Advantage Solutions Inc.

Greetings and welcome to the Advantage Solutions fourth quarter and full year 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. Depending on what you require operator assistance during the conference, please press star 0. As a reminder, this conference is being recorded. It's now my pleasure to introduce Ruben Meya, Vice President of Investor Relations. Thank you, Ruben. You may begin.

Thank you, Operator, and thank you, everyone, for joining us on Advantage Solutions' fourth quarter and full year 2023 earnings conference call. On the call with me today are Dave Peacock, Chief Executive Officer, Chris Grohe, Chief Financial Officer, and Sean Chosky, Senior Vice President of Strategy and M&A. Dave and Chris will provide their prepared remarks, after which 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 upon management's current expectations and involve assumptions, risks, and uncertainties that are difficult to predict. Actual outcomes and results could differ materially due to several 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 the entirety by such factors. The company does not undertake any duty to update or revise any forward-looking statements except as required by law. Please note management's remarks today will contain certain non-GAAP financial measures. Our earnings release issued earlier today presents reconciliations of these non-GAAP financial measures the most comparable gap measure. This call is being webcast, and a recording will also be available on the company's investor relations website. We will reference a presentation during the prepared remarks, also available on the events and presentation section of the IR website. And now I'd like to turn the call over to Advantage's CEO, Dave Peacock.

Thanks, Ruben. Good morning, everyone, and thank you for joining us. 2023 marked an important year for Advantage Solutions as we began to execute a strategy to maximize our full potential as a partner of choice to consumer brands and retailers and drive long-term profitable growth. At the same time, we remain focused on meeting the needs of our clients and keeping our promise to shareholders by exceeding our adjusted EBITDA guidance in 2023. We were especially pleased to deliver year-over-year adjusted EBITDA growth and margin expansion in the fourth quarter. Our success in 2023 centers on our teammates across the enterprise who share a heart for service and a relentless dedication to winning together each day. On behalf of the leadership team, I thank them for their efforts. I want to take a few minutes to review some of our significant actions to date to enhance value for everyone we touch, including our shareholders. We believe these accomplishments will help fortify the long-range plan to create a more unified company with enhanced operational efficiencies through streamlined processes, strategic rigor, agility, and improved capabilities. In January, we expanded our executive leadership team and welcomed Brian McCroskey as Chief Growth Officer. Brian joined Advantage after 17 years with Bain, where he collaborated with executives in the consumer packaged goods industry to solve their toughest strategic challenges. It will be pivotal in shaping our growth strategy, identifying new business opportunities, and driving organizational excellence. We have renewed a service provider agreement with a large multinational retailer, and as an expansion of our existing relationship, Advantage will also now be their exclusive experiential partner, conducting all sampling and demo events across its many U.S. stores. Our leading capabilities with in-store and digital sampling offerings will help us to convert more shoppers into buyers as we expand our relationship with this longstanding customer. We executed contracts with several significant customers to continue providing services for them in late 23 and into 2024, demonstrating our longstanding relationships. One example is with a large US retailer specializing in trend-forward general merchandise. This will mark the 12th year of our exclusive partnership supporting this retailer's beauty category, both in-store and online, to provide shoppers with a more engaging experience. We feel good about the momentum heading into 2024. More than 95% of our key enterprise clients re-upped with us this year, with the majority adding new services and many enhancing their respective annual spendings. For example, we signed an agreement to leverage the broad range of services we provide with one of the leading global food, health, and beauty CPG companies where we expanded our scope in our launching key pilot programs over the course of the year. We also entered into two new agreements with third-party technology companies to help optimize back-office costs in the coming years, reduce complexity, and enhance the suite of capabilities we offer clients. But first, with Genpact, a global leader in business and technology services, gives us access to their expertise and advanced AI-powered technology and automation, which complements our client management capabilities and connectivity across the consumer goods and retail industries. Separately, we are modernizing our IT support services in collaboration with an award-winning provider of business services, Tata Consultancy Services. TCS is known for its expertise in digital technologies, innovation, and commitment to delivering customer value. They will transform and modernize our IT services to benefit the team, clients, and customers. We have also completed several divestitures and continue to evaluate opportunities to simplify our operations further so we can focus more resources on our core businesses and enable growth. In January, we sold our collection of businesses serving the food service industry, most notably Waypoint to Prospect Hill Growth Partners. The food service businesses were combined with key impact sales and systems as a part of that sale. Advantage received a total gross proceeds of approximately $100 million, representing mostly cash and an ongoing 7.5% stake in the new entity, Action Food Services. The sale further streamlines our portfolio, enables us to partner in core adjacent categories, and helps us de-lever our balance sheet. We've also taken steps to optimize our European joint venture. We've reduced our majority stake in Advantage Small and Limited, a joint venture with Small and Group, to a minority stake of 49.6% in exchange for cash and other considerations. This transaction will ultimately simplify our reporting and help Advantage reduce back office complexities and expenses while allowing us to continue our constructive partnership with the Small and Group. Finally, last October, we sold Atlas Technology Group to CRISP, which will empower CPG brands with better data and serve as the data acquisition technology platform for Advantage clients. With its cloud-based data sharing platform, we will collaborate with CRISP to offer clients sophisticated supply chain analytics with an expanded retail footprint. All of these transactions, from our recent divestitures to new collaborations with world-class providers, will make Advantage stronger, more nimble, more competitive, and better enable us to drive our brand clients and retail customers' businesses. We have a record of success with client relationships that have lasted for decades. In fact, among our top 100 clients, the average relationship duration is north of 15 years, with over 90% retention over time. This track record of client retention and these recent divestitures and collaborations serves the foundation that will allow us to focus our efforts and reinvest in enhancing our capabilities from talent to technology. As a critical accountability lever, our enhanced processes and platforms will enable us to strengthen relationships and be our client's strategic partner of choice. We know our long-term success is tied to the people we employ and the talent we develop. That's why we're committed to putting people first and building an environment of belonging where our teams can work and win together. Recently, Newsweek recognized Advantage as one of America's greatest workplaces for diversity in 2024. We are creating a culture that attracts top talent and remains committed to improving retention across our business. We hired over 2,800 net new employees in 2023, supporting continued improvements in our in-store merchandising and demonstration businesses. We continue to prioritize reducing turnover across our enterprise with significant improvements with our part-time employees over the year. Most notably, the year-over-year turnover rate improved in the fourth quarter by approximately 10% in our sampling and demonstration business and approximately 20% in our retailer merchandising business. We are pleased with these improving trends as Advantage employs tens of thousands of teammates, most of whom are on the front lines with consumers. Our transformation roadmap is based on a comprehensive understanding of the macro, environment, market trends, and competitive landscape. Nearly every major trend we're seeing in the market today aligns with the services and expertise we offer to our customers. Put simply, with our position at the intersection of brands and retailers and brick and mortar and e-commerce, we believe we have an unparalleled understanding of the challenges and opportunities our clients and customers face. That means we can provide strategic services and solutions faster, more efficiently, and, in many cases, better than they can themselves. Our depth of experience, agility, and speed can help offset some of the headwinds their businesses face while identifying new paths to growth. Here are some of the trends we are seeing today and advising our clients and customers on. First, from retailers, we see an appetite for innovation and a growing desire to expand private brands with encouraging indicators for the food and personal care industry. This bodes well for our private brand business, which continues to serve as a key partner to dozens of retailers. Second, with broader inflation reverting to more normal levels, Pricing in the food category is stabilizing, encouraging more typical shopping patterns. In 2024, we expect a focus for CPGs and retailers on unit volume growth, given the declines in most categories in 2023, and we are seeing early signs of this with innovation and SKU count increases. Our Q1 2024 Advantage Outlook survey of nearly 100 retailers and CPG manufacturers indicates that almost 80% of manufacturers are planning for unit growth. listing innovation and expanded distribution as top drivers. Our retail merchandising teams support both innovation and distribution growth through their unparalleled capabilities in capturing opportunities at retail. Retailers, on the other hand, are less optimistic. Just 44% are planning for unit volume growth. They're relying on promotions and the expansion of private brands as the drivers. In fact, 60% of retailers in our survey named private brands as one of their top three strategies to deliver value to their shoppers over the next six months. And promotions are on the rise. Last year, almost 30% of units sold at retail were on promotion, a number that's risen each year since 2020, but remains below pre-pandemic levels. Next. We continue to see food away from home pricing outpace food at home. Given the different cost dynamics and competitive aspects of retail and restaurants, this trend will likely continue and serve as a tailwind for growth in retail food sales. Finally, U.S. consumers appear incredibly resilient. However, there is persistent uncertainty in growing pockets of financially strained shoppers. Return of student loan repayments and high interest rates are expected to continue impacting this segment of U.S. consumers. Manufacturers and retailers are recognizing the need to cater to two distinct sets of consumers at the same time while managing costs. Two-thirds of manufacturers and retailers surveyed indicate they are satisfied with current staffing levels and plan no meaningful changes over the next 12 months. This requires retailers to scrutinize their shelf sets to meet different consumer needs in different stores, and we are able to help them execute more strategic planograms in-store through our retailer services team. Let me conclude by stating we are excited about the opportunities ahead in 2024 as we ramp up activities to execute our strategy for growth acceleration. We also expect revenue and adjusted EBITDA growth, excluding the in-year impact of the completed divestitures. We are steadfast in our mission to generate demand for consumers, brands, and retailers, converting shoppers into buyers in every way they shop. Advantage is uniquely positioned at the intersection of CPG brands and retailers, physical retail and e-commerce, and national and private brands. We leverage leading capabilities, spanning the path to purchase that are essential and sticky no matter the market conditions, and cultivate enduring relationships across the national retail ecosystem serving as a strategic consultant and delivering customized solutions to fuel growth. We know that when end-to-end demand generation is done right, shoppers turn into buyers. With that, I'll turn it over to Chris for more on our financial performance and outlook.