Q2 2023 Advantage Solutions Inc Earnings Call
Ladies and gentlemen, good morning, and welcome to the advantaged solutions second quarter 2023 auding skull.
Speaker 1: links gone.
Speaker 2: Today's call is being recorded and we have allocated 1 hour for prepared remarks and Q&A.
Today's call is being recorded and.
And we have allocated one hour for prepared remarks and Q&A.
Speaker 2: At this time, I'd like to turn the conference over to Sean Choksi in investor relations and strategy for Advantage. Thank you.
At this time I'd like to turn the conference over to Sean jokes, He investor Relations and strategy for advantage. Thank you you may begin sir.
Thank you operator, and thank you everyone for joining us on advantaged solutions second quarter 2023 earnings conference call on.
Speaker 3: 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 growing chief financial officer.
On the call with me today are Dave Peacock, Chief Executive Officer, and Chris <unk>, Chief Financial Officer. After their prepared remarks, we will open the call for a question and answer session.
Speaker 3: After their prepared remarks, we will open the call for a question and answer session.
Speaker 3: 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.
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.
Speaker 3: 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 10K filed with the SEC.
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.
Speaker 3: All forward-looking statements are expressly qualified in their entirety by such factors.
All forward looking statements are expressly qualified in their entirety by such factors.
Speaker 3: The company does not undertake any duty to update or revise any forward-looking statement except as required by law.
The company does not undertake any duty to update or revise any forward looking statement, except as required by law.
Speaker 3: Please note, management's remarks today will highlight certain non-GAAP financial measures. Our earnings release, which was issued earlier today, presents reconciliation of these non-GAAP financial measures in 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 Advantages CEO , Dave Peacock. Thanks, Sean. Good morning. Every
Please note management's remarks today, we'll highlight certain non-GAAP financial measures our earnings release, which was issued earlier today presents reconciliations of these non-GAAP financial measures.
Comparable GAAP measure is 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 advantages CEO , Dave Peacock.
Thanks, John Good morning, everyone and thank you for joining us.
Speaker 4: 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.
I'm going to start by thanking everyone on the advantage team for their hard work this past quarter.
Can you to spend time in the market connecting with many of our team members remain impressed by their care for one another commitment to service excellence and passion for strengthening relationships and results.
Speaker 4: 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 dollars in revenue, an increase of 5.7% year over year, an 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.
As evidenced 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 five 7% year over year and adjusted EBITDA of $104 million.
Or more we continue to make strides on cash flow performance, which Chris will provide more color on in his remarks.
Speaker 4: 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.
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.
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.
Speaker 4: 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.
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.
Speaker 4: Advantage holds a unique position at the intersection of brands and retailers with extensive reach and breadth of services spanning the entire purchase path.
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 4000 clients across 17 trade channels and most of the largest U S grocery and several big box retailers partnering with advantage.
Speaker 4: We are a market leader in terms of operational scale with more than 4,000 clients across 17 trade channels in most of the largest US grocery and several big box retailers partnering with advantage to serve as their exclusive and store experiential partner.
To serve as their exclusive in store experiential partner.
Speaker 4: 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 of 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.
It's a competitive position that gives us a critical insights and a strategic perspective on today's shoppers being at this vantage point, we arguably no more about shopper expectations or 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.
Speaker 4: 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 6 to 12 months. These surveys are packed with valuable, unvarnished insights that are unmatched in the industry.
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.
Advantages latest outlook report, which will release publicly in the weeks ahead revealed several trends that continue to drive demand for advantages services, while complementing our deep expertise relentless execution and trusted relationships in the industry.
Speaker 4: Advantage's latest outlook report, which will release publicly in the weeks ahead, reveals several trends that continue to drive demand for advantages services, while complementing our deep expertise, relentless execution, and trusted relationships in the industry.
Speaker 4: For starters, install labor for retailers as critical. Retailers continue to face labor shortage challenges. In fact, lack of install labor and plan a gram oversight of the top two factors affecting on shelf availability.
For starters in store labor for retailers is critical retailers continue to face labor shortage challenges in fact lack of in store labor and plant a gram over side of the top two factors affecting on shelf availability.
Moving forward retailers plan to increase self checkout and reduce in store labor with many saying they will use third party relationships to combat the labor issue.
Speaker 4: Moving forward, retailers plan to increase self-checkup and reduce in-store labor, with many saying that we'll use third-party relationships to combat the labor issue.
Speaker 4: Additionally, product innovation is a top priority for both manufacturers and retailers.
Additionally, product innovation is a top priority for both manufacturers and retailers.
Speaker 4: Nearly every CPG manufacturer in our study says they are targeting innovation at mainstream or premium price products with a heavy focus on health and wellness. And more than half indicate they're focusing on app and in-home indulgences, indicating a bullish outlook on consumer appetite for premium items.
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're focusing on at an in home indulgences, indicating a bullish outlook on consumer appetite for premium items.
Speaker 4: Manufacturers current and future focus on innovation is well time since a majority of retailers expect to increase their acceptance of innovation and will accept new item cut-ins outside of a reset window.
Manufacturers current and future focus on innovation is well timed with the 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 released the next advantage outlook later this month.
Speaker 4: 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 I do possess sentiment that will populate?"
Speaker 4: During the second quarter, we continued to realize revenue gains in cases where we believe the value of our services were not yet fully realized, as well as areas where incremental labor cost inflation necessitated increases in pricing. Across our businesses, we are experiencing labor cost inflation at mid-single digits consistent with the market and moderating relative to prior year.
During the second quarter, we continued to realize revenue gains in cases, where we believe the value of our services. We are not yet fully realized as well as areas, where incremental labor cost inflation necessitated increases in pricing.
Across our businesses, we are experiencing labor cost inflation at mid single digits, consistent with the market and moderating relative to the prior year.
Speaker 4: 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 improvement.
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.
Speaker 4: We also are focused on driving efficiency in our business, recognizing the need to deliver services in a way that is more precise and generate the greater yield on the time and cost-expended.
More precise and generates a greater yield on the time and cost expanded.
Speaker 4: Additionally, we are sharpening our focus on more effective cast generation. In the second quarter, our executive leadership team has continued the drive change and we're making sequential progress as our results suggest.
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.
Speaker 4: On a year-to-date basis, advantage generated approximately 188 million of adjusted on levered free cash flow, representing a significant increase versus the prior year, driven by solid improvement and working capital.
Speaker 4: 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.
We had approximately 1000 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.
Speaker 4: Relatedly, we reduced turnover across our enterprise by an additional 10% quarter over quarter with significant improvements in our part-time retention rate.
Relatedly, we reduced turnover across our enterprise by an additional 10% quarter over quarter with significant improvements in our part time retention rates.
Speaker 4: 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.
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 75000 plus associates in a 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 opportunity.
Speaker 4: Even our sheer breadth and scale is 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.
<unk> 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.
Speaker 4: 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.
Thank you, Dave I continue to grow increasingly confident in our ability to strategically position. This business for long term success and deliver value to all stakeholders.
Speaker 4: Thank you, Dave. I continue to grow increasingly confident in our ability to strategically position this business for long-term success and deliver value to all stakeholders. Now let's get into the performance for the quarter. On a consolidated basis, second quarter revenue grew 5.7% year over year to total $1 billion, excluding unfavorable foreign exchange rates and acquisitions and investors, revenues increased by 7.7%.
Now, let's get into the performance for the quarter on a consolidated basis second quarter revenue grew five 7% year over year to total $1 billion.
Excluding unfavorable foreign exchange rates and acquisitions and divestitures revenues increased by seven 7%.
Speaker 4: Second quarter, adjusted EBITDA declined 3.8% your year to $104 million.
Second quarter, adjusted EBITDA declined three 8% year over year to $104 million.
Speaker 4: Sales segment revenues of $600 million decreased 0.7% year over year, but we're up 1.8% done, excluding foreign exchange and acquisition of investors.
Sales segment revenues of $600 million decreased 0.7% year over year, but were up one 8%, excluding foreign exchange and acquisitions and divestitures.
Speaker 4: Sales segment, the Judacity with DAA of $64 million declined 11.3% year over year.
<unk> segment, adjusted EBITDA of $64 million declined 11, 3% year over year.
The revenue decline was driven by our completed divestiture and intentional client exit partially offset by growth in retail and merchandising services success, and our pricing initiatives and growth in our European joint venture.
Speaker 4: The revenue decline was driven by our completed investor and intentional client exit. Parts have set by growth and retail and merchandising services, success in our pricing initiatives, and growth in our European joint venture.
Speaker 4: The decline in Justin Yvada in the sales segment is largely a result of mixed shift toward lower margin business services as we discussed on prior earnings calls, inflationary pressures, and the completed investor.
The decline in adjusted EBITDA and the sales segment is largely a result of mix shift toward lower margin business services as we discussed on prior earnings calls inflationary pressures and the completed divestiture.
Speaker 4: Marketing and segment revenues of $437 million, we're up 16% year over year, and up 17.1%, excluding foreign exchange, and acquisitions and investors.
Marketing segment revenues of $437 million were up 16% year over year, and up 17, 1%, excluding foreign exchange and acquisitions and divestitures.
Speaker 4: This growth was primarily driven by the continued return of our in-store sampling and demonstration services to higher event counts, as well as pricing realization in this business, with digital services starting to show signs of stabilization.
This growth was primarily driven by the continued return of our in store sampling and demonstration services to higher event counts as well as pricing realization in this business with digital services is starting to show signs of stabilization.
Speaker 4: marketing segment, adjusted the batat of $41 million was up 10.8% year over year driven largely by the aforementioned return to sampling and demonstration events and pricing realization.
Marketing segment adjusted EBITDA of $41 million was up 10, 8% year over year, driven largely by the aforementioned return of sampling and demonstration events and pricing realization.
Speaker 4: In the air grid, the adjusted EBITDA margin came in at 10%. Down 100 basis points year over year, marking an improvement in trajectory from Q1s approximately 150 basis point year over year compression. Let's move on to this.
In the aggregate the adjusted EBITDA margin came in at 10% down 100 basis points year over year marketing improvement in trajectory from Q1 is approximately 150 basis point year over year compression.
Let's move on to discuss some balance sheet items.
Speaker 4: Our net debt to Adjusted Evidoff finished the second quarter at approximately 4.3 times. We will continue to explore opportunities to deliver our balance sheet and reduce our leverage ratio over time.
Our net debt to adjusted EBITDA finished the second quarter at approximately four three times, we will continue to explore opportunities to delever, our balance sheet and reduce our leverage ratio over time.
Speaker 4: For the second quarter, we achieved the adjusted, unlearned free cash flow conversion of approximately 114% of a justity of a DAW. Reflushing continued emphasis on optimizing working capital.
For the second quarter, we achieved adjusted Unlevered free cash flow conversion of approximately 114% of adjusted EBITDA, reflecting continued emphasis on optimizing working capital.
Speaker 4: And lying with the prior quarter, our debt profile remains healthy. And we've known meaningful maturities in the next four years.
In line with the prior quarter, our debt profile remains healthy with no meaningful maturities in the next four years.
Speaker 4: At the end of the second quarter, our total funded debt outstanding continue to be approximately $2 billion.
At the end of the second quarter, our total funded debt outstanding continued to be approximately $2 billion. We've.
Speaker 4: We've doubled down on our initiatives to stabilize our balance sheet and protect against future interest rate risk.
We've doubled down on our initiatives to stabilize our balance sheet and protect against future interest rate risk.
Speaker 4: During the quarter, we voluntarily repurchased $52 million of floating rate debt at an attractive discount and will continue to monitor opportunities to deploy capital that the leverages the balance sheet while generating a favorable rate of return. As of June , approximately 85% of our debt is hedged or at a fixed interest rate.
During the quarter, we voluntarily repurchased $52 million of floating rate debt at an attractive discount and we'll continue to monitor opportunities to deploy capital that de leverages the balance sheet, while generating a favorable rate of return.
June approximately 85% of our debt is hedged or at a fixed interest rate.
Speaker 4: A summary of our debt and equity capitalization can be found on slide five and the supplementary slides for the second quarter results posted on the investor section of our website.
A summary of our debt and equity capitalization can be found on slide five in the supplementary slides for the second quarter results posted on the investors section of our website.
Speaker 4: Turning to our outlook, for the full year 2023, we are reconfirming the Justity Vita in the range of $400 million to $420 million.
Turning to our outlook for the full year 2023, we are reconfirming, our adjusted EBITDA in the range of $400 million to $420 million.
Speaker 4: Our guidance contemplates the continued realization of pricing, growth of in-store sampling demonstration events.
Our guidance contemplates the continued realization of pricing growth of in store sampling and demonstration events.
Speaker 4: as well as the investor that closed early in second quarter and the accelerated investments behind technology and talent.
As well as the divestiture that closed early in second quarter, and the accelerated investments behind technology and talent.
Speaker 4: We remain diligent with regards to revenue management, our cost structure, and our cash generation, as we continue to strengthen our financial discipline to help fuel growth. Thank you for your time. I'll now turn.
We remain diligent with regards to revenue management, our cost structure and our cash generation as we continue to strengthen our financial discipline to help fuel growth.
Thank you for your time I'll now turn it back to Dave.
Thanks, Chris we're pleased with the progress but continue to acknowledge that there remains a lot of work to be done I am confident in our leaders of our company, both new and legacy we continue to work towards enhancing our people powered culture, optimizing our operations and serving our brand and retail partners.
Speaker 5: Thanks, Chris. We're pleased with the progress, but continue to acknowledge that there remains a lot of work to be done. I am confident in the leaders of our company, both new and legacy, who continue to work towards enhancing our people-powered culture, optimizing our operations, and serving our brand and retail partners.
Speaker 5: The people of advantage have done tremendous work growing the company to what it is today. We have more than 75,000 associates who wake up every day with a focus on serving on behalf of the brands we represent and for the retailers where they work. It's our job to enable their efforts and to help them also realize their personal goals so that we become the employer of choice for them and others.
The people of advantage have done tremendous work growing the company to what it is today, we have more than 75000 associates, who wake up every day with a focus on serving on behalf of the brands, we represent and for the retailers where they work.
It's our job to enable their efforts and to help them also realize their personal goals. So that we become the employer of choice for them and others.
Speaker 5: Our collective success requires us to have a workforce that reflects the communities where we live and work. We are committed to improving representation and belonging through our diversity and inclusion efforts, as we also bring more fresh perspective to how we deliver innovative solutions for our brand and retail partners.
Our collective success requires us to have a workforce that reflects the communities, where we live and work we are committed to improving representation and belongings of our diversity and inclusion efforts as we also bring more fresh perspective as to how we deliver innovative solutions for our brand and retail partners.
Speaker 5: With the passion and commitment to growth that I see on a daily basis, I'm confident in the company we're continuing to build as we pave the path to sustainable long-term growth. We'll now take your questions.
With the passion and commitment to growth that I see on a daily basis I'm confident in the company, we're continuing to build as we pave the path to sustainable long term growth.
We will now take your questions operator.
Thank you.
Speaker 2: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Ladies and gentlemen, even and I will be conducting a question and answer session.
I would like to ask a question. Please press star and one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
Speaker 2: You may press star and two if you'd like to remove your question from the queue.
You May press star two if you'd like to remove your question from the queue.
Speaker 2: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.
All participants using speaker equipment, it may be necessary to pick up your handset, that's what but I think the stock east.
Ladies and gentlemen, we will wait for a moment, while we poll for questions.
Speaker 2: Ladies and gentlemen, we will wait for a moment while we pull for questions.
Okay.
Our first question comes from the line of Greg Parish with Morgan Stanley . Please go ahead.
Speaker 2: Our first question comes from the line of Craig Parish with Morgan Stanley . Please go ahead.
Great Good morning.
Speaker 6: Great, good morning. Congrats on the result. I said we'll answer about margin, clearly some improvement from first quarter, second quarter here or so.
And congrats on the result.
You said warrants around margin clearly some improvement from first quarter second quarter here or so.
Speaker 6: Is this level here the right way to think about the back half? And I know you talked about continued realization of pricing. So if some of that comes through, just that can have to get a little bit better. And then this is way too early, understandably. But it's one to potentially talk about 2024 and margin level. I don't know if you have any thoughts there, that would be helpful too.
It is this level here the right way to think about the back half and you know I know you talked about continued realization of pricing. So there's some of that come through the second half get a little bit better.
And then this is way too early understandably, but just wanted to potentially talk about 'twenty 'twenty four and margin level I don't know if you have any thoughts there that'd be helpful too.
Thanks, Greg.
Speaker 7: Thanks, Greg. Yeah, this is Dave. Look, we were first very pleased by the second quarter results.
Yes. This is Dave.
Look we were first very pleased by our second quarter results.
And really want to acknowledge our team.
Speaker 7: and really want to acknowledge our team for stepping up and doing a great job. You're exactly right. We saw a little bit of margin improvement. We're seeing better pricing flow through, in fact, year-to-date of our organic growth.
For stepping up and doing a great job.
You're exactly right, we saw a little bit of margin improvement, we're seeing better pricing flow through in fact year to date.
Ganic growth pricing is just under a third of it.
Speaker 7: pricing is just under a third of it. And we'll probably continue to see pricing improvements in the second half. We do envision margins being a bit better in the second half.
We will probably continue to see pricing improvements in the second half, we do envision margins being a bit better in the second half.
Speaker 7: and the combination of factors or driving that, obviously some of the revenue, the pricing side, and then obviously just the general mix of performance within the business. And it relates to 24, it is early. You know, we still, a fairly new management team, well, I've been around six months.
And a combination of factors are driving that obviously some of the revenue the pricing side and then obviously just the general mix of performance within the business and as it relates to 'twenty four it is early.
We are still a fairly new management team and while I have been around six months.
Speaker 7: A lot of the team members, they increase sitting here or less than that. So we wanna make sure we have full visibility and understanding of the business before we put any guidance out before.
The team members.
I think Chris sitting here.
Less than that so we want to make sure we have full visibility and understanding of the business before we put any guidance out for.
Speaker 6: Great. And then, sort of similar question on Hayden's first half's second half. Think about the three cash flow conversions. Again, strong in the first half. How do we think about that in the second half? Some of that reverse a little bit.
Great and then sort of a similar question.
Cadence first half second half think about the free cash flow conversion was again strong in the first half how do we think about that in a second half some of that reverse a little bit.
Sure.
Speaker 7: I think as we look at unleavored free cash flow, we're sort of seeing it.
I think as we look at Unlevered free cash flow.
We're sort of seeing it probably being a good level to think about it like 65% plus.
Speaker 7: probably being a good level that can think about it, like 65% plus on a sustaining basis. So you're gonna see,
On a sustaining basis, so you're going to see.
Speaker 7: you know potentially a little bit less than the second half could be just as good you know the team has done a phenomenal job and I know I'm Chris make a few comments but I want to acknowledge him and his team for for really finding creative ways to as I call it ring more cash out of the business and get more cash yield out of our activity so is that continues and we're kind of pulling every lover we're off the misty about the second.
Potentially a little bit less in the second half could be just as good as the team has done a phenomenal job and then I'll have Chris make a few comments, but I want to acknowledge Jim and his team for really finding creative ways to as I call. It bring more cash out of the business and get more cash yield out of our activities. So.
As that continues and we are.
Kind of pulling every lever we are optimistic about the second half.
Speaker 4: And just out of that great day, we said it well. You know, in the second half, just to keep in mind, you know, we talked about investments. There are real investments that are occurring here, especially in tech. And so we want to just keep that in mind as part of our outlook for the second half of the year. Therefore, in our cash conversion.
And just to add to that Greg Dave said it well.
In the second half just to keep in mind, we talked about investments there are real investments that are occurring here, especially in tech and so we want to just keep that in mind as part of our outlook for the second half of the year. Therefore in our cash conversion.
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Speaker 4: But I think at the same time there's an intense focus, well I know there's an intense focus internally on working capital. So I think if we can continue to make some progress there, I hope we can do a little better than that. But I think that 65% plus is a good average. It's right at, let's call it 100% in the first half of the year. Again, working capital being the key driver there. I hope to continue that and if we do, I hope we can generate even more cash in the second half of the year.
But I think at the same time, there is an intense focus while I know there is intense focus internally on working capital. So I think if we can continue to make some progress there I hope we can do a little better than that but I think that 65% plus is a good average.
Right, So let's call it 100% in the first half of the year again working capital will be in the key driver there I hope to continue that and if we do I hope we can.
Generate even more cash in the second half of the year.
Yeah.
Speaker 6: Great. And then I was going to flip it one more. It's any up through updates, your strategic review and sort of assets that you're looking at. And then maybe to get a little bit more specific because this has been coming up.
Okay, Great and then I'll just slip in one more any other updates versus strategic review and what sort of assets that youre looking at and then maybe to get a little bit more specific because this has been coming up but.
Speaker 6: Think about marketing, specifically the sampling business and why that fits. And I understand I think when gaming was bought, there was a real rationale for a large retailer, a provider, but as you're sitting here and there's clearly some opportunities to pay down that, like, why does the sampling business really fit with sales? It can kind of walk us through.
You're about marketing specifically, the sampling business and why that sat there and I understand I think when Damon was bought there was a real rationale for a large retail where a large retailer went preferred provider, but as you're sitting here and there's clearly some opportunities that to pay down debt.
As you know.
Why does the sampling business is really split with sales and you can kind of walk us through that.
Speaker 7: No, Greg, appreciate that. Yeah, I think as we get into our November meeting, we'll talk a little bit about where we're headed from a strategic standpoint. And then even more so as we get into early next year. I like to let our actions speak for us and our results more importantly. And so you can see already, and then again, it's very early for the team, where we're focused and.
No Greg I appreciate that yes, I think as we get into our November meeting, we'll talk a little bit about where we're headed from a strategic standpoint, and then even more so as we get into early next year.
I'd like to let our actions speak for us and our results more importantly, and so you can see already and again, it's very early for the team, where we're focused and how we're trying to bring discipline around cash generation and paying down debt.
Speaker 7: how we're trying to bring discipline around cast generation and paying down debt, and getting our balance sheet in the goods.
And getting our balance sheet in a good spot.
Speaker 7: and we're very pleased with the results thus far.
And we're up and we're very pleased with the results thus far.
Sure.
Speaker 5: of the sampling business or demonstration business. You know, it's interesting.
The sampling business or demonstration business.
It's interesting it's.
Speaker 5: I think it's a good business in the sense that there is a certain level of consistency in demand for that type of service.
It's a good business in the sense that there is a certain level of consistency and demand for that type of service.
Speaker 7: especially when you see 98% plus of manufacturers really dialing up innovation. And some of those are doing so in a significant way. And you're finding retailers more receptive to innovation. And you compound that with the fact that you're seeing private label grow at about a half a share point, if you will, total store.
Especially when you see 98% plus of of manufacturers.
Really dialing up innovation and some of those are doing so in a significant way and you're finding retailers more receptive to innovation.
And you compound that with the fact that Youre seeing private label grow at about a half of.
Sharepoint, if you will total store.
Speaker 5: you know, private labels are often in many retailers part of what you're sampling. So we've seen consistency in demand and you know, it's a business for us that
Private labels are often in many retailers and part of what Youre sampling. So we've seen consistency in demand.
And it's a business for us that.
Speaker 5: from a kind of working capital or cash flow standpoint, is also a good one.
From a working capital or cash flow standpoint is also a good one.
Speaker 7: But that's by as far as I'm going to go as it relates to talking about anything related to our strategic review. But we remain bullish on the demonstration business and see opportunity both for growth and a little bit of better margin realization. All right, very helpful.
But thats, probably as far as I'm going to go as it relates to talking about it.
Anything related to our strategic review, but we remain bullish on the demonstration business and see opportunity both for growth and a little bit of better margin realization.
Alright very helpful. Congrats on a result happy Friday.
Thank you.
Thank you.
Speaker 2: Our next question comes from the line of Jason English with Goldman Sachs. Please go ahead.
Our next question comes from the line of Jason English with Goldman Sachs. Please go ahead.
Hey, Jason Hey, guys Hey.
Stockholder letter.
Speaker 8: Good morning, everyone. Thank you for slotting in for the question. A couple quick questions. You mentioned that retailers are still facing really tight labor conditions. Are you still facing really tight labor conditions? And is this route does this remain a gating factor in terms of how quickly you can recover your sampling?
Good morning, everyone. Thank you for the question.
A couple of quick questions. You mentioned that retailers are still facing really tight labor conditions are you still facing a really tight labor conditions and is this does this remain a gating factor in terms of how quickly you can recover your sampling business.
Speaker 5: We're seeing, I continue to tight labor market, but you saw that we're seeing pretty strong that new hires. We are, I think over 75,000 teammates now. So we've seen that slowly build back, obviously in the last year or so. We saw turnover down 10%. And that's actually really important for us. The more we can retain, and if you can imagine than some of these businesses, we had had people.
We're seeing a continued tight labor market, but you saw that we're seeing.
Strong net new hires.
We are I think over 75000 teammates now.
So we've seen that slowly build back obviously in the last year or so.
We saw turnover down 10% and that is actually really important for us the more we can retain and if you can imagine in some of these businesses we had had people.
Speaker 7: you know, serving for a long time and then the pandemic hit and some of those businesses virtually shut down. So it's rebuilding that, but the good news is we've had a
Serving for a long time, and then depend mek and sorry, some of those businesses virtually shut down so its rebuilding that but the good news is we've had a successful track record of retaining people and we want to we want to continue to leverage that and we have a lot of talent management efforts underway.
Speaker 7: successful track record of retaining people and we want to continue to leverage that and we have a lot of talent management efforts underway To give people as many opportunities as possible to advance within the company, which is one of the key Enablers to retention But it is I won't I won't Sugarcoded it's fill the tight market you saw the unemployment was down to 3 and a half percent
To give people as many opportunities as possible to advance within the company, which is one of the key enablers to retention.
But it is I won't I won't I won't sugarcoat. It it's still a tight market you saw the unemployment was down to three 5% in U S added another 200000, plus jobs and the report that came out today. So.
Speaker 7: US added another 200,000 plus jobs and the report came out today. So it's one of the least we see worth watching, but we're pleased with our retention rate so far.
It's one we see worth watching but we're finding we're pleased with our retention rates so far.
Speaker 8: Okay. So on the marketing of sampling side, are you back to Brighton? Should we take the runner, you hop here and say, this is a reasonable runner, I go it forward, you're back to the level of sampling that the market's comfortable with, you're able to supply the sampling, there's no real further ramp on that one.
Okay.
So on the marketing and sampling side are you back to Brian like should we say to take the run rate you hop here and say this is a reasonable run rate going forward youre back to the level of sampling that the market's comfortable with youre able to supply the sampling and Theres no real further ramp on that one.
Speaker 5: Now we think there's still gap to close. It's a combination of factors. Some of it is supply based, as far as the supply chains and product availability, especially when you're dealing with newer innovative items.
No. We think there is still.
Theres still a gap to close.
It's a combination of factors some of it is supply base as far as.
The supply chain and product availability, especially when youre dealing with newer innovated innovative items.
Speaker 7: Some of it is personnel. And so we continue, especially in regional pockets, if you will, if the least is a little tighter, as it relates to labor than a lot of other parts of the country, as an example.
Some of it is personnel and so we continue especially in regional pockets. If you will in South East is a little tighter as it relates to labor and a lot of other parts of the country as an example.
Speaker 7: And then some obviously is just some of our customers getting those programs back, you know, even still post COVID and going within their stores as they assess their strategy going forward. So there's a number of factors, but we do see continued growth and gap closing as it relates to event counts.
And then some obviously is just some of our customers getting those programs back even still post COVID-19 and going within their stores as they assess their strategy going forward. So there's a number of factors, but we do see continued growth and gap closing as it relates to event count.
Jason just to add to that were a little less than 80% of where we were in 2019 and I think we're going to continue to see each quarter, just a sequential improvement of a few percentage points.
Speaker 4: Jason, just to add to that, we're a little less than 80% of where we were in 2019. And I think we're going to continue to see each quarter just a sequential improvement, sort of a few percentage points, and just keep plotting our way back to that 2019 level. And evidence so far this year would indicate that each month we're seeing that sequentially improve. So I think that should continue.
And just keep plotting our way back to that that 2019 level in evidence. So far this year would indicate that each month, we're seeing that sequentially improve something that should continue.
Speaker 8: Thank you. I appreciate the numbers that are pressed. It's another early helpful. Two more questions for me. It's great to see you stabilize it.
Thank you I appreciate the numbers that Chris did other always helpful.
Two more questions for me.
It's great to see you stabilize the margins I know your aspirations aren't stabilized but to restore margins.
Speaker 8: I know your aspirations are not to stabilize, but to restore margins, which would appear to be requisite on further pricing actions, to not only kind of cover the ongoing labor situation, but catch up with the stuff that you fell behind on.
Which would appear to be requisite on further pricing actions did not only kind of cover yamana labor inflation to catch up with the stuff that you fell behind on it.
Speaker 8: In light of the inflationary environment, more realistically, in the fact that retailers are becoming much less accommodated for price increases because they see the cost pressures not as wide as widespread and manufacturers as the specter are going to be as disciplined as they always are in terms of trying to fight that. How is that impacting your billion of price, whether we're talking about this year, next year, like the forward, how does that evolving environment influence your price?
In light of the inflationary environment more holistically in the fact that retailers are becoming much less accommodated for price increases because they see the cost pressures.
As widespread manufacturers I suspect are going to be as disciplined as they always are in terms of trying to fight that.
Wow, how is that impacting your ability to price whether we're talking about this year next year like look forward, how does that evolving environment.
Pricing.
Speaker 7: Yeah, as I mentioned before, a little under a third of our organic growth here today has come from price. And where, you know, we need to have those conversations and everybody's obviously aware of labor inflation. I think those conversations have gone well. We look at our retailer and CPG.
Yeah, as I mentioned before.
A little under a third of our organic growth year to date has come from price.
And where we need to have those conversations and everybody's obviously aware of labor inflation I think those conversations have gone well, we look at our retailer and CPG.
Speaker 7: customers really as partners and we talk a lot about that and that's how they refer to us and so in that spirit of partnership we have to
Customers really as partners and we talk a lot about that and that's how they refer to us and so in that spirit of partnership we have to.
Speaker 7: share the fact that we are dealing with cross escalation. At the same time, it's incumbent upon us to realize a value proposition.
Sure. The fact that we are dealing with cost escalation at the same time, it's it's incumbent upon us to realize the value proposition.
Speaker 7: or the need relative to what we're doing. And I mentioned for example with demonstration.
Or the need relative to what we're doing and I mentioned before for example, with the demonstration.
Speaker 7: What you see with a lot of the innovation and private label growth, private label obviously is a business that we're steeped in from the legacy day inside. And we're seeing opportunity with that business as well.
What you see with <unk>.
A lot of the innovation in private label growth private label, obviously is a business that were steeped in.
From the legacy <unk> side.
We're seeing opportunity with that business as well and even the merchandising we're doing for retailers things like resets are bid in higher demand because youre seeing.
Speaker 7: and even the merchandising we're doing for retailers, things like resets.
Speaker 7: or a bit in higher demand because you're seeing a little higher, a little higher interest in cutting in between reset windows. You're seeing with the innovation growth a lot of need to reset. So.
Little more higher a little higher interest in cutting in between reset windows Youre seeing with the innovation growth a lot of need to reset so the demand for the businesses there and whenever you have demand and then you've got real cost pressures usually you can have.
Speaker 7: The demand for the business is there and whenever you have demand.
Speaker 7: And then you've got real cost pressures. Usually you can have a rational conversation relative to price.
A rational conversation relative to price.
Okay, Yeah that makes sense in terms of the cut ins and that merchandise. The interest went on the CPG companies sustained innovation.
Speaker 8: And yeah, that makes sense in terms of the cuttings and the merchandise, the insurance went on the CPG companies, the same innovation. The other side of the sales equation, you do have a commission-based business and as we look across the brand of landscape, binds a bit of section itself and we're of course, we'd be an employee where price is the minimum. So if not negative for some categories, what does the, that seems to have, it would seem to have negative implications.
On the side of the.
Equation.
<unk> base business and as we look across the broader landscape volumes have been exceptional.
How quickly would be at a point where prices development no negative for some categories.
What is the.
It seems that it would seem to have negative implications for the.
Speaker 9: for the commission side of business. What is your outlook there, and it can remind us how big that is in context of your overall fail.
The commission side of your business.
What is your outlook there and if you can remind us how big that is in context of your overall sales segment.
Speaker 7: Commission side to be as much as about 25%. So we've got other contracts in place, they're not commission based. And...
Commission side could be as much as about 25%. So we've got other contracts in place that are not commission based and.
Speaker 7: And look, you obviously have to negotiate those commission rates as well. In light of the activities we're performing in the market and the same inflationary pressures that we're facing. So, you know, we still have some opportunities there. And from an aggregate, as you zoom out, what we do in the services we provide from a toll of someone's cost of good soul can be pretty small. And so when you look at their margins, for instance.
And look what you obviously have to negotiate those commission rates as well in light of the activities. We're performing in the market and the same inflationary pressures that we're facing so.
We still have some opportunities there.
From an aggregate as you assume out.
What we do and the services we provide from a.
Total of someone's cost of goods sold can be pretty small.
And so when you look at their their margins for instance.
Speaker 5: Some of the pricing actions I have, you know, pretty minimal impact. But...
Some of the pricing actions I have.
Pretty minimal impact.
But.
Speaker 5: Yes, we are seeing volumes, the same thing you're seeing Jason in the market, slip for a lot of the manufacturers and a desire to get increased traffic and increased volume. And I think that increased volume.
Yes, we are seeing volumes the same thing youre seeing Jason and the market <unk>.
Slipped for a lot of the manufacturers and a desire to get increased traffic and increased volume and I think that increased volume.
Speaker 5: leads to a lot more out of aisle, merchandising opportunities, which plays into one of our strengths as well as what we do both for CPGs and for retailers. So it does create more demand for what we're doing and an opportunity to continue to grow our business.
<unk> leads to a lot more out of aisle merchandising opportunities, which plays into one of our strengths as far as what we do both for <unk> and for retailers. So it does create more demand for what we're doing and an opportunity to continue to grow our business.
Understood. Thanks, guys. Thank you for your time.
Thanks, Jason.
Thank you.
Speaker 2: As there are no further questions, I would now hand the conference over to Dave Pico, Chief Executive Officer for closing comments.
As there are no further questions I would now hand, the conference over to Dave Peacock.
Chief Executive Officer for closing comments.
Thanks, a lot guys look if it was it was a quarter that we're pleased with you at the same time.
Speaker 5: Thanks a lot, guys. Look, it was a quarter that we're pleased with, yet at the same time, we're never satisfied with our results. So we remain committed to focusing on those things that can get us to getting a balance sheet where we're much more in a stronger position relative to our debt. And look, the future for our businesses, right? We've talked about some of the things through the Q&A that we feel are helping
We're never satisfied with our results. So we remain committed to.
Focusing on those things that.
Can get us to getting our balance sheet, where we're much more.
In a stronger position relative to our debt and look the future for our business as Brian we've talked about some of the things through the Q&A that we feel are helping drive demand and create some tailwind. So we remain optimistic and again really appreciative of the great work our team did the last three months.
Speaker 5: drive-demanded creates some tailwinds. So we're remain optimistic and again, really appreciative of the great work our team did the last three.
Speaker 2: Thank you. The conference of Advantage Solutions has now concluded. Thank you for your participation. You may now disconnect your lines.
Thank you the conference off advantaged solutions has now concluded. Thank you for your participation you may now disconnect your lines.
Yeah.
Speaker 10: The C.
Yeah.
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Yeah.
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Yes.
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