Advantage Solutions Inc.

Ladies and gentlemen, good morning and welcome to the Advantage Solutions second 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 Sean Chokshi, Investor Relations and Strategy for Advantage. Thank you and you may begin, sir.

Thank you, Operator, and thank you, everyone, for joining us on Advantage Solutions' second quarter 2023 earnings conference call. On the call with me today are Dave Peacock, Chief Executive Officer, and Chris Grohe, 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 company's website. And now, I'd like to turn the call over to Advantage's CEO, Dave Peacock. Thanks, Sean.

Good morning, everyone, and thank you for joining us. I want to start by thanking everyone on the Advantage team for their hard work this past quarter. I've continued to spend time in the market connecting with many of our team members and remain impressed by their care for one another, commitment to service excellence, and passion for strengthening relationships and results. It's evident in the positive feedback I've constantly heard from our brand and retail partners and our solid performance for the quarter. I'm pleased to report another consecutive quarter of improving company performance. Together, we delivered $1 billion in revenue, an increase of 5.7% year over year, and adjusted EBITDA of $104 million. Furthermore, we continue to make strides on cash flow performance, which Chris will provide more color on in his remarks. Our executive leadership team continues to fortify the strategy we're building together to maximize the company's full potential and position the business for long-term profitable growth. As part of this strategy, we are investing both time and money behind technology modernization and best-in-class talent management initiatives, which include building a more diverse leadership team reflective of our broader workforce and creating a more inclusive organization for all teammates. The intent is to strengthen our culture, simplify our operations, improve our financial discipline, and enhance our processes as a unified company to deliver more value to our stakeholders. Advantage holds a unique position at the intersection of brands and retailers with extensive reach and breadth of services spanning the entire purchase path. We are a market leader in terms of operational scale with more than 4,000 clients across 17 trade channels and most of the largest U.S. grocery and several big box retailers partnering with Advantage to serve as their exclusive in-store experiential partner. It's a competitive position that gives us critical insights and a strategic perspective on today's shoppers. Being at this vantage point, we arguably know more about shopper expectations and demands than any company in the industry. We regularly leverage this knowledge and expertise 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. For example, we conduct a quarterly survey among dozens of brand manufacturers and retailers to gain robust data on marketplace trends, emerging dynamics, and the macro operating outlook over the next six to 12 months. These surveys are packed with valuable, unvarnished insights that are unmatched in the industry. Advantage's latest Outlook report, which we'll release publicly in the weeks ahead, reveals several trends that continue to drive demand for Advantage's services while complementing our deep expertise, relentless execution, and trusted relationships in the industry. For starters, in-store labor for retailers is critical. Retailers continue to face labor shortage challenges. In fact, lack of in-store labor and planogram oversight are the top two factors affecting on-shelf availability. Moving forward, retailers plan to increase self-checkup and reduce in-store labor, with many saying they will use third-party relationships to combat the labor issue. Additionally, product innovation is a top priority for both manufacturers and retailers. Nearly every CPG manufacturer in our study says they are targeting innovation at mainstream or premium-priced products with a heavy focus on health and wellness. And more than half indicate they are focusing on at- and in-home indulgences, indicating a bullish outlook on consumer appetite for premium items. Manufacturers' current and future focus on innovation is well-timed since a majority of retailers expect to increase their acceptance of innovation and will accept new item cut-ins outside of a reset window. We expect more manufacturers to consider retail exclusives with early innovation launches. We will share the full slate of industry-leading insights when we release the next Advantage Outlook later this month. During the second quarter, we continued to realize revenue gains in cases where we believed the value of our services were not yet fully realized, as well as areas where incremental labor costs inflation necessitated increases in pricing. Across our businesses, we are experiencing labor costs inflation at mid-single digits consistent with the market and moderating relative to prior year. While we continue to see the benefit from price increases, it's important to remember that these initiatives take time. We expect to see these changes as the year progresses and fully anticipate better revenue management reflected in margin improvements. We also are focused on driving efficiency in our business, recognizing the need to deliver services in a way that is more precise and generates a greater yield on the time and cost expended. Additionally, we are sharpening our focus on more effective cash generation. In the second quarter, our executive leadership team has continued to drive change, and we're making sequential progress, as our results suggest. On a year-to-date basis, Advantage generated approximately $188 million of adjusted unlevered free cash flow, representing a significant increase versus the prior year, driven by solid improvement in working capital. We had approximately 1,000 net new hires in the quarter, which has supported continued improvements in our sampling and demonstration business. Event counts are up 24% year over year, reaching approximately 78% of comparable 2019 levels, and we expect to further close the gap over the next few quarters. Relatedly, we reduced turnover across our enterprise by an additional 10% quarter over quarter, with significant improvements in our part-time retention rates. We will continue to refine our talent practices to strengthen retention in the future, which should allow us to provide better service to our brand and retail partners, enhance volumes, and limit talent acquisition and training costs. Given our sheer breadth and scale as exemplified by our 75,000-plus associates and 100 million hours of annual service, we continue to regularly identify operational enhancements and levers by which we can simplify our service offerings while driving performance. Our team is energized for this challenge and is invigorated by the opportunities that we see for this business. At the end of the day, we're happy to be an organization that supports a sticky, fragmented customer base and is anchored in two long-term secular growth industries in CPG and retail. With that, I'll turn it over to Chris for more on our financial performance and outlook.