Advantage Solutions Inc.

Good afternoon and welcome to Advantage Solutions first quarter 2021 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 would like to turn the conference over to Dan Riff, Chief Investor Relations and Strategy Officer for Advantage. Thank you. You may begin.

Thank you, Operator. Thank you for joining us on Advantage Solutions 2021 first quarter earnings conference call. On the call with me today are Tanya Domeyer, Chief Executive Officer, Brian Stevens, Chief Financial and Chief Operating Officer, Jill Griffin, President and Chief Commercial Officer, and Dan Morrison, our Senior Vice President of Finance and Operations. During this call, management may make forward-looking statements within the meaning of the Federal Securities Law. These statements are based on management's current expectations and involve risks and uncertainties that could differ materially from actual events and those described in the forward-looking statements. Forward-looking statements are based on the company's current expectations and are subject to inherent uncertainties, risks, and assumptions that are difficult to predict. Actual outcomes and results could differ materially due to a number of factors, including those described more fully in the sections titled risk factors and management discussion and analysis of financial condition and results of operation, and elsewhere in the company's filings with the Securities and Exchange Commission. All forward-looking statements are expressly qualified in their entirety by such factors. The company does not undertake any duty to update any forward-looking statement except as required by law. Please note, management's remarks today will highlight certain non-GAAP financial measures. Our earnings release issued earlier today presents reconciliation of these non-GAAP financial measures to the most comparable GAAP numbers, which can be found on the Investors section of our website at AdvantageSolutions.net. The company has also prepared presentation slides, which are posted on Advantage's Investor Relations website. You may want to refer to the slides during today's call. This call is being webcast, and a recording of this call will also be available on the website. And now, I'd like to turn the call over to Tanya Domeyer.

Thanks, Dan. Hello, everyone. I'd like to start by thanking our associates who work so tirelessly to help keep our clients' business running safely and smoothly throughout the whole COVID-19 pandemic. I'm so proud of our team's work to help communities in need during these trying times, and our fingers are crossed that we're in the final innings of this pandemic and poised to continue reopening from here. As I did on our last call, I'd like to start by just framing our business for you. We're the leading provider of outsourced sales and marketing solutions to consumer goods companies and retailers. We have a strong platform of competitively advantaged services like headquarters sales and retail merchandising, in-store sampling, digital commerce, and shopper marketing. And this is for brands and retailers of all sizes. Our role is to help get the right products on the shelf, whether physical or digital, and into the hands of consumers, however they're shopping. Creating value on this platform is simple, but it's not easy, and we've talked about this before. At the most fundamental level, we sit at the nexus of consumer goods companies and retailers, and we're a trusted partner and problem solver for both. We help our clients sell more while spending less. We like to say we do it better, cheaper, and faster. We make our clients more effective, and we also make them more efficient. And we win with winners by providing best in class service every single day. And by innovating on a very nimble platform, we operate efficiently providing fuel for reinvestment and growth. And we redeploy capital at attractive returns through tech and acquisitions and organic reinvestment. And as we deliver value to our clients by being better and faster and cheaper, our platform compounds over time. growing profits at more than two and a half times the pace of the S&P. So now I'll hop into today's update. Once I conclude my remarks, I'll turn things over to Brian and he'll discuss our financial results. And then after that, we'll open the call for questions. So we've had a good start to 2021 reporting strong results for a third straight quarter. The sales segment continued to benefit from elevated at-home consumption, from new client wins and e-commerce growth, and the marketing segment enjoyed the early innings of COVID recovery in sampling and also posted continued strength at our digital agencies. We're really proud to be helping clients navigate recovery and reopening, and times like these with uncertainty and change are when our compounding platform at Advantage really shines. We're navigating an omni-channel world that's seen 15 years of e-commerce growth in just over a year, as we've all seen together. And we're working hard to ensure that consumers are truly delighted when they fully return to retail. Across our portfolio of essential services, we continue to have winners and losers from the pandemic, as we talked about last quarter. On one hand, operations related to in-store sampling and food service in our international joint venture are rebounding from virus-related closures. On the other hand, our core headquarter sales and merchandising teams are serving still elevated stay-at-home consumption, with recent numerator surveys, as many of you have seen, of fully vaccinated Americans suggesting that this higher demand persists. and we're emerging from COVID a bigger, stronger business. We've served our clients very well through this pandemic. We've reinforced their trust in us with relentless execution and new service innovation, and we really believe that this will pay dividends over time. As we said during year-end results, we believe that the business will continue to improve throughout the year and will benefit as COVID-impacted businesses are restored to health, especially in the second half of 2021. Here are some highlights from our strong first quarter. We exceeded our plans in the sales segment thanks to elevated at-home demand and new client wins and e-commerce growth as we replicate core bricks and mortar offering online. Our sales segment growth was broad-based, up low mid-single digits in our headquarter sales and merchandising business and strong double digits in digital commerce services. Food service and international, we're still down year over year, but slowly coming back. Both volume and pricing trends remain healthy across consumer goods. Surprisingly healthy, in fact, as our CPG and retail clients sustain elevated at-home demand and take pricing to offset commodity and wage inflation, they're emerging a bit stronger out of COVID. Just one word of caution as we continue through the second quarter, last April's pantry loading presents the toughest comp of the year in the sales segment. Our marketing segment also came in better than forecast as we brought back in-store sampling events in a safe and measured way with our retailer partners and saw impressive digital agency growth. Here, I'd like to remind investors that bringing event teams back in a surprisingly strong Q2 labor market is complex, and it's also expensive in recruiting and training and ongoing wage rates. A healthy pricing environment helps offset this, though. As we sit here today, just under halfway through this second quarter, We continue to see solid consumption patterns in the sales segment as the baseline remains elevated from pre-COVID levels with consumers working and consuming more from home. And as I noted earlier, the April comp is especially challenging in Q2. But we are seeing supply chain stabilize, quite a bit of innovation, and product news steadily return, price hikes tied to commodities, and wage inflation flow through and promotions remain muted. While we're still being flexible as we resume in-store sampling with retailers in the marketing segment, we continue to receive strong support in our rollout, and consumers are very pleased to see the events that they've missed. Brands are eager to invest to drive sales, and we've seen event counts continue to grow, running at roughly 176,000 in March 2021 versus a low of 23,000 last April and 133,000 events in February of 2021. So we're almost halfway back to March 2019 event levels of nearly 400,000 events. Again, the caveat here is that standing up armies of tens of thousands of trained workers, something that we're uniquely good at, is complex and costly. The pace of vaccine rollout has been encouraging. virus count trends have been more mixed, but we continue to see the pandemic disruption to subside further into the second half as the state of health improves. Based on the strength of the business and the flexibility of our model, we are very confident in our 2021 EBITDA outlook of 515 to 525 million. This represents very healthy mid to high single digit EBITDA growth year over year. And it takes us above the pre-COVID 2019 EBITDA of 504 million. This guidance range continues to assume that in-store sampling builds back towards pre-COVID levels in the second half of 2021. And guidance also assumes that at-home demand reverts meaningfully toward pre-COVID levels, an assumption that may prove conservative. Looking out a bit further, We'll be entering 2022 with mid single digit profit tailwinds from an annualized COVID recovery and self-help initiatives on top of our normal organic growth and tuck-in acquisition algorithm. It's early, but consensus estimates show a further acceleration in EBITDA growth next year to just over 10%. Now let's quickly touch on some of the key metrics from our first quarter. Q1 revenue declined 10% year over year and 10.8% year over year organically to $791 million. Nice progress versus our three prior quarters of minus 30, minus 20, and minus 16. An adjusted EBITDA of $111 million was even more impressive. It was up 4.8% year over year overall against a tough positive 10.9 Q1 2020 comps, better than 2020's minus 3% trend. Favorable mix and disciplined cost management have helped us sustain earnings despite the tough revenue headwinds from the pandemic. This result was ahead of our forecast. Our net debt to EBITDA came in at 3.9 times, and we continue to expect progress towards three times by the end of 2022. We're very excited about our momentum to start 2021. In terms of the shape of the year, we expect marketing spend to stand up demo and sampling teams and a tough April sales segment comp in Q2. And the broader outlook remains back half-weighted as COVID recovery unfolds. Finally, we remain very focused on our mission to create value for all of our stakeholders and continue to win on the advantage compounding platform that i mentioned earlier to recap there are really three fundamental pillars of our platform first we always operate with excellence this means we deliver best-in-class services to our clients while driving productivity reducing costs and increasing our margins over time second we take a portion of the productivity savings that we generate and the ample free cash flow our business model produces and reinvest in our services to widen our moat, accelerate innovation, and drive growth. Third, we really nurture and protect our evolutionary culture. This builds the business to suit our clients' changing needs, and it really helps ensure that we remain, A, partners of choice for brands and retailers, and B, very importantly, nimble and opportunistic when fortune presents itself with compelling propositions to build a better, more valuable advantage. I am very excited about our future. We're well positioned to win under multiple recovery scenarios. We serve a historically stable and resilient consumer goods and market, a market that's just weathered a once-in-a-century disruption and is emerging stronger. For us, this means tailwinds over the next couple of years from a recovery from temporary COVID-19 softness in portions of our business tied to in-person shopping, accelerated omni-channel service adoption during COVID that we believe likely sticks and continues to grow, like online grocery pickup and delivery sampling, and growth and adoption in our margin of creative digital and e-commerce solutions. With that, I'll now turn it over to Brian to cover our first quarter financial results in more detail.