Advantage Solutions Inc.

Good afternoon, and welcome to Advantage Solutions' second quarter 2022 earnings call. Today's call is being recorded, and we have allotted one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Lassa Glasson, Investor Relations. Thank you, sir. You may begin.

Thank you, operator. Thank you, everyone, for joining us on Advantage Solutions' 2022 second quarter earnings conference call. On the call today are Jill Griffin, Chief Executive Officer, and Brian Stevens, Chief Financial Officer and Chief Operating Officer. After their prepared remarks, we will open the call for a question and answer session. During this call, management may make forward-looking statements within the meaning of federal securities laws. These statements are based on management's current expectations and involve assumptions, risks, and uncertainties that are difficult to predict and could cause actual results to differ materially from those expressed or implied by such forward-looking statements. 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 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 or revise any forelooking statement, whether a result of new information, future events, or otherwise, except as required by law. Please note management's remarks today will highlight certain non-GAAP financial measures. Our earnings release, which was issued earlier today, presents reconciliations of these non-GAAP financial measures to the most comparable GAAP measure, 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 the website. You may want to refer to these slides during today's call. The 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 Jill Griffin.

Thanks, Lhasa. Good afternoon, everyone. Thank you for joining us today on our 2022 Second Quarter Results Conference Call. On today's call, I'd like to begin by sharing our second quarter highlights and macroeconomic trends, and then move to an update on our 2022 investment activities, which remain an important area of focus. Brian will then provide additional details on our second quarter financial performance, as well as an update on our full year outlook. Our success continues to hinge on our talent, and at Advantage, we are talent first. Our successful track record in managing a large flexible workforce remains an enduring competitive advantage for the company. And I would like to take a moment to thank the Advantage Associates for their continued dedication and the work they do day in and day out to serve our clients. They're providing essential high return services, helping consumer goods companies and retailers navigate the current environment better, cheaper, and faster. Let's begin with a few key messages from this past quarter. From a macro standpoint, online and in-store consumer goods demand remains volatile. Inflation is clearly top of mind for consumers, which has started to result in trade down behavior to lower priced alternative channels and products, including private labels, both areas in which Advantage participates and offers services. Despite the uncertain operating environment, we are pleased to report that our Q2 results were in line with our expectations for the quarter. Once again, we delivered strong year-on-year revenue growth of approximately 15%. Similar to the first quarter, we continued to see a lift in our businesses that were most impacted by the pandemic, with in-store sampling and demonstration events up 49% year-on-year. As measured against pre-pandemic levels, Q2 in-store sampling and demonstration events were at 64% of Q2 2019 levels, up from 61% last quarter. In addition, I am very pleased with our continued strategic M&A efforts. Here, we remain focused on acquiring tuck-in assets, particularly in areas that help brands and retailers navigate an increasingly omnichannel world. So far this year, we have completed three acquisitions, including BrandShare this past quarter. BrandShare's expertise and capabilities in e-commerce sampling are highly complementary to our own and further enhance our existing offerings. However, as expected and consistent with last quarter, adjusted EBITDA margins declined due to a shift in revenue mix, headwinds from wage increases, and our ongoing investment activities. We are spending on wages, recruiting, and retention in the challenging labor market to stand up significant numbers of new associates to meet client demand for our must-have services. We also continue to invest in developing new higher growth and margin accretive offerings together with infrastructure to improve company-wide efficiencies. Furthermore, we are constantly engaging in dialogue with partners and implementing pricing increases. As previously discussed, we continue to see a timing lag as a result of the dynamic labor market and would expect this to persist until the employment market stabilizes. Despite these pricing actions, we did not lose any clients in the second quarter as a result. Within this context, I'd like to expand a bit further on our financial performance in the second quarter. As noted earlier, revenues were up approximately 15% year-on-year for the second quarter, driven largely by the continued recovery in our in-store sampling and demonstration business, along with further growth in retail merchandising services. partially offset by declines in food service and third-party selling and retailing services. As anticipated, our second quarter adjusted EBITDA margin contracted by approximately 340 basis points from the prior year period, reflecting the following. A shift in revenue mix with our historically lower margin in-store sampling and demonstration business regaining momentum. The ongoing investment activities I just referenced, most notably in the second quarter related to staffing and recruiting, and a prior year client loss in our food service business. Despite the labor market headwinds and inflationary backdrop, Advantage has delivered performance in line with expectations and the ongoing investments we are making position the business well heading into the future. As a reminder, we are making investments in three key areas. First, in talent, we are stepping up spending on wages, recruiting, and retention. Second, in renovation, we are accelerating investment in infrastructure, systems, and tools to improve productivity and operational efficiencies across the enterprise. And finally, in innovation, we're investing to scale adjacent and complementary services with a targeted focus on data, intelligence, and digital offerings. We continue to make progress during the second quarter in each of these three areas. We remain confident that our efforts will strengthen our franchise and enhance our competitive advantages while driving growth, improving efficiencies, and better positioning advantage to capitalize on future opportunities. Let's take a closer look at each area, starting first with talent. We are investing to stay competitive on wages and continuing to stand up our workforce in in-store sampling and demonstration activities. We are also investing in wages to improve retention among our existing associates and recruiting new associates in key positions to further drive our growth and development. Now let's move on to activities within renovation, where we are investing in our core business to enhance productivity and cost efficiency. Here, a key focus is investing in new recruiting software that has already materially improved speed to hire and that we expect to reduce cost to hire across our enterprise in the back half of 2022. This software is enabling our business to more efficiently acquire talent and the early results are positive. Furthermore, we are investing behind the consolidation of in-store execution platforms across the organization. We believe this will enable us to improve the quality of our offering to our partners while enhancing internal reporting consistency and driving potential cost efficiencies. And finally, with innovation, we believe a key future growth driver for advantage is new data and digital solutions that create even better commercial outcomes for both our CPG manufacturer and retail clients. To this end, During the second quarter, we introduced Advantage Intelligence Services, which combines at scale the company's data, analytics, intelligence, and technology capabilities. We are also investing in world-class leadership to oversee these services with the addition of Alex Kelleher, who joined us from Deloitte Digital. Alex's vast experience in starting, growing, and managing data-driven companies makes him ideally suited to drive development for these solutions. In marketing, we recently announced the launch of Advantage Unified Commerce. These services collectively provide consumer goods brands a holistic solution across e-commerce and brick and mortar, including audience identification, in-store and digital media, multi-channel activation, attribution, and analytics, all powered by a technology platform and award-winning creative team. As we look ahead to the second half of the year, I also wanted to share a bit of color on our third quarter. Starting first with the headwinds, which are not unique to Advantage. Supply chain challenges persist and inflationary pressures, as shared by leading retailers, are changing shopping behaviors. Wage inflation continues to increase and remains at historically high levels. That said, our services remain need to have rather than nice to have, and we continue to have cost advantage scale in delivering our offerings. Looking at the key tailwind, we continue to expect the pandemic's disruption to slowly subside and anticipate a continued rebound in those services, notably in-store sampling and demonstration, which were most heavily impacted by COVID-19. Taken together, we are affirming our full year adjusted EBITDA guidance range of 490 million to 510 million, which Brian will speak to further, along with additional detail on our second quarter performance. With that, I'll turn it over to Brian.