelerated long-term our discipline in achieve maintain a and to cost our rigor on improving cash path growth. will financial we in and We years our

Operator, we for are now questions. ready

Operator

[Operator our Joseph will from question Instructions] Canaccord. And take from Vafi first

Joseph Vafi

et we just I a you're got some what a the of bit kind on tariffs seeing the on but know we maybe bit cetera, little maybe start time. here little Maybe macro macro real environment commentary more it. on already,

David Peacock

and Joe, [indiscernible]. Thanks, thanks for early west. out joining

may think to lot. Obviously, we some is the I items least in saw it's that if probably there seeing you're yesterday word until going anything, back that uncertainty generating some see are April. which of a the market, scaling tariffs a be at we of

of kind little really, a relative and companies the the on and their some work with, of to we far nature they what is as people off steps so frozen some the categories next as business. again, for of that do And want again tariffs bit sort to

I that. think really are that certain think given significantly mode categories wait-and-see most are in do And there's affected. a I

the because interactions, But see we that average obviously, hold. product you an will the estimates And categories to impact $X,XXX falls the interactions, store. cost across seen and incremental interactions, in category into year $X,XXX U.S. represent. of between some per We've brand that of

commissions. of are in we based our us, For business on parts paid

So declines. obviously have flows see elasticities commissions volume but if our increased way, through, you and you pricing coming can

merchandising teams shelf making services chains, is disruptive their You disrupted see would when greater on kind bit, important. need our a pretty could this supply chains have supply you probably which sure retail of for product see

to as could and time. are anyone's imposed this play examples a of a point, at for imposed to just those it's is I tariffs going see so you out. long obviously think over guess And But period of what few both are if these

Joseph Vafi

maybe that of you environment new is in is more really for are achievable? there's a a -- of demand kind Or where kind Sure. logo services. And that another and maybe just environment think and more this wins high-level appetite kind more growth one of that then

David Peacock

both, out a We've some in just over we're about an pipeline Yes, we And came really if then the and -- effort across on got the new it process services I in to and look have it's development pretty in an really new put is market, Thanks, support still right? and that services relates think provide that within that the last Joe. that place and a [indiscernible] the to I'd was services lot side, bump group leadership labor you really, excited and say, we as aggressive business there retailer structure year can doing retailers the constrained opportunity. our showed job segments on the And out healthy space, incremental hiring. logos. just

that which than the to waiting expected. it is market, the was And in all people we're think I for kind come. labor little of softening a significant softer likely

the But that I which a efficiency we think manner there scale retailers. are really provide can lower and them, cost of they can really at because in we do benefit services

from emerging of when side or where that on disruptions you've brands. So any the that an area similar. significant then midsize our supply product sampling retail growth, that especially And Branded Services we're into to for. exploring demonstration a we especially on Experiential of look And business, lot product then it's forms pretty of space, kind behalf mentioned There's Services and the and of seeing CPGs, at demand space, the opportunity, and/or of if chains sampling in-store real there's beyond got I space. opportunities other in is you healthy are moving merchandising

Operator

We'll Greg Morgan take Stanley. Parrish from our next with question

Gregory Parrish

some slow to quarter. year This going a the bit bit. just growth little the want of little headwinds There's on full on unpack the a Maybe on start Branded. Congrats results. in

persist to quarter. those in expect You first

XXXX, single-digit market sort us XXXX. it's right given kind to what's now? headwinds flesh similar what mean, just in framework to growth, the I So of way the right low revenue or in right down about the out XXXX, the think of to expect help

David Peacock

Thanks, the specifically? Services Branded Greg. for And you're segment talking

Gregory Parrish

Yes. Yes, exactly.

David Peacock

yes. Yes,

reports We assessment competing paid attention recently, sanguine and also input the to as bit little consumer from category, we know but obviously talked of instance, don't happened other be guide at the by I'd a environment just of tariffs to realizing and, segment, you relative it's for but some companies. product you say CAGNY think to I correct. everybody kind some on outlook. And could your costs. significant watching is you're of a what uncertainty is in, because it relates about depending most

group the the You call more. food adoption. what obviously higher that as drugs much even with and income GLP-X households can have comes and really We that, that drug household impact I -- GLP-X on know X% as uncertainty spending

question recently, single-digit the those that does and drugs a The on adoption become those stay going to people But percentage population persist? expensive, the too. how are curve going past came and it's are pattern now. out long is what's We of right how know little to less a long that drugs it

to have closely. we So that watch

So some into provide. the do some continues are retail. retail a of I them side, business e-commerce leaning do we that lot for of merchandising this and all services uncertainty these things for suggest the the consumer I some for mentioned and think the we our generate things is through ability logos provided, said, side growth be space. a the we to growth of have to of That on who area of on depend new that will things incremental clients

placing cost for can areas them and we the where We're of improvement operations energy provide environment. our kind So against based we're optimistic. think and the uncertain current in bets on efficiency we

Gregory Parrish

guide, I in versa, this guess how in are persisting how do maybe XQ. Yes. You that That's have about conservative headwinds think is into vice all rolling color. right? XXXX the we helpful these it then And like or

guide EBITDA contemplate of sort So that the if getting be year? seeing your guidance you we're to better would Or currently hit persist through market able first headwinds even the these quarter after does your here?

David Peacock

to the so open the of and guidance, Yes. would existing tariffs say, obviously to wide the environment. kind eyes are I that we probably We things out the difficult -- when how most those predict. we can did are tariffs we performed is you've some forward. on looking an that uncertainty probably But tariffs. the that where thing I even to environment relative around things the capitalize difficult or or got that's determine most But there's estimate mentioned play in

look I'd had focused on had at portfolio in in in to where system years we've building the over the first and leadership, as and right team opportunities system you try X investment a implementation. we right way quickly right. is the is around divestitures, talked transformation. year, the get We on lot the hitting as making years, say It about late to couple to right, but great to terms guys we're of this diagnosing kind last ago. for business it we of And We simplify year resegment. structure big the some Obviously, year last progress one of simple the We then win. processes a that with implementation XXXX. of of started is the a started

and for data because the data granular So stable systems, modern in increase key investment systems of more invested more hands -- have technology getting systems, but some in the reliable managers. account our faster we spend get both more into better, of more to

in you If kind those, the more mid-single-digit be rate. we exclude growth of would

with business we'd unlevered free onetime like we unique items if his would flow strong. what didn't the this cash in pretty comments, in we flow as have feel from seeing standpoint, So be a Chris expect flow of cash in exist, we alluded And net actually fundamentals line and free to cash the are business. of they more kind that some

is effort of I'll say, coming end And growth the year. more are more call kind what have markets that heavy we positive ready lean We're meet investment the transformation. we cost-efficient we're and can upon, of And and investment a I'd around to degree to of stabilize historical get the to an much outlook. the a think yes, we company. a and and gaining So back growth rate,

Gregory Parrish

in super one one of intentionally any there That's your further Is client map? helpful And a On any XXXX? part road exits those that more maybe anticipate me. you Great. on client exits, for final in the color. do

David Peacock

still so. just into think quarter we little don't of a any That's from We move I feeling the think first I XXXX. no, intentional had can those. client effects as through exits lapping No, We've as we kind what don't a no. a into 'XX bit those unique of, We're of anticipate worked circumstances. of standpoint, but couple

Operator

And there at remarks. I are like back to this questions go call to closing for time. ahead. would Please over Dave no the further turn Peacock

David Peacock

for you joining. know we thank a Well, it's early on Friday. We all

time attention So our to you we Thank the first the we and business, appreciate on talking and look quarter. in forward to you.

Operator

This concludes teleconference. today's

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

Advantage Solutions (ADV) 7 Mar 252024 Q4 Earnings call transcript