Advantage Solutions Inc.

Good morning and welcome to the Advantage Solutions first quarter 2023 earnings 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 Kimberly Esterkin, Investor Relations for Advantage. Please go ahead.

Thank you, Operator, and thank you everyone for joining us on Advantage Solutions first quarter 2023 earnings conference call. On the call with me today are Dave Peacock, Chief Executive Officer, and Chris Crowey, Chief Financial 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 the federal securities laws. These statements are based on management's current expectations and involve assumptions, risks, and uncertainties 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 company's annual report on Form 10-K filed with the SEC. 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 forward-looking statement, 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. 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 Advantages CEO, Dave Peacock.

Thanks, Kimberly. Good morning, everyone, and thank you for joining us. I am pleased to be able to report a strong start to the year for Advantage Solutions, including stronger than expected revenue and adjusted EBITDA performance for the business. I'll provide more color on our performance and our outlook in a few minutes. I want to start by thanking everyone on the Advantage team for their hard work this past quarter. In my first 100 days in Advantage, I've spent considerable time in the market connecting with many of our stakeholders. I've been consistently impressed by the caliber of our talented teams, their heart for service, and their unwavering commitment to delivering results, which is evident in the feedback I've heard from clients and customers, the new business we're winning, and our solid performance for the quarter. Specifically, our revenue and adjusted EBITDA were ahead of our plan, and that stronger business performance, along with a focus on working capital, led to an improved free cash flow performance as well. Together with our newly formed executive leadership team, we've been assessing our services, capabilities, and potential. We're setting the stage for a long-range business plan that will position Advantage for long-term profitable growth. We'll share this plan in the coming months. Advantage is uniquely positioned at the intersection of brands and retailers with extensive reach and breadth of services that span the entire path to purchase. Our operational scale is unmatched with nearly 4,000 clients spanning 17 channels of trade and most of the largest U.S. grocery retailers regarding Advantage as their exclusive in-store experiential partner. It's a competitive position that gives us critical insights and a strategic perspective to both inform and help achieve our clients' goals, including how best to play and where to pivot to optimize performance. In doing so, we also make consumers' lives easier. Our people-powered culture and data-driven insights create collective intelligence that differentiate our execution. In fact, through my many meetings with clients, I've been repeatedly reminded of the clear value of our work. They're up against evolving consumer behavior, supply chain challenges, and labor constraints, all while CPGs are accelerating innovation at a pace closer to pre-COVID levels. As a result, advantages offerings are needed now more than ever. During the first quarter, we successfully continued to increase pricing in cases where we believed the value of our services were not yet fully realized, as well as areas where incremental labor costs and inflation necessitated a change. While we are beginning to see the benefit from price increases, it's important to remember that those initiatives take time. The contract-based nature of our work often results in a lag to implement price increases on the sales side of our business as compared to the CPT or retail industries where price increases can be implemented and realized more quickly. We'll see these changes as the year progresses and fully anticipate better revenue management reflected in margin improvements. We've also been very active and successful in winning new business while increasing the scope of existing business, demonstrating the value we provide to our clients and customers. Overall, we delivered a strong first quarter result with advantage generating $1 billion in revenue, an increase of 10.6% year over year, and adjusted EBITDA of $92 million. I am confident in our capabilities and our potential. Together with the deep expertise of our newly formed executive leadership team, we're taking decisive action to leverage our strengths to drive operational excellence and position advantage for long-term profitable growth. We're seeing some early progress. It takes a favorable cash flow yield and a strong balance sheet to create the capacity to invest and grow. In Q1, Advantage generated approximately $70 million of adjusted unlevered free cash flow, representing a significant increase versus the prior year, driven by solid performance in working capital year over year. With all roads leading back to our people, we experienced notable growth in our recruitment and retention efforts. We had approximately 900 net new hires in the quarter, which has helped fuel growth in our sales segment and supported continued improvements in our sampling and demonstration business. Event counts have now reached approximately 77% of comparable 2019 levels, up from 72% last quarter. We reduced turnover by approximately 25% year over year across our enterprise. We'll continue to refine our talent practices to strengthen retention in the future. And thanks to our top talent, we were once again recognized by AdAge as the number one experiential marketing agency and top promotion agency for the 10th consecutive year. Our executive leadership team is identifying operational enhancements, new ways of collaborating and exploring white space where Advantage has the right to win. We're confident that aligning our core competencies while enhancing capabilities will deliver more value to our stakeholders. Financial strength is critical, and we intend to build capacity to invest in innovation and improve our balance sheet. We will do this by enhancing our cash generation, enabling us to reduce our debt while investing in core areas of our company. With financial strength, we can make more strategic investments in the right technology, modernize our systems, and improve our reporting. Our sales and marketing platforms generate massive amounts of data, given our unique positioning within the consumer retail ecosystem. Under the leadership of our new Chief Digital Officer, we're working to improve our tech infrastructure, simplify our processes, and calibrate our analytics to assess this data more efficiently. In doing so, we'll be able to work smarter, faster, and expand our strategic service offerings. We will make it easier for associates to do their jobs and for clients to do business with us. None of this is possible without our people. Led by our new chief of HR, we're implementing a competitive and holistic talent strategy to deliver an exceptional associate experience that drives retention, fuels growth, and positions us as an inclusive employer of choice. We're also continuing to build on our strong track record of providing differentiated services to retailers. We continue to grow this part of our business while working to create new service offerings and enhance our penetration with existing retailers to help them grow their businesses more effectively. With that, I'll turn it over to our new Chief Financial Officer, Chris Grohe, for more on our financial performance and outlook. Chris, it's great to have you on the team, and welcome to your first of many Advantage Earnings Calls.