Advantage Solutions (ADV) 1 Mar 232022 Q4 Earnings call transcript

Ladies and gentlemen, good afternoon, and welcome to Advantage Solutions Fourth Quarter and Full Year 2022 Earnings Conference Call. Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A.

At this time, I'd just like to turn the conference over to Kimberly Esterkin, Investor Relations for Advantage. Thank you.

You may begin.

operator. you, Thank for and everyone, on Solutions Advantage Thank year joining XXXX quarter fiscal earnings fourth you, us conference call.

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

and and this management forward-looking may based meaning that securities federal the statements to call, could make are the predict risks from by During cause to laws. management's expressed on involve are difficult expectations actual such current of implied or uncertainties differ forward-looking statements assumptions, those These and statements. within materially results

materially by and Commission. of Operations announcement All as The statements law. Actual Condition titled the future statements qualified the by number to not of are sections as a including Analysis Company any expressly Exchange or otherwise, and Factors Results their events Company's fully the forward-looking outcomes Securities information, could of Management's required any result to and a of and in and Risk revise update such differ Financial whether does Discussion due with filings those results in forward-looking or factors, factors. new undertake described duty except entirety in more

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

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

are me I excited together. to we helped for the welcome also Thanks, you work afternoon, everyone joining Advantage the who's and thank thank to embarking the want team Company. to on everyone, us. for upon Kimberly. Good I'm

spent and with spent Advantage, exactly it the joining understand the I've to with since of month our the I of team time call for our In earnings I've business. And and spent first Company. discuss time financial state one my growth. our associates. strategic of also weeks, my with to our clients Directors is plans Today our marks four past performance review time and Board

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reason In as of excellence I our service business they core the joining people. am and our to every bring is Advantage, They so resilient were in most customers our proud clients day.

consecutive holds share event For the in market number and the sales one in ninth the position experiential marketing number and year, services and Advantage marketing. essential one

record $X line first full the history. results the top billion are for proven Revenue cycles year indicative our Those build a upon. great and in foundation also track company for across time economic of to topped

in in building XX the our not days opportunities and spend further that our and will belt, few be stakeholders quite years allow will challenges thinking. summer, to With of outlook leaning later my we'll five deliver to initial under our myself key providing of to come. guide themes understanding capabilities I the months value that fully a next business, on immerse to continuing all I'm our my us this to

core proposition organization. It customers. is effective value paramount the an to First, our on to relentless focus

should over and how Next, cash our flow foundation this This for level balance into any good will of importance sheet operate forward. a the and focus our of A be debt the is time. this we sheet. guiding business, business will and associated balance leads yield, reduce provide going strong ratios we strong

this Fourth, in business. all people make the difference

for an all assessing, clear process ensuring So and is inclusive a with mobility. as for transparent, is attracting levels retaining at opportunity upward culture talent critical effective

commitment come. finally, strategy to market in this more precision leverages by must And about to months company and creates have systems look ours excited value a that we to for like optimized most and the forward effectively relative constituents. are deliver, our sharing with and how and and supported all scale position about I executed analytics team's processes I'm

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

the to and continuing Thank as you, you our Dave. forward have It's great to part of partnership looking I'm together. team,

$XXX segment year-over-year. of segment million increased our consolidated improved basis, EBITDA billion. quarter. of million declined X.X% a year-over-year. quarter $X.X with for XX% revenues fourth Sales begin the Let's results to $XX fourth P&L On revenues X% year-over-year Sales adjusted

driven decrease and selling lower-margin was is in of been strength our retail which decline a offset retail pressures services. including continued by The and third-party EBITDA improvement services, the merchandising calls. have on in discussed largely business services, in by the previous result adjusted was partially earnings Revenue inflationary a

were down inflationary benefit XX% event with driven $XX year-over-year. our services. $XXX segment of headwinds business The and by adjusted was the the spend in and The of marketing Marketing demonstration employee to volumes. up primarily EBITDA ongoing year-over-year, expenses, of million sampling growth million return higher-margin wage higher impact recruiting, and digital our in-store was largely X% revenues driven segment services by to continued count coupled

basis as came of points at reflecting the segment in down XXX segment. and margins XXX adjusted in basis points in the anticipated, points XX.X% EBITDA and sales year-over-year, basis aggregate, the In a marketing decline XXX

$XXX discuss sustained the not of a non-cash on to price, and flow Moving $X.XXX in balance billion and asset impairment to inflation impact rates. sheet quoted Company's goodwill from These the to and This non-cash our impairment mainly fourth impairment charge items. interest decline October, of In the headwinds cash share Company. is quarter does rising we the the were in impairment charge. impairment conducted non-cash intangible which led due test, the million annual a charges

and it in our initiatives quarter over X.Xx, and to to we approximately goal Our reduce the very net at EBITDA that sheet that finished to ratio and adjusted fourth are time, leverage considering goal. our our to remains debt open adhere balance delever

have line the in free believe conversion in M&A with in to or Staying approximately flow remains improve no XXXX. prior adjusted achieved EBITDA, prior year, we four we our maturities For XX% profile full the levered next years. meaningful will earnouts quarter, debt we cash and of of healthy, which

in At debt of and found A $X outstanding debt on our equity funded website. of X the the Investors of fourth results section our quarter slides end to the total be for capitalization our can the approximately summary Slide in fourth quarter, the supplementary billion. continued be posted

to XXXX. turning for the Now outlook fiscal

the For divestitures. adjusted $XXX any and prior adjustments we related range $XXX EBITDA year, to to acquisitions to in million million of the anticipated

and prudent uncertain from continued results, believe While the this decline conditions. is macroeconomic is a it the XXXX industry our given headwinds we

progress quarters we revisit business, and guidance. will have our more around our annual the As visibility we

provide our as business noted, These areas making revenue alternatives our areas. result divestitures will, our we just revenue main such guidance, currently of certain contemplated, a overall business in would decline our divestitures I services refine that that refocus focus we could we not not would our align leverage as do on strength, but strategic of several core EBITDA, as with While as consider our position. and efforts improve in do and note

some year. EBITDA as into said, insight call date range this is that the more like the believe I'd of to of With this the right adjusted provide we for why

in continued resulted for tight. First, Relative well retail labor business previous rebuild as and sampling our a our gradual as expectations, demand offering. has be in-store on to demonstration business merchandising to more availability services despite services our this our continues

While show improvement labor Company is slower anticipated. signs starting of improvement, to than is previously had the this

market Advantage was approximately net our XXXX. hires. improved And to our positive attract from to a We faster speed continuing made the in despite XX% ability the X,XXX fourth talent. benefits hire note, continue new recruiting in that remain retain approximately our to in labor XXXX, are plan backdrop. top speed software quarter, to mind to investing and of challenging we to in has XXXX hire than new expect see On challenge and we the Overall,

have expenses. see in labor-intensive higher-than-average margins. certain given our to ongoing inflationary the leverage impacted pressures price which In we're negatively gasoline continue our and our fully operating the a costs able also lag impacted travel, in business. other business fixed to services Second, business associated subscale, our of with negatively has increase wages, profitability sales we not segment Furthermore, workforce our

consumers, offset year, resulting pursue and preserve signals and the ancillary retailers pricing uncertainty margin. opportunities will CPG broad wage the ecosystem. we volatile brands, to Third, demand In across increases new spend challenged macroeconomic has continue and in to

first compared inflation mid-single wage high double inflationary to second increases. digits well in year, of the XXXX, digits to this of months is digits still low the the the to above single While in year-over-year slowed rate long-term six our half

with increase, diligent and price approach remain to regards for to As pricing we our labor customers increases. continue costs

We continue and sheet services. deleveraging the balance rebound in in-store of sampling to drive demonstration our work prioritize our and also continued will XXXX to

back labor remains the remain confident will build business we securing continue Although year. that to this challenging,

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

Thank for Advantage. right are that There initiatives for building technology the long-term Company also is establish redesign, success. strongly weather necessary to the no to helping are current for efficiency environment us steps remain enhancements, challenging, Operational and doubt And XXXX to us not blocks was difficult the to a conditions the while future. value only position enabling you, macro pricing but the aligning Brian. taking we year are

questions, your the now welcome We and Operator? open we'll up line.

question-and-answer a Toni first conducting [Operator be Morgan will we the ahead. from time, Instructions] comes this Stanley. line at Our session. Kaplan of gentlemen, and Ladies from go you. Thank question Please

forward with needle Parrish headwinds for alleviating? labor headwinds there's I drive facing This Dave, you. in with the Dave. to some Welcome your is given I direction? is you Is Or what really fresh thing key What Greg Company. right direction? initiatives look perspective to this just clearly, Toni. on the here to wanted in moves the working your start it right the are to

seen Thanks, Greg, I it different think The labor worker just labor openings look for cyclical got significantly question forward for external That, a you've when. with You've what that, two you environment Look, like working and got bounce and is historically. I you've opportunities with right any significant think back should I mean a is improvement, we've eventually. macro every I and now? environment other is that got now. inflation, right? dynamics Toni. internal it's to

demonstration in for there's think, and desire in a We sampling front back. business to so our referenced Cagney comments, decomposing his discussion market. more got where ways a on we've as deliver people. technology, products you see, to sessions, understanding Brian innovation, I last find then innovation. get of to leveraging were And our being there's to time serve internally, really much typically, hear And week's in continue customers' bounce will then encouraged and clients to to expectations, And and efficient, the in around

eventually we've internally levers then and you optimistic So, favorable of be got we're pull number that we more get for a the our can macro both that will environment business.

through about then an mean costs. and How pass right? issue, those And proposition lines, sort me And the here. about on client-facing slides let better go to the Dave, background really enhancing along I your your even talk it's able due one it's better think to customers? do think be able I passing follow-up you cost Great. been of I of value to

the on first a in nail with the the my XX hit And It's you of visiting days head. reinforcing spent proposition. think I've I Greg, clients. that time value lot

lot and both different addressing tracking understanding in or alongside performance them, meetings, their and I or ahead better think, to what's to of a bringing have business XX any be important gaps we client opportunities And getting them XX for of had marketplace. away in right them. should performance them how traveling the them,

of the products a business, executional business, attention a And as point is is for make not and to consumers provide. complex complex truth when of it's their of and someone's it's The It It's going think brands, retail. reassured lot an we a that overly to I've a been value clients, it to requires I spoken I've moment of with highly but our detail. lot decision purchase.

that and we opportunity can provide decisions and as -- those so to we that can a back with far work activity. do the have then make insights we as better And they influence great

it's demonstrating I and that we're the strong continuous reinforcing ROI think creating that proposition loop, value justifies So, on value building that for a them. always

Yes. And then and hop one just then Great. I out I'll last one here. slip

two competitors the wanted more competition on on they're competition. big years few they ago, I organized competing were a and ask And than side. now also Just price. to about have sales

So you? of that how much impacting

can think, the haven't of talked last to kind in much us right is we've couple to pass said just times customers playing when a And landscape? that So of I that the you on how year your over really the competitive now? you still case. yet that update lost that of Brian, if a price, But any price through is ability you've factor

I and at we're end them. we're for to of at end mindful competitors. job of day, the we customers the the on and think day, the of need our our the focus But doing clients

have job our and relates we satisfaction highest it we less and if perceived do for and for clients what to the doing And become what efficiency -- to we the the competitors we're possible we've level got of Our customers. relevant us less best if that and as value do.

especially obviously position a just We with relative more market employees than attention position intersection X,XXX the both about businesses business got got with marketplace, we in at all our branded of business We've they're the with and what doing. in the great unique CPG our of on. retailers we've to breadth XX,XXX being significant on pay a over clients with companies, that and a and and perspective with categories worked

then sure So provide that us to clients partnerships of properly. key for those each is just to each collective And and customers. making our that of we're leveraging those relationships managed intelligence and that is value

you. Thank

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

here pleasure questions. be being A of to forward I've number a to Dave. got with Look in person. phone,

of year of normally EBITDA you If the the run So first, million in finished at $XXX implies XX% confidence you million apply starting where $XXX million like EBITDA your fourth quarter. to exited. the $XXX the next with year. It for to rate the and it, deliver seasonality take we normal we in

to that $XXX So better year to next get $XXX million what million? to gets you

you. look No, working initially. high-level I Brian to as thoughts may well. forward appreciate it, have I'll an you give I opinion Jason. with some

especially labor when First, this by where the average you say, market, there's our both relates got derived EBITDA rolling quarter relative as to been volatility I'd contracts. environment, timing to where of while -- -- of it's historic has in it how have in pricing the been you've

quarter one. got comes demo The EBITDA may recovering from a that number of change, business. a You've percentage

we to still booked. both be obviously, demonstrations little look while the a out. we And going the like bit seeing we're are And as know first fourth quarter

sight a doing work of where line some have go. the our and range of of We contractual a understanding on we're going terms to obviously good be clear and should pretty rates

in confidence have we We provided. guidance the

I with maybe add Dave more. agree Jason, I bit saying. Yes, little can a what is

the we and of at that's price second to look at at you of QX, had a the the wage quarter 'XX. look QX quarter in increase to for you quarter, trending QX, half COVID 'XX difference specifically, you being impact if not third about If and quarter COVID have look versus quarter And in the inflation second to just first all, the of third it 'XX, -- address 'XX a in of also then apply timing sense we of demo, difference. in in for QX,

We significant price of it's a did 'XX. of effective in get this QX increase QX year, but

going on sector And in that timing hit then QX we've in difference. seen so a through also, And the advertising QX in flow And that had aspects sure us the as which quarter there's see well. headwinds, I'm digital forward. you've you'll

there's within think I we to that give into going us quarter -- for it's million $XXX next the million differences So guess, $XXX a year. some confidence, our

before basic X% don't look as guidance level, And basic is, of a supplier it's a come get to to EBITDA reasonable to kind comment retailers. know label pricing margin of want stay want your high to production kind all year, going here assume companies or labor. to in that assumptions. or we can similar an case, in you next there, mid- revenue something in unreasonable outsourced you I outsourced for they're private which to I range, for provider it's CPG And or some mid-Xs, similar, like an the to think I And to a back sort back Okay. to just I higher give manufacturer the of but implies didn't I it little guidance. you this

XX%, manufacturer label it would lose a the base a in which margin, you where set of stuck I is if fine, to this spiral in expectation any get that this to greedy to you're going run of right business if level cash rate generating And terms be But want sort can get case this right, good and cash. level just business? this you're generation, try X% for private reasonable just higher is to and As you becomes such, like like get margins. on chase

a things be about a came from term. business A know think when quite contract I manufacturing a should -- side about the the before this you role to bit of background comparison, make Advantage. do in joining one, couple margin that look Jason, we great I teens read No, you've be this question. low the could previous a think in I And past. that's investment on where long

you the occurred of fell margin sort cost You're demo in the of seeing when during inflation. in business and see in the and lag swell off snapback to volatility that labor pricing relative that as then COVID

mix, degree full little you the this A change the relative pin But the size far that labor of part-time if group there's me a number manufacturing will, to of little stuck the on as after as some hourly reading previously. bit. people. contract more swell part-time to hourly full-time with relates hourly as bit would point just your of But cost kind of in available and it is to wouldn't work

you've of in yourself. XX regional got a where First, -- different at look XX we from, us what well in pretty know and in they're I the label top looked I XX contract the label, being categories network business a this doing average, I'd three largest on we're it side. alternatives, When at kind national say to of on private one difference. kind anywhere When private the situation I'd say different manufacturers where

you've got at look from options just that created. is what valuation standpoint the when less So you just

could business, today. seven historically, look higher that trading when that now, believe of if years, we factor some have manufacturers we thought least the a at do you where multiple right slightly margin, have our in last $X the look, apply to should in that price and and you And contract traded at multiples this be you stock

So to all differences. not your point, bad, I but it's there think are

think much production value is that very support critical, that of intersection businesses for make benefit insights about our we're I the brand from customers, as diminishing comments, absolutely our But fact the and of and we sure sort finding to, we side leveraging the private dogmatic and in clients we come the possible we're label, with be prepared in revenue clients. we this with my being if retail, as should layer I of provide And the and these CPG mentioned a should premium. at the side. not And be need and partner we

your And price value, have and much are why critical successfully? raise so services been you so to if able not create

that's Brian relative the price of with reinforce Well, ROI I the rolling start think clients opportunity we're charging. and you through some to there year. as I one, discussions said, through, in And is have we move that going customers think to the have, some to of our and as

think XX do regard So last forward. do capture over of as I our contractual going opportunity when with the see have that that is to businesses. it of contract we lag impacting you months, also an timing certain steps But can call timing you price a impacting taken in our sort it, relates

my welcome. Okay. last probably I'm pass overstayed And very I it on. I'll know question,

trying You've seen? sense in last you million outlays. made telling Just of it M&A? of assume to around so $XXX growth erosion you've to $XX EBITDA for that them we've years got over years, Is much that business, three how three into a million get reasonable the a from number last like acquired of of the Xx, acquisitions roughly underlying

Yes, Jason.

-- the at when not revenue not our can it, acquiring a relationships think apples-to-apples businesses that it's with our personnel, leverage from depth requiring we're basis it acquiring the So our like we're I our to because and streams. clients, servicing retailers, relationships acquiring. We're the breadth technology. easy capability an We're with you say a of look of the lot we

growth our our with together overall business. blended for it's so And

with businesses, separately. not So, together them we run the

easy not those to separate apart. it's So,

on aggregate? paying multiples higher than you're X% So average in

average digits about talked we've multiples. historically, on saying mid-single I'm paying

buying Right. with businesses you're capabilities? just EBITDA But no now

No. EBITDA. have The businesses

over no Peacock, the to since Ladies further and closing would turn are for there conference questions, Dave gentlemen, I comments. to CEO, like

future and which our company. from a our a you, of better management I my with team, build firmly one Ryan. an is Thank with to strong core believe bright in Advantage rebuild Along entire to goals has even credibility foundation you, investors.

high providing that and efficiently Our yield more associates our with navigate CPG companies our the and a helping environment for essential customers provide conviction. and clients retailers are current and services

talented true this to scaled is the intend we value better unlock we company, Our team of as work our organization and source growth. a for advantage drive competitive to enable to

today. well again for time look later you upcoming to some speaking UBS as at our this first you Thank meeting forward on month your I conference of the quarter call May. in

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

You your disconnect now may lines.