NASDAQ:ADV Advantage Solutions Q1 2023 Earnings Report $1.30 0.00 (-0.31%) As of 10:17 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Advantage Solutions EPS ResultsActual EPS-$0.15Consensus EPS $0.07Beat/MissMissed by -$0.22One Year Ago EPSN/AAdvantage Solutions Revenue ResultsActual Revenue$1.01 billionExpected Revenue$962.04 millionBeat/MissBeat by +$49.94 millionYoY Revenue GrowthN/AAdvantage Solutions Announcement DetailsQuarterQ1 2023Date5/10/2023TimeN/AConference Call DateWednesday, May 10, 2023Conference Call Time8:30AM ETUpcoming EarningsAdvantage Solutions' Q1 2025 earnings is scheduled for Thursday, May 8, 2025, with a conference call scheduled at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Advantage Solutions Q1 2023 Earnings Call TranscriptProvided by QuartrMay 10, 2023 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Good morning, and welcome to the ADDvantage Solutions First Quarter 2023 Earnings Call. Today's call is being recorded, and we have allocated 1 hour for prepared remarks and Q and A. At this time, I'd like to turn the conference over to Kimberly Esterkin, Investor Relations for ADDvantage. Please go ahead. Speaker 100:00:22Out. Thank you, operator, and thank you, everyone, for joining us on ADDvantage Solutions' Q1 2023 earnings conference call. Hour. On the call with me today are Dave Peacock, Chief Executive Officer and Chris Growe, Chief Financial Officer. Hour. Speaker 100:00:36After their prepared remarks, we will open the call for a question and answer session. During this call, management may make forward looking statements Speaker 200:00:44hour Speaker 100:00:45within the meaning of the federal securities laws. These statements are based on management's current expectations and involve assumptions, risks and uncertainties outcome 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 ks filed with the SEC. All forward looking statements are expressly qualified in hour in their entirety by such factors. The company does not undertake any duty to update or revise any forward looking statements, hour, except as required by law. Speaker 100:01:21Please note management's remarks today will highlight certain non GAAP financial measures. Outperformance. Our earnings release, which was issued earlier today, presents reconciliations of these non GAAP financial measures to the most comparable GAAP measure. Call. And now, I'd like to turn the call over to ADDvantage's CEO, Speaker 300:01:47hour to Dave Peacock. Thanks, Kimberly. Good morning, everyone, and thank you for joining us. I am pleased to be able to hour to record a strong start to the year for ADDvantage Solutions, including stronger than expected revenue and adjusted EBITDA performance for the business. Out I'll provide more color on our performance and our outlook in a few minutes. Speaker 300:02:04I want to start by thanking everyone on the ADDvantage team for their hard work this past quarter. Out. 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 out of the 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, hour, 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. Speaker 300:02:52We're setting the stage for a long range business plan that will position ADDvantage for long term profitable growth. Hour. Advantage is uniquely positioned at the intersection of brands and retailers with extensive reach and breadth of services hour to span the entire path to purchase. Our operational scale is unmatched with nearly 4,000 clients outstanding, 17 channels of trade and most of the largest U. S. Speaker 300:03:20Grocery retailers regarding Advantage as their exclusive in store experiential partner. Out. 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 outperformance. In doing so, we also make consumers' lives easier. Out. Speaker 300:03:44Our people powered culture and data driven insights create collective intelligence that differentiate our execution. Out. In fact, through my many meetings with clients, I've been repeatedly reminded of the clear value of our work. Outperformance. Out. Speaker 300:04:09As a result, ADDvantage's offerings are needed now more than ever. During the Q1, we successfully incremental labor cost inflation necessitated a change. While we are beginning to see the benefit from price increases, hour. 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 outperformance on the sales side of our business as compared to the CPG or retail industries where price increases can be implemented and realized more quickly. Speaker 300:04:50Out. We'll see these changes as the year progresses and fully anticipate better revenue management reflected in margin improvements. Out 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 of Speaker 200:05:07our customers. Overall, we delivered a Speaker 300:05:10strong first quarter result with ADDvantage generating $1,000,000,000 in revenue, hour, an increase of 10.6 percent year over year and adjusted EBITDA of $92,000,000 out I am confident in our capabilities and our potential. Together with the deep expertise of our newly formed executive leadership team, we are taking decisive action to leverage our strengths to drive operational excellence and position ADDvantage for long term profitable growth. Outperformance. It takes a favorable cash flow yield and a strong balance sheet to create the capacity to invest in growth. Outperformance. Speaker 300:05:47In Q1, Vantage generated approximately $70,000,000 of adjusted unlevered free cash hour representing a significant increase versus the prior year driven by solid performance in working capital year over year. Hour. 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 Speaker 400:06:18hour in our Speaker 300:06:18sampling and demonstration business. Event counts have now reached approximately 77% of comparable 2019 levels, up out from 72% last quarter. We reduced turnover by approximately 25% year over year across our enterprise. Hour. We'll continue to refine our talent practices to strengthen retention in the future. Speaker 300:06:40And thanks to our top talent, we were once again recognized by Ad Age as the number one experiential marketing agency and top promotion agency for the 10th consecutive year. Out our executive leadership team is identifying operational enhancements, new ways of collaborating and exploring white space where ADDvantage has the right to win. Outperformance. We're confident that aligning our core competencies while enhancing capabilities will deliver more value to our stakeholders. Out Financial strength is critical and we intend to build capacity to invest in innovation and improve our balance sheet. Speaker 300:07:14We will do this by enhancing our cash generation, enabling us outperformance 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, to modernize our systems and improve our reporting. Our sales and marketing platforms generate massive amounts of data hour, given our unique positioning within the consumer retail ecosystem. Under the leadership of our new Chief Digital Officer, we are working to improve our tech infrastructure, simplify our processes and calibrate our analytics to assess this data more efficiently. Out. Speaker 300:07:51In 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 hour. 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 hour 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. Speaker 300:08:27Hour. 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. Outflow. With that, I'll turn it over to our new Chief Financial Officer, Chris Growe, for more on our financial performance and outlook. Outperformance. Speaker 300:08:45Chris, it's great to have you on the team and welcome to your first of many ADDvantage earnings calls. Speaker 200:08:52Out. Thank you, Dave. I'm excited to be here on the other side of these calls as a CFO of ADDvantage. I look forward to working with you, Dave and the rest of the team in hour. I believe there's a tremendous amount of value to unlock for all stakeholders. Speaker 200:09:09And although it is early days, my conviction in this business is high and has only grown in my short time here. I am joining ADDvantage after over of 25 years in sell side research, most recently at Stifel. And I believe that experience and familiarity with the consumer and retail sector out will serve me well in this position and an advantage more holistically. I have the great benefit of working with the entire finance team hour. We're aiding EMI assimilation into the organization and getting me positioned quickly to succeed in this role. Speaker 200:09:38Now let's get into the performance for the quarter. Out. On a consolidated basis, 1st quarter revenues grew 10.6% year over year to total $1,000,000,000 hour. Excluding unfavorable foreign exchange rates, revenue increased by 12.1%. 1st quarter out EBITDA declined 4.8 percent year over year to $92,000,000 Sales segment revenues of $613,000,000 out increased 3.6% year over year. Speaker 200:10:08Sales segment adjusted EBITDA of $66,000,000 declined 3.5% year over year. Outlier. Top line growth is driven by growth in retail and merchandising services and our European joint venture along with success in our pricing initiatives. Outlier. The decline in adjusted EBITDA in the sales segment is largely a result of the continued inflationary pressures and mix shifts toward lower margin business services hour as we discussed on prior earnings calls. Speaker 200:10:35Marketing segment revenues of $399,000,000 were up 23.5% year over year. This growth was driven primarily by the continued return of our in store sampling and demonstration services to higher event counts out as well as pricing realization in this business, partially offset by softness in digital services. Marketing segment adjusted EBITDA of 20 $6,000,000 was down 8% year over year, driven largely by the flow through of headwinds in our higher margin digital services, outperformance, partially offset by the aforementioned return of sampling and demonstration events. In the aggregate, the adjusted EBITDA margin came in at 9.1%, down 150 basis points year over year, reflecting a decline of 80 basis points in the sales segment and 220 basis points in the marketing segment. Out. Speaker 200:11:25Let's move on to discuss some balance sheet items. Our net debt to adjusted EBITDA finished the Q1 at approximately 4.5 times. Outlier. It remains our goal to delever our balance sheet and reduce our leverage ratio over time and we continue to explore various initiatives which adhere to that goal. Outlier. Speaker 200:11:43For the Q1, we achieved adjusted unlevered free cash flow conversion of approximately 75% of adjusted EBITDA, hour reflecting significant improvement from the same period a year ago as a result of working capital improvements. In line with the prior quarter, hour. Our debt profile remains healthy and we have no meaningful maturities in the next 4 years. At the end of the Q1, hour. Our total funded debt outstanding continue to be approximately $2,000,000,000 We've also taken tangible steps to mitigate future risk and promote a healthy balance sheet. Speaker 200:12:16Out. We voluntarily paid down a small amount of floating rate debt at an attractive discount and we'll continue to monitor opportunities to deploy capital that deleverages the balance sheet hour generating a favorable rate of return. In April, we also initiated a favorable collar on $300,000,000 of our term loan, hour, resulting in 84% of our debt being hedged or at a fixed interest rate and allowing us to capture most of the downside interest rates should it occur. Outlier. Additionally, we completed a small divestiture subsequent to quarter end that generated cash to further strengthen our balance sheet. Speaker 200:12:49Outperformance. A summary of our debt and equity capitalization can be found on Slide 5 in the supplementary slides for the Q1 results posted on the Investors section of our website. Out According to our outlook, for the full year 2023, we are reconfirming adjusted EBITDA in the range of $400,000,000 to $420,000,000 hour inclusive of the impact from the completed divestiture. Looking ahead, we will continue to pursue pricing initiatives to offset wage and ancillary spend increases out. While wage inflation has begun to moderate as they've noted, the rate remains elevated relative to historical levels. Speaker 200:13:26Hour. As labor costs increased, we remain diligent with regard to revenue management and our cost structure. Thank you for your time and I'll turn it now back over to Dave. Speaker 300:13:36Out Thanks, Chris. We are just getting started and have a lot of work to do. We do not believe that 1 quarter defines success, but we're pleased with our start. Hour. I'm confident in the leaders in our company, both new and legacy, who are uncovering and capitalizing on the opportunities every day, both for our own operations out and for our clients and customers. Speaker 300:13:57We have tens of thousands of associates who are a powerful force for consumer and retail businesses and the passion and commitment that I've seen in market visits gives me incredible optimism and confidence in our future. We will now take your questions. Operator? Operator00:14:14Hour. We will now begin the question and answer session. Hour. Out. The first question is from Faiza Alwy of Deutsche Bank. Operator00:14:32Please go ahead. Speaker 500:14:34Yes. Hi. Good morning and congrats Chris. Nice to hear you on hour. I guess I wanted to start first around pricing. Speaker 500:14:45Hour. Can you talk about where you are in the cycle right now? Where are the specific areas where you're getting better pricing from hour and how should we think about that for the rest of the year? Speaker 300:15:01Thanks, Faiza. This is Dave Peacock. Hi, hour. Thanks for the question. Pricing is going well. Speaker 300:15:08We're seeing success in multiple areas of our business hour. I think there's a strong recognition of the labor inflation that we obviously experienced over the last year plus. Out And while labor inflation is moderating a bit from maybe a year ago, we're obviously still experiencing it. Everybody saw the information from the government out just a few weeks ago. But we feel good about the pricing outlook for our business. Speaker 300:15:38Out we've seen it in both those areas of our business that service retailers more directly as well as those on the consumer packaged goods side. Out there's a strong demand for retail activity, if you will, both funded from consumer products companies with all the innovation coming out and a strong desire to leverage off shelf merchandising. And we also see it in our out of retail funded area where we do a lot of resets directly for on behalf of retailers, as they are working in more private label products as well as out some of the innovations coming from their branded product partners. Speaker 500:16:18Understood. And then Dave, I know you've been spending a lot of time with your customers. Hour. Talk a bit you touched on this in some of your comments, but give us a bit more color in terms of what you're hearing out from your customers, what are they looking for from you? And I believe you mentioned some new business wins within the sales segment. Speaker 500:16:38So maybe talk about what are some of the areas where you're gaining some traction in these new business ones? Speaker 300:16:46No, absolutely. And think of our customers kind of broken into, as we had to mention, the branded consumer products companies and hour. Retailers, you obviously are seeing at the branded consumer products side, a strong move hour back into innovation, a lot of new items coming to market. The innovation engines are back on with many of our clients, which is great to see. And as I mentioned, we actually just had a survey with our manufacturers and CPG companies. Speaker 300:17:17And the kind of hour tool that they're using to drive performance at retail right now is off shelf merchandising and positioning, which serves well our retail merchandising out segment. We're hearing a lot of optimism about just I think the year from our CPG partners. Out From the retail side, you're obviously seeing in many cases units down overall, and you are seeing private label outpacing the growth out of branded products, but both so from a dollar standpoint growing well. While we hear a lot in the media, hour Obviously, right now about looming recession or concern over the debt ceiling, I think, so far what we're hearing is hour. Cautious optimism as it relates to the consumer. Speaker 300:18:08Obviously, the labor markets being constrained can be challenging for us, but hour. The more funds in the consumer pockets is going to continue to drive, I think continued visits and out spending in stores. So, pretty I'd say cautiously optimistic is the feedback. I've been in 40 client meetings over the last out in person, actually 3 just in the last 6 days. And we've hour. Speaker 300:18:39We had great discussions around where they see the business going. And as I said, I think there's cautious optimism for this year and you've out We've been tracking some of the reports that have come out for the Q1 from many companies. Speaker 500:18:52Great. And then just last one, if I may. Hour. Give us a sense on how you're thinking about free cash flow conversion for the year. It sounds like you had some good conversion this quarter because of working capital developments. Speaker 500:19:08So just help us a bit in terms of how we should think about that for the course of the year. Speaker 200:19:15Out Hi, Faiza. It's Chris Growe and great to speak to you from this side. This is where I get involved, right? So unlevered free cash flow was hour. Quite strong in the quarter. Speaker 200:19:26It's really going to be a driving force of the rest of the year. We saw really good working capital improvement through the quarter. Hour. I would just say that while we're pleased with the Q1, it's our intent to keep driving improvements in free cash flow. I would just obviously working capital improvements are our focus, but one of the best hour Drivers of free cash flow is profit growth. Speaker 200:19:44So that's our key here, our goal. So the main driver of the working capital improvement was better receivables and better DSOs and out Some of this was the year over year comparison and some of it was our work internally to do that, so to accomplish that. We have financially outlier. Stable large and midsized customers. Cash cycles are stable overall. Speaker 200:20:04So it's aiding our performance in the quarter and it should continue throughout the year. Speaker 500:20:09Hour. Great. Thank you so much. Operator00:20:13The next question is from Greg Parrish of Morgan Stanley. Please go ahead. Speaker 600:20:18Out Hi, good morning. Thanks for taking my question and welcome to Chris as well. So just wanted to circle back on pricing real quick. I think you called out pricing realization in both segments. I guess how was that versus your initial plan? Speaker 600:20:32Are you kind of hour to execute on in order to achieve your guidance. Speaker 300:20:44I'd say we're effectively on a plan and realizing the pricing we out Coming into the year. Obviously, we need to see how things unfold as we move through the year because the timing of our contracts And when they're renewed vary, but so far we're on schedule. Speaker 600:21:04Okay, fair enough. And then I wanted to talk about out capital allocation prior management sort of shifted its focus towards debt pay down. Now that you're sort of both in your seats, can you confirm that's your focus too? And then out previously you were looking at potential asset sales or something in the quarter. If you could maybe confirm what that asset was, that would be helpful. Speaker 600:21:22And then are you looking at further divestitures? Out. So I guess broadly, can you give your sort of high level capital allocation philosophy and then also sort of a near term plan to execute on it? Speaker 300:21:35Yes. I mean, our capital allocation policy is to reduce our debt. So that really hasn't changed. I'll let Chris out Expound a bit more on the recent divestiture, but we're obviously as a new management team assessing the portfolio and looking to determine out both fit strategically, but also value, if you will, in the market and what can hour to position us well as it relates to achieving our goal of paying down debt and also just our hour. What merits internal resource allocation in the form of both funding and people outlier as it relates to the divisions of our company. Speaker 300:22:18So we're going through a pretty rigorous review. I mentioned in my comments about a plan that will come forward. Hour. I don't want to oversell that in the sense that we're going to release some 50 page document to the world, but we will probably talk a little more in detail out in the coming months about how we specifically expect to get our leverage ratio in a much better place. Out I'll just Speaker 200:22:45add on that, Dave. Hi, Greg. I look forward to working with you. Let me start with the divestiture. We can't offer specifics on that. Speaker 200:22:54The best way I can say it, it's less than 3% of revenue and EBITDA. So it is a non core business. It was a 3rd party e commerce reseller out and we divested that business and we're now out of that business overall. And in terms of debt repayment, I think that as Dave said, that's our hour focus now, right. So in the quarter, we had our gross debt, our net debt and our net debt to EBITDA all went down sequentially And that's driven by a slight reduction in debt overall as well as an increase in cash. Speaker 200:23:27We did buyback a small amount of debt in the quarter out and we're going to continue to focus on our balance sheet in general and improving our balance sheet. That's in our kind of top list of priorities for the year. Out just to add one other point here, 84% of our debt is fixed or hedged. We have this recent collar we put on place in place on another $300,000,000 of debt outlier. And that allows us to control any upside in rates and actually allows us to capture the downside in rates from here. Speaker 200:23:54So I like the improved Speaker 300:23:59out And Greg, one more thing too on that. I do want to reinforce, when hour. The business necessitates it or we see opportunities to invest in the business, we will. And that can be in the technology area, that may be in areas in support of our demonstration business as it comes back and grows. So I do want to reinforce that. Speaker 300:24:22We will invest in our business because we do see the opportunities for growth, but we obviously are also prioritizing hour debt repayment. Speaker 600:24:31Okay, great. That's all very helpful. I appreciate the color. And then lastly for me, just out Maybe you can give us an update on labor availability, wages. Obviously, labor numbers last week, it's still very hot and tight out there. Speaker 600:24:44But I don't know out maybe there's no change, but just want to kind of get an update on what you're seeing. Speaker 300:24:50I think I'd say it's shifting a bit. You're right. If you look at labor participation rates, dipped a bit Kind of month over month and you obviously saw the numbers as it relates to unemployment and job creation. Hour. We had 900 net new hires in the quarter. Speaker 300:25:11So we've had 3 consecutive quarters of net new hires, and continue to see success out in that area. And what I like seeing is our new Chief Digital Officer and our new Chief of HR partnering in finding better ways and quicker ways and this also is included in our workforce management group, to get people, from kind of hire hour to enroll, if you will. One of the things that we've seen and I saw this when I was working in grocery retail, the quicker you can get people through what I call the hiring funnel, hour. The more success you're going to have both in attracting candidates, but also keeping them longer term because you just make it less difficult to join the company. So that's one of our hour. Speaker 300:25:56And it's paying off right now as we're seeing much better recruiting efforts and we are seeing a little bit of a out reduction in turnover as well. So we're starting to see some stickiness with the current labor force. Speaker 600:26:11Great. Thank you very much. Operator00:26:15Out. The next question is from Jason English of Goldman Sachs. Please go ahead. Speaker 400:26:20Out Hey, good morning folks. Thanks for slotting me in and congrats Chris on the new role. I must apologize in advance. Hour. Juggling 4 different earnings calls this morning. Speaker 400:26:29I missed much of your prepared remarks. So I apologize if I ask you something redundant. Out It's great to hear the progress on the labor front that you just mentioned. I'm curious if we could delve in deeper on the progress on the pricing front. There's a lot of chatter in the industry right now about increased tension hour between manufacturers and brokers with manufacturers not just pushing back on price, but actually trying to get commission dollars down out And threatening polling businesses, etcetera. Speaker 400:26:55I'm curious if you think those concerns are sensationalized, out If you're actually seeing it play out and how the interplay between the interactions and negotiating price between your Speaker 300:27:12hour Thanks, Jason. Yes, I mentioned and you may not have heard it, but I've been with hour We've been 40 client meetings in person over the last couple of months and I've not experienced what you referenced in the minor actions outlier with our clients. Clearly, there's always sort of a push and pull as it relates to pricing at any time, whether it's an inflationary period or a deflationary period. Hour. But, yes, I have not experienced that sort of tension, if you will. Speaker 300:27:44That said, I mean, at the end of the day, we actually have a responsibility as well to make sure that we're delivering our services more efficiently. And one of the things we're doing more and more as we hour speak with our clients and I want to reiterate you really have in CPG companies, but retailers as well. There's a lot of what we do out on behalf of and for the retailers directly. And we're talking a lot about the results And what are the desired results and what are their objectives and what are we trying to achieve, and getting less into sort of the, if you will, the hour How many bodies are up because at the end of the day, if we can be more efficient in what we do, whether that's through technology or just better process controls within the functions and hour. As we perform, it takes some pressure off that pricing side. Speaker 300:28:32But thus far, we've had, I think very good and reasonable discussions with both our CPG and retailer partners as it relates to pricing. Speaker 400:28:42Okay. That's good to hear. Hour. And in terms of sampling, I see the progress you're showing on your slides and it's good to see the continued progress there. Hour Still well below 2019 levels. Speaker 400:28:54How much of that is labor constraints and how much of that is lost demand, meaning some of these manufacturers are spending a lot more on retail media hour And other commitments, they pulled back the sampling, maybe they discovered they didn't need it. Like, are we at a rebased level in your view? Speaker 300:29:11No, I'd say a lot of it is with labor constraint. And just as I mentioned earlier, getting the net hires up. Out Anytime you have an innovation environment like we have now, in the survey we just performed with our CPG partners, over 90 hour. Are enhancing their innovation efforts and the third have over a third have said they're aggressively pursuing innovation. Hour that plus private label growth can those can both lead to increased demand for sampling. Speaker 300:29:42So, it's really what I'd say focus for us is sort of an hour execution rate and our ability to bring people in and get them trained and as we say from hire to cart, shorten that time period so that we get people in out and get these jobs filled because the demand is there. Speaker 400:30:01Got it. Okay, good to hear. Thanks guys. I'll pass it on. Operator00:30:07Hour. This concludes our question and answer session. I would like to turn the conference back over to Dave Peacock for closing remarks. Speaker 300:30:15Thank you. No, I can't reiterate enough that we're very pleased with the quarter. We don't obviously declare victory after 1 quarter. We've got a lot of work to do. The team is very hour and covering opportunities every day, to both improve the services we provide to our clients and customers hour and enhance the employee experience within our organization. Speaker 300:30:36We have to remember that the associate experience is critical to our success out because we're a people based business, a people powered business, and we remain focused on that. We thank you for your time and we look forward to speaking to you again. Operator00:30:48Hour. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallAdvantage Solutions Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Advantage Solutions Earnings HeadlinesAndrea YoungMarch 15, 2025 | latimes.comAdvantage Solutions price target lowered to $3.50 from $5.50 at CanaccordMarch 11, 2025 | markets.businessinsider.comCrypto’s crashing…but we’re still profitingMost traders are panicking right now. Bitcoin’s dropping. Altcoins are bleeding. The stock market’s a mess. The news is screaming fear. But while most traders watch their portfolios tank…April 25, 2025 | Crypto Swap Profits (Ad)Morgan Stanley Sticks to Their Hold Rating for Advantage Solutions (ADV)March 10, 2025 | markets.businessinsider.comADVANTAGE SOLUTIONS Earnings Preview: Recent $ADV Insider Trading, Hedge Fund Activity, and MoreMarch 7, 2025 | nasdaq.comAdvantage Solutions names Dean General new Chief Operating Officer of Branded Services business segmentMarch 7, 2025 | globenewswire.comSee More Advantage Solutions Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Advantage Solutions? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Advantage Solutions and other key companies, straight to your email. Email Address About Advantage SolutionsAdvantage Solutions (NASDAQ:ADV) provides business solutions to consumer goods manufacturers and retailers in North America and internationally. It operates in two segments, Sales and Marketing. The Sales segment offers brand-centric services, such as headquarter relationship management; analytics, insights, and intelligence; and brand-centric merchandising services. This segment also provides retailer-centric services comprising retailer-centric merchandising and in-store media services. The Marketing segment offers brand-centric services, including shopper and consumer marketing, and brand experiential services; retailer-centric services, such as retail experiential and private label services; and digital marketing, and digital media and advertising services. The company was formerly known as Karman Holding Corp. and changed its name to Advantage Solutions Inc. in March 2016. The company was founded in 1987 and is headquartered in Irvine, California.View Advantage Solutions ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step In Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 7 speakers on the call. Operator00:00:00Good morning, and welcome to the ADDvantage Solutions First Quarter 2023 Earnings Call. Today's call is being recorded, and we have allocated 1 hour for prepared remarks and Q and A. At this time, I'd like to turn the conference over to Kimberly Esterkin, Investor Relations for ADDvantage. Please go ahead. Speaker 100:00:22Out. Thank you, operator, and thank you, everyone, for joining us on ADDvantage Solutions' Q1 2023 earnings conference call. Hour. On the call with me today are Dave Peacock, Chief Executive Officer and Chris Growe, Chief Financial Officer. Hour. Speaker 100:00:36After their prepared remarks, we will open the call for a question and answer session. During this call, management may make forward looking statements Speaker 200:00:44hour Speaker 100:00:45within the meaning of the federal securities laws. These statements are based on management's current expectations and involve assumptions, risks and uncertainties outcome 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 ks filed with the SEC. All forward looking statements are expressly qualified in hour in their entirety by such factors. The company does not undertake any duty to update or revise any forward looking statements, hour, except as required by law. Speaker 100:01:21Please note management's remarks today will highlight certain non GAAP financial measures. Outperformance. Our earnings release, which was issued earlier today, presents reconciliations of these non GAAP financial measures to the most comparable GAAP measure. Call. And now, I'd like to turn the call over to ADDvantage's CEO, Speaker 300:01:47hour to Dave Peacock. Thanks, Kimberly. Good morning, everyone, and thank you for joining us. I am pleased to be able to hour to record a strong start to the year for ADDvantage Solutions, including stronger than expected revenue and adjusted EBITDA performance for the business. Out I'll provide more color on our performance and our outlook in a few minutes. Speaker 300:02:04I want to start by thanking everyone on the ADDvantage team for their hard work this past quarter. Out. 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 out of the 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, hour, 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. Speaker 300:02:52We're setting the stage for a long range business plan that will position ADDvantage for long term profitable growth. Hour. Advantage is uniquely positioned at the intersection of brands and retailers with extensive reach and breadth of services hour to span the entire path to purchase. Our operational scale is unmatched with nearly 4,000 clients outstanding, 17 channels of trade and most of the largest U. S. Speaker 300:03:20Grocery retailers regarding Advantage as their exclusive in store experiential partner. Out. 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 outperformance. In doing so, we also make consumers' lives easier. Out. Speaker 300:03:44Our people powered culture and data driven insights create collective intelligence that differentiate our execution. Out. In fact, through my many meetings with clients, I've been repeatedly reminded of the clear value of our work. Outperformance. Out. Speaker 300:04:09As a result, ADDvantage's offerings are needed now more than ever. During the Q1, we successfully incremental labor cost inflation necessitated a change. While we are beginning to see the benefit from price increases, hour. 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 outperformance on the sales side of our business as compared to the CPG or retail industries where price increases can be implemented and realized more quickly. Speaker 300:04:50Out. We'll see these changes as the year progresses and fully anticipate better revenue management reflected in margin improvements. Out 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 of Speaker 200:05:07our customers. Overall, we delivered a Speaker 300:05:10strong first quarter result with ADDvantage generating $1,000,000,000 in revenue, hour, an increase of 10.6 percent year over year and adjusted EBITDA of $92,000,000 out I am confident in our capabilities and our potential. Together with the deep expertise of our newly formed executive leadership team, we are taking decisive action to leverage our strengths to drive operational excellence and position ADDvantage for long term profitable growth. Outperformance. It takes a favorable cash flow yield and a strong balance sheet to create the capacity to invest in growth. Outperformance. Speaker 300:05:47In Q1, Vantage generated approximately $70,000,000 of adjusted unlevered free cash hour representing a significant increase versus the prior year driven by solid performance in working capital year over year. Hour. 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 Speaker 400:06:18hour in our Speaker 300:06:18sampling and demonstration business. Event counts have now reached approximately 77% of comparable 2019 levels, up out from 72% last quarter. We reduced turnover by approximately 25% year over year across our enterprise. Hour. We'll continue to refine our talent practices to strengthen retention in the future. Speaker 300:06:40And thanks to our top talent, we were once again recognized by Ad Age as the number one experiential marketing agency and top promotion agency for the 10th consecutive year. Out our executive leadership team is identifying operational enhancements, new ways of collaborating and exploring white space where ADDvantage has the right to win. Outperformance. We're confident that aligning our core competencies while enhancing capabilities will deliver more value to our stakeholders. Out Financial strength is critical and we intend to build capacity to invest in innovation and improve our balance sheet. Speaker 300:07:14We will do this by enhancing our cash generation, enabling us outperformance 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, to modernize our systems and improve our reporting. Our sales and marketing platforms generate massive amounts of data hour, given our unique positioning within the consumer retail ecosystem. Under the leadership of our new Chief Digital Officer, we are working to improve our tech infrastructure, simplify our processes and calibrate our analytics to assess this data more efficiently. Out. Speaker 300:07:51In 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 hour. 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 hour 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. Speaker 300:08:27Hour. 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. Outflow. With that, I'll turn it over to our new Chief Financial Officer, Chris Growe, for more on our financial performance and outlook. Outperformance. Speaker 300:08:45Chris, it's great to have you on the team and welcome to your first of many ADDvantage earnings calls. Speaker 200:08:52Out. Thank you, Dave. I'm excited to be here on the other side of these calls as a CFO of ADDvantage. I look forward to working with you, Dave and the rest of the team in hour. I believe there's a tremendous amount of value to unlock for all stakeholders. Speaker 200:09:09And although it is early days, my conviction in this business is high and has only grown in my short time here. I am joining ADDvantage after over of 25 years in sell side research, most recently at Stifel. And I believe that experience and familiarity with the consumer and retail sector out will serve me well in this position and an advantage more holistically. I have the great benefit of working with the entire finance team hour. We're aiding EMI assimilation into the organization and getting me positioned quickly to succeed in this role. Speaker 200:09:38Now let's get into the performance for the quarter. Out. On a consolidated basis, 1st quarter revenues grew 10.6% year over year to total $1,000,000,000 hour. Excluding unfavorable foreign exchange rates, revenue increased by 12.1%. 1st quarter out EBITDA declined 4.8 percent year over year to $92,000,000 Sales segment revenues of $613,000,000 out increased 3.6% year over year. Speaker 200:10:08Sales segment adjusted EBITDA of $66,000,000 declined 3.5% year over year. Outlier. Top line growth is driven by growth in retail and merchandising services and our European joint venture along with success in our pricing initiatives. Outlier. The decline in adjusted EBITDA in the sales segment is largely a result of the continued inflationary pressures and mix shifts toward lower margin business services hour as we discussed on prior earnings calls. Speaker 200:10:35Marketing segment revenues of $399,000,000 were up 23.5% year over year. This growth was driven primarily by the continued return of our in store sampling and demonstration services to higher event counts out as well as pricing realization in this business, partially offset by softness in digital services. Marketing segment adjusted EBITDA of 20 $6,000,000 was down 8% year over year, driven largely by the flow through of headwinds in our higher margin digital services, outperformance, partially offset by the aforementioned return of sampling and demonstration events. In the aggregate, the adjusted EBITDA margin came in at 9.1%, down 150 basis points year over year, reflecting a decline of 80 basis points in the sales segment and 220 basis points in the marketing segment. Out. Speaker 200:11:25Let's move on to discuss some balance sheet items. Our net debt to adjusted EBITDA finished the Q1 at approximately 4.5 times. Outlier. It remains our goal to delever our balance sheet and reduce our leverage ratio over time and we continue to explore various initiatives which adhere to that goal. Outlier. Speaker 200:11:43For the Q1, we achieved adjusted unlevered free cash flow conversion of approximately 75% of adjusted EBITDA, hour reflecting significant improvement from the same period a year ago as a result of working capital improvements. In line with the prior quarter, hour. Our debt profile remains healthy and we have no meaningful maturities in the next 4 years. At the end of the Q1, hour. Our total funded debt outstanding continue to be approximately $2,000,000,000 We've also taken tangible steps to mitigate future risk and promote a healthy balance sheet. Speaker 200:12:16Out. We voluntarily paid down a small amount of floating rate debt at an attractive discount and we'll continue to monitor opportunities to deploy capital that deleverages the balance sheet hour generating a favorable rate of return. In April, we also initiated a favorable collar on $300,000,000 of our term loan, hour, resulting in 84% of our debt being hedged or at a fixed interest rate and allowing us to capture most of the downside interest rates should it occur. Outlier. Additionally, we completed a small divestiture subsequent to quarter end that generated cash to further strengthen our balance sheet. Speaker 200:12:49Outperformance. A summary of our debt and equity capitalization can be found on Slide 5 in the supplementary slides for the Q1 results posted on the Investors section of our website. Out According to our outlook, for the full year 2023, we are reconfirming adjusted EBITDA in the range of $400,000,000 to $420,000,000 hour inclusive of the impact from the completed divestiture. Looking ahead, we will continue to pursue pricing initiatives to offset wage and ancillary spend increases out. While wage inflation has begun to moderate as they've noted, the rate remains elevated relative to historical levels. Speaker 200:13:26Hour. As labor costs increased, we remain diligent with regard to revenue management and our cost structure. Thank you for your time and I'll turn it now back over to Dave. Speaker 300:13:36Out Thanks, Chris. We are just getting started and have a lot of work to do. We do not believe that 1 quarter defines success, but we're pleased with our start. Hour. I'm confident in the leaders in our company, both new and legacy, who are uncovering and capitalizing on the opportunities every day, both for our own operations out and for our clients and customers. Speaker 300:13:57We have tens of thousands of associates who are a powerful force for consumer and retail businesses and the passion and commitment that I've seen in market visits gives me incredible optimism and confidence in our future. We will now take your questions. Operator? Operator00:14:14Hour. We will now begin the question and answer session. Hour. Out. The first question is from Faiza Alwy of Deutsche Bank. Operator00:14:32Please go ahead. Speaker 500:14:34Yes. Hi. Good morning and congrats Chris. Nice to hear you on hour. I guess I wanted to start first around pricing. Speaker 500:14:45Hour. Can you talk about where you are in the cycle right now? Where are the specific areas where you're getting better pricing from hour and how should we think about that for the rest of the year? Speaker 300:15:01Thanks, Faiza. This is Dave Peacock. Hi, hour. Thanks for the question. Pricing is going well. Speaker 300:15:08We're seeing success in multiple areas of our business hour. I think there's a strong recognition of the labor inflation that we obviously experienced over the last year plus. Out And while labor inflation is moderating a bit from maybe a year ago, we're obviously still experiencing it. Everybody saw the information from the government out just a few weeks ago. But we feel good about the pricing outlook for our business. Speaker 300:15:38Out we've seen it in both those areas of our business that service retailers more directly as well as those on the consumer packaged goods side. Out there's a strong demand for retail activity, if you will, both funded from consumer products companies with all the innovation coming out and a strong desire to leverage off shelf merchandising. And we also see it in our out of retail funded area where we do a lot of resets directly for on behalf of retailers, as they are working in more private label products as well as out some of the innovations coming from their branded product partners. Speaker 500:16:18Understood. And then Dave, I know you've been spending a lot of time with your customers. Hour. Talk a bit you touched on this in some of your comments, but give us a bit more color in terms of what you're hearing out from your customers, what are they looking for from you? And I believe you mentioned some new business wins within the sales segment. Speaker 500:16:38So maybe talk about what are some of the areas where you're gaining some traction in these new business ones? Speaker 300:16:46No, absolutely. And think of our customers kind of broken into, as we had to mention, the branded consumer products companies and hour. Retailers, you obviously are seeing at the branded consumer products side, a strong move hour back into innovation, a lot of new items coming to market. The innovation engines are back on with many of our clients, which is great to see. And as I mentioned, we actually just had a survey with our manufacturers and CPG companies. Speaker 300:17:17And the kind of hour tool that they're using to drive performance at retail right now is off shelf merchandising and positioning, which serves well our retail merchandising out segment. We're hearing a lot of optimism about just I think the year from our CPG partners. Out From the retail side, you're obviously seeing in many cases units down overall, and you are seeing private label outpacing the growth out of branded products, but both so from a dollar standpoint growing well. While we hear a lot in the media, hour Obviously, right now about looming recession or concern over the debt ceiling, I think, so far what we're hearing is hour. Cautious optimism as it relates to the consumer. Speaker 300:18:08Obviously, the labor markets being constrained can be challenging for us, but hour. The more funds in the consumer pockets is going to continue to drive, I think continued visits and out spending in stores. So, pretty I'd say cautiously optimistic is the feedback. I've been in 40 client meetings over the last out in person, actually 3 just in the last 6 days. And we've hour. Speaker 300:18:39We had great discussions around where they see the business going. And as I said, I think there's cautious optimism for this year and you've out We've been tracking some of the reports that have come out for the Q1 from many companies. Speaker 500:18:52Great. And then just last one, if I may. Hour. Give us a sense on how you're thinking about free cash flow conversion for the year. It sounds like you had some good conversion this quarter because of working capital developments. Speaker 500:19:08So just help us a bit in terms of how we should think about that for the course of the year. Speaker 200:19:15Out Hi, Faiza. It's Chris Growe and great to speak to you from this side. This is where I get involved, right? So unlevered free cash flow was hour. Quite strong in the quarter. Speaker 200:19:26It's really going to be a driving force of the rest of the year. We saw really good working capital improvement through the quarter. Hour. I would just say that while we're pleased with the Q1, it's our intent to keep driving improvements in free cash flow. I would just obviously working capital improvements are our focus, but one of the best hour Drivers of free cash flow is profit growth. Speaker 200:19:44So that's our key here, our goal. So the main driver of the working capital improvement was better receivables and better DSOs and out Some of this was the year over year comparison and some of it was our work internally to do that, so to accomplish that. We have financially outlier. Stable large and midsized customers. Cash cycles are stable overall. Speaker 200:20:04So it's aiding our performance in the quarter and it should continue throughout the year. Speaker 500:20:09Hour. Great. Thank you so much. Operator00:20:13The next question is from Greg Parrish of Morgan Stanley. Please go ahead. Speaker 600:20:18Out Hi, good morning. Thanks for taking my question and welcome to Chris as well. So just wanted to circle back on pricing real quick. I think you called out pricing realization in both segments. I guess how was that versus your initial plan? Speaker 600:20:32Are you kind of hour to execute on in order to achieve your guidance. Speaker 300:20:44I'd say we're effectively on a plan and realizing the pricing we out Coming into the year. Obviously, we need to see how things unfold as we move through the year because the timing of our contracts And when they're renewed vary, but so far we're on schedule. Speaker 600:21:04Okay, fair enough. And then I wanted to talk about out capital allocation prior management sort of shifted its focus towards debt pay down. Now that you're sort of both in your seats, can you confirm that's your focus too? And then out previously you were looking at potential asset sales or something in the quarter. If you could maybe confirm what that asset was, that would be helpful. Speaker 600:21:22And then are you looking at further divestitures? Out. So I guess broadly, can you give your sort of high level capital allocation philosophy and then also sort of a near term plan to execute on it? Speaker 300:21:35Yes. I mean, our capital allocation policy is to reduce our debt. So that really hasn't changed. I'll let Chris out Expound a bit more on the recent divestiture, but we're obviously as a new management team assessing the portfolio and looking to determine out both fit strategically, but also value, if you will, in the market and what can hour to position us well as it relates to achieving our goal of paying down debt and also just our hour. What merits internal resource allocation in the form of both funding and people outlier as it relates to the divisions of our company. Speaker 300:22:18So we're going through a pretty rigorous review. I mentioned in my comments about a plan that will come forward. Hour. I don't want to oversell that in the sense that we're going to release some 50 page document to the world, but we will probably talk a little more in detail out in the coming months about how we specifically expect to get our leverage ratio in a much better place. Out I'll just Speaker 200:22:45add on that, Dave. Hi, Greg. I look forward to working with you. Let me start with the divestiture. We can't offer specifics on that. Speaker 200:22:54The best way I can say it, it's less than 3% of revenue and EBITDA. So it is a non core business. It was a 3rd party e commerce reseller out and we divested that business and we're now out of that business overall. And in terms of debt repayment, I think that as Dave said, that's our hour focus now, right. So in the quarter, we had our gross debt, our net debt and our net debt to EBITDA all went down sequentially And that's driven by a slight reduction in debt overall as well as an increase in cash. Speaker 200:23:27We did buyback a small amount of debt in the quarter out and we're going to continue to focus on our balance sheet in general and improving our balance sheet. That's in our kind of top list of priorities for the year. Out just to add one other point here, 84% of our debt is fixed or hedged. We have this recent collar we put on place in place on another $300,000,000 of debt outlier. And that allows us to control any upside in rates and actually allows us to capture the downside in rates from here. Speaker 200:23:54So I like the improved Speaker 300:23:59out And Greg, one more thing too on that. I do want to reinforce, when hour. The business necessitates it or we see opportunities to invest in the business, we will. And that can be in the technology area, that may be in areas in support of our demonstration business as it comes back and grows. So I do want to reinforce that. Speaker 300:24:22We will invest in our business because we do see the opportunities for growth, but we obviously are also prioritizing hour debt repayment. Speaker 600:24:31Okay, great. That's all very helpful. I appreciate the color. And then lastly for me, just out Maybe you can give us an update on labor availability, wages. Obviously, labor numbers last week, it's still very hot and tight out there. Speaker 600:24:44But I don't know out maybe there's no change, but just want to kind of get an update on what you're seeing. Speaker 300:24:50I think I'd say it's shifting a bit. You're right. If you look at labor participation rates, dipped a bit Kind of month over month and you obviously saw the numbers as it relates to unemployment and job creation. Hour. We had 900 net new hires in the quarter. Speaker 300:25:11So we've had 3 consecutive quarters of net new hires, and continue to see success out in that area. And what I like seeing is our new Chief Digital Officer and our new Chief of HR partnering in finding better ways and quicker ways and this also is included in our workforce management group, to get people, from kind of hire hour to enroll, if you will. One of the things that we've seen and I saw this when I was working in grocery retail, the quicker you can get people through what I call the hiring funnel, hour. The more success you're going to have both in attracting candidates, but also keeping them longer term because you just make it less difficult to join the company. So that's one of our hour. Speaker 300:25:56And it's paying off right now as we're seeing much better recruiting efforts and we are seeing a little bit of a out reduction in turnover as well. So we're starting to see some stickiness with the current labor force. Speaker 600:26:11Great. Thank you very much. Operator00:26:15Out. The next question is from Jason English of Goldman Sachs. Please go ahead. Speaker 400:26:20Out Hey, good morning folks. Thanks for slotting me in and congrats Chris on the new role. I must apologize in advance. Hour. Juggling 4 different earnings calls this morning. Speaker 400:26:29I missed much of your prepared remarks. So I apologize if I ask you something redundant. Out It's great to hear the progress on the labor front that you just mentioned. I'm curious if we could delve in deeper on the progress on the pricing front. There's a lot of chatter in the industry right now about increased tension hour between manufacturers and brokers with manufacturers not just pushing back on price, but actually trying to get commission dollars down out And threatening polling businesses, etcetera. Speaker 400:26:55I'm curious if you think those concerns are sensationalized, out If you're actually seeing it play out and how the interplay between the interactions and negotiating price between your Speaker 300:27:12hour Thanks, Jason. Yes, I mentioned and you may not have heard it, but I've been with hour We've been 40 client meetings in person over the last couple of months and I've not experienced what you referenced in the minor actions outlier with our clients. Clearly, there's always sort of a push and pull as it relates to pricing at any time, whether it's an inflationary period or a deflationary period. Hour. But, yes, I have not experienced that sort of tension, if you will. Speaker 300:27:44That said, I mean, at the end of the day, we actually have a responsibility as well to make sure that we're delivering our services more efficiently. And one of the things we're doing more and more as we hour speak with our clients and I want to reiterate you really have in CPG companies, but retailers as well. There's a lot of what we do out on behalf of and for the retailers directly. And we're talking a lot about the results And what are the desired results and what are their objectives and what are we trying to achieve, and getting less into sort of the, if you will, the hour How many bodies are up because at the end of the day, if we can be more efficient in what we do, whether that's through technology or just better process controls within the functions and hour. As we perform, it takes some pressure off that pricing side. Speaker 300:28:32But thus far, we've had, I think very good and reasonable discussions with both our CPG and retailer partners as it relates to pricing. Speaker 400:28:42Okay. That's good to hear. Hour. And in terms of sampling, I see the progress you're showing on your slides and it's good to see the continued progress there. Hour Still well below 2019 levels. Speaker 400:28:54How much of that is labor constraints and how much of that is lost demand, meaning some of these manufacturers are spending a lot more on retail media hour And other commitments, they pulled back the sampling, maybe they discovered they didn't need it. Like, are we at a rebased level in your view? Speaker 300:29:11No, I'd say a lot of it is with labor constraint. And just as I mentioned earlier, getting the net hires up. Out Anytime you have an innovation environment like we have now, in the survey we just performed with our CPG partners, over 90 hour. Are enhancing their innovation efforts and the third have over a third have said they're aggressively pursuing innovation. Hour that plus private label growth can those can both lead to increased demand for sampling. Speaker 300:29:42So, it's really what I'd say focus for us is sort of an hour execution rate and our ability to bring people in and get them trained and as we say from hire to cart, shorten that time period so that we get people in out and get these jobs filled because the demand is there. Speaker 400:30:01Got it. Okay, good to hear. Thanks guys. I'll pass it on. Operator00:30:07Hour. This concludes our question and answer session. I would like to turn the conference back over to Dave Peacock for closing remarks. Speaker 300:30:15Thank you. No, I can't reiterate enough that we're very pleased with the quarter. We don't obviously declare victory after 1 quarter. We've got a lot of work to do. The team is very hour and covering opportunities every day, to both improve the services we provide to our clients and customers hour and enhance the employee experience within our organization. Speaker 300:30:36We have to remember that the associate experience is critical to our success out because we're a people based business, a people powered business, and we remain focused on that. We thank you for your time and we look forward to speaking to you again. Operator00:30:48Hour. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by