Advantage Solutions Inc.

Good afternoon, and welcome to Advantage Solutions' second 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'd like to turn the conference over to Dan Morrison, Senior Vice President of Finance and Operations for Advantage. Thank you. You may begin.

Thank you, Operator. Thank you for joining us on Advantage Solutions' 2021 second quarter earnings conference call. On the call with me today are Tanya Domeyer, Chief Executive Officer, Brian Stevens, Chief Financial Officer and Chief Operating Officer, Jill Griffin, President and Chief Commercial Officer, and Dan Riff, our Investor Relations and Strategy Officer. 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's discussion and analysis of financial condition and the 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 reconciliations 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. Good afternoon, everyone. As I did on our first few calls, I'd like to start by framing the Advantage Solutions business. We're the leading provider of outsourced sales and marketing solutions to consumer goods companies and retailers. We have a very strong platform of competitively advantaged services like headquarter sales, retail merchandising, in-store sampling, digital commerce, and shopper marketing. And we do this for brands and retailers of all sizes. We help get the right products on the shelf, whether physical or digital, and into the hands of consumers however they want to shop. Creating value on this platform is simple, but it's not easy. At the most fundamental level, we're a trusted partner and problem solver. We help our clients sell more while spending less. We operate efficiently, providing fuel for growth. We reinvest at attractive returns, both organically and through tech and acquisition. As we deliver value, our platform compounds over time, growing profits at more than two and a half times the pace of the S&P. Also, as I move further into this discussion, I'd like to thank our associates. They continue to be instrumental in helping consumer goods companies and retailers navigate out of this pandemic, providing our essential services better, cheaper, and faster. Now I'll jump into our update. Once I conclude my remarks, I'll turn things over to Brian, and he will discuss our financial results. After that, we'll open the call for your questions. We had solid performance in our second quarter as reopening continued. Given the company's strong first half performance and second half outlook, we're raising our 2021 adjusted EBITDA guidance to a range of $520 to $530 million. In services most impacted by COVID, we're seeing steady recovery, with sampling events in our marketing segment up by four times year over year in June, and more retailers are ramping from July forward. We're also seeing continued strength in at-home consumer demand, with both volume and price trends helping our sales segment. Also encouraging a handful of higher growth and higher margin franchises like Click and Collect curbside sampling that scaled meaningfully during COVID has sustained their strength year to date. And we've seen our acquisition and new business pipeline fill back up as we move from all hands on deck managing the pandemic to a more normalized operating and selling environment. We're proud to be helping clients navigate recovery and reopening racing to stand up tens of thousands of new associates in a still constrained labor environment, and also investing through the P&L to innovate for a post-pandemic world. Times like these, with uncertainty and change, are when our compounding platform at Advantage really shines. We're navigating an omnichannel world that's seen 15 years of e-commerce growth in just over a year. and we're working hard to ensure that consumers are truly delighted when they fully return to a retail environment. With our portfolio of essential services, we continue to help consumer goods companies and retailers navigate an unusual period of post-pandemic uncertainty, working very closely with them on managing things like divergent growth expectations for at-home demand from manufacturers and retailers, a wide range of expectations for the path of omnichannel and e-commerce adoption from here, unprecedented inflation and the need for sticker price hikes and more surgical promotions, differing plans for SKU assortment and the return of innovation, and the growth of retail media networks as a larger piece of the marketing mix. Here are some highlights from our second quarter. Revenue growth was robust in our sales segment, driven by healthy rebounds in COVID-impacted international and food service businesses and growth in retail merchandising services. The revenue rebound in marketing was even more substantial as the steady return of product demonstration and sampling delighted consumers and our digital services shined again. The sales segment did see expected year-over-year EBITDA flatness. This was driven primarily by lower margin revenue mix, investment in our merchandising workforce, and higher allocated corporate and bonus expenses as a public company. To elaborate on the mix component, the addition of the retail merchandising and international revenue that we saw in the quarter as COVID recovery continues comes at lower margins. and the modest expected normalization in the headquarter sales services against last year's peak pantry loading was a slight headwind. Marketing saw healthy EBITDA growth with a steady return of in-store sampling and digital growth at strong incremental margins. As we sit here today, just under halfway through the third quarter, we continue to see solid consumption patterns in the sales segment, as baseline volumes remain elevated from pre-COVID levels. We expect volumes to normalize further as we head back to in-person learning and at least hybrid work this fall. We're also seeing consumer goods supply chains stabilize, innovation and product news starting to return, price hikes tied to commodities and wage inflation flow through, and promotions remain muted. In product demonstration and sampling, we continue to receive strong support in our rollout and consumers are very pleased to see events they've missed. Brands are eager to bring innovation and product news to market and demand for events continues to grow. So we're almost halfway back to March 2019 event levels of nearly 400,000 with solid gains so far in Q3. As we noted last quarter, standing up armies of tens of thousands of trained associates, something that we're uniquely good at, doesn't happen overnight, and it's complex and it's costly. We continue to invest to recruit, to train, and retain in a challenging labor market that may not normalize immediately. We're also innovating here, which is important with automation and technology to improve the recruiting process, to improve the experience and our results. On the COVID front, we're watching the pace of vaccine rollout and the path of the Delta variant very closely. We continue to expect the pandemic's disruption to subside further in the second half as the state of health improves, but remain nimble and prepared for a wider than normal range of outcomes. As noted earlier, we're raising our 2021 adjusted EBITDA guidance to a range of 520 to 530 million. As many of you know, we plan cautiously and execute relentlessly. Given solid organic performance and tuck-in acquisitions year-to-date, we're comfortable boosting our outlook and delivering against this raised outlook in a wide range of macro scenarios. The guidance range continues to assume three key things. First, in-store sampling builds back towards pre-COVID levels in the second half of 2021. Second, at-home demand reverts to pre-COVID levels in the back of the year. And last, Advantage invests in future-focused practical solutions to help clients navigate post-COVID recovery in areas like sampling innovation and digital commerce and trade promotion optimization through our pioneering new partnership with Eversight Technologies. Looking out a bit further, we'll be entering 2022 with a mid-single-digit profit lift above 2019's pre-COVID levels, driven roughly equally from permanent real estate savings, acquired EBITDA, and innovative new services that will stick. This tailwind stacks on top of our normal organic growth and tuck-in acquisition algorithm, setting us up well to invest a bit more organically in our great team and continuing to compound for our owners. I'll quickly touch on some of the key metrics from our second quarter. Q2 revenue grew 32.5% overall and 31.4% year-over-year organically to $850 million. Nice progress versus our three prior quarters of minus 20, minus 16, and minus 10 respectively. Adjusted EBITDA of $122 million. was up 8.9% year-over-year overall. A healthy demonstration in sampling recovery, with events up 22% in Q2 versus Q1, continued solid at-home demand volume and disciplined cost management helped offset investment to stand up large labor-based teams very quickly. Our net debt to EBITDA came in at 3.9%, and we continue to expect progress towards three times by the end of 2022. We're excited about our momentum just halfway through 2021. In terms of the shape of the second half, we expect continued sequential recovery quarter over quarter with further recruiting and hiring investments concentrated in Q3 and the final innings of a sampling rebound in Q4. Finally, We remain focused on our mission to create value for all stakeholders and to continue to win on the advantage compounding platform that I mentioned earlier. I'm 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 and portions of our business that were tied to in-person shopping, accelerated omnichannel 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 services. With that, I'll now turn it over to Brian to cover our second quarter financial results in more detail.