Q4 2023 Advantage Solutions Inc Earnings Call

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Operator: Greetings and welcome to the Advantage Solutions fourth quarter and full year 2023 earnings call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the advantage solutions fourth quarter and full year 2023 earnings call.

At this time all participants are in a listen only mode.

Operator: After the speaker's remarks, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue.

After the speaker's remarks, there will be a question and answer session.

To ask a question during the session you will need to press star one on your telephone keypad.

A confirmation until indicate that you're in line as in the question queue.

Operator: If anyone should require operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded. It's now my pleasure to introduce Reuben Meya, Vice President of Investor Relations. Thank you, Reuben.

Then what you require operator assistance during the conference. Please press star is zero.

As a reminder, this conference is being recorded.

It's now my pleasure to introduce Reuben <unk>, Vice President of Investor Relations. Thank you Ruben you may begin.

Reuben Meya: You may begin. Thank you, operator. And thank you, everyone, for joining us on Advantage Solutions' fourth quarter Employer 2023 Earnings Conference Call. On the call with me today are Dave Peacock, Chief Executive Officer, Chris Growe, Chief Financial Officer, and Sean Choksi, Senior Vice President of Strategy at M&A. Dave and Chris will provide their prepared remarks, after which we will open the call for a question and answer session. During this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based upon management's current expectations and involve assumptions, risk, and uncertainties that are difficult to predict. Actual outcomes and results could differ materially due to several factors, including those described more fully in the company's annual report on Swarm 10-K filed with the SEC. All forward-looking statements are expressly qualified in the entirety by such factors. The company does not undertake any duty to update or revise any forward-looking statements, except as required by law.

Thank you everyone for joining us on Venus solutions fourth quarter and full year 2023 earnings conference call on.

On the call with me today or days Peacock, Chief Executive Officer, Chris Screwy, Chief Financial Officer, Sean Celski, Senior Vice President of strategy and emanate.

Dave and Chris will arrive they're prepared remarks, after which were open the call for a question and answer session.

During this call management may make forward looking statements within the meaning of the federal Securities laws.

<unk> are based upon management's current expectations evolve assumptions risks and uncertainties.

Two per day.

Actual outcomes or results to differ materially due to several factors, including those described more fully in the company's annual report on Form 10-K filed with the S. E C.

All forward looking statements are expressly qualified in the entirety by such factors the.

The company does not undertake any duty to update or revise any forward looking statements, except as required by law.

Reuben Meya: Please note that management's remarks today will contain certain non-GAAP financial measures. Our earnings release issued earlier today presents reconciliations of these non-GAAP financial measures to the most comparable GAAP measure. This call is being webcast, and a recording will also be available on the company's investor relations website. We will reference the presentation during the prepared remarks, also available on the events and presentations section of the IR website. And now I'd like to turn the call over to Advantage's CEO, Dave Peacock. Thanks, Ruben. Good morning, everyone.

Please note manage with remarks today will contain certain non-GAAP financial measures our earnings release issue earlier today presents reconciliations of these non-GAAP financial measures the most comparable gap measure.

This call is being webcast and a recording will also be available on the company's Investor Relations website.

Will reference a presentation during the prepared remarks also available on the events and presentations section of the eye our website.

And now I'd like to turn the call over to your advantage of C E O J Peacock.

Rubin good morning, everyone and thank you for joining US 2023 March an important year for advantage solutions as we began to execute a strategy to maximize our full potential as a partner of choice to consumer brands and retailers and drive longterm profitable growth.

David A. Peacock: And thank you for joining us. 2023 marks an important year for Advantage Solutions as we begin to execute a strategy to maximize our full potential as a partner of choice to consumer brands and retailers and drive long-term profitable growth. At the same time, we remain focused on meeting the needs of our clients and keeping our promise to shareholders by exceeding our adjusted EBITDA guidance in 2023. We were especially pleased to deliver year-over-year adjusted EBITDA growth and margin expansion in the fourth quarter. Our success in 2023 centers on our teammates across the enterprise who share a heart for service and a relentless dedication to winning together each day. On behalf of the leadership team, I thank them for their efforts.

At the same time, we remain focused on meeting the needs of our clients and keeping our promise to shareholders by exceeding our adjusted EBITDA guidance in 2023.

Were especially pleased to deliver a year over year, adjusted EBITDA growth and margin expansion in the fourth quarter.

Our success in 2023 centers on our teammates across the enterprise, who share a heart for service and a relentless dedications winning together each day.

Half of the leadership team I, thank them for their efforts.

David A. Peacock: I want to take a few minutes to review some of our significant actions to date to enhance value for everyone we touch, including our shareholders. We believe these accomplishments will help fortify the long-range plan to create a more unified company with enhanced operational efficiencies through streamlined processes, strategic rigor, agility, and improved capabilities. In January, we expanded our executive leadership team and welcomed Brian McCroskey as Chief Growth Officer. Brian joined Advantage after 17 years at Bain, where he collaborated with executives in the consumer packaged goods industry to solve their toughest strategic challenges.

I wanted to take a few minutes to review some of our significant actions to date to enhance value for everyone. We touch including our shareholders. We believe these accomplishments will help fortify the long range plan to create a more unified company with enhanced operational efficiencies through streamline processes strategic rigor.

Agility and improved capabilities.

In January we expanded our executive leadership team and welcomes Brian Mccroskey is cheaper with officer, Brian joined advantage. After 17 years with pain, where he collaborated with executives and the consumer package goods industry to solve their toughest strategic challenges you.

David A. Peacock: He will be pivotal in shaping our growth strategy, identifying new business opportunities, and driving organizational excellence. We have renewed a service provider agreement with a large multinational retailer, and as an expansion of our existing relationship, Advantage will also now be their exclusive experiential partner, conducting all sampling and demo events across its many U.S. stores. Our leading capabilities within store and digital sampling offerings will help us convert more shoppers into buyers as we expand our relationship with this long-standing customer. We executed contracts with several significant customers to continue providing services for them in late 23 and into 2024, demonstrating our long-standing relationships. One example is with a large US retailer specializing in trend-forward general merchandise. This will mark the 12th year of our exclusive partnership supporting this retailer's beauty category both in-store and online to provide shoppers with a more engaging experience.

It will be pivotal and shaping our growth strategy identifying new business opportunities and driving organizational excellent.

We have renewed his service provider agreement with a large multinational retailer and as an expansion of our existing relationship advantage will also now be their exclusive experiential partner conducting all sampling and demo events across its many U S stores.

Are leading capabilities within store and digital sampling offerings will help us convert more shoppers into buyers as we expand our relationship with this longstanding customer.

We executed contracts with several significant customers to continue providing services for them in late twenty-three and into 2024, demonstrating our long standing relationships. One example is with a large U S retailers specializing in trend forward general merchandise. This.

This will mark the 12th year of our exclusive partnership supporting this retailers beauty categories, both in store and online to provide shoppers with more engaging experience.

David A. Peacock: We feel good about the momentum heading into 2024. More than 95% of our key enterprise clients re-upped with us this year, with the majority adding new services and many enhancing their respective annual spending. For example, we signed an agreement to leverage the broad range of services we provide with one of the leading global food, health, and beauty CPG companies, where we expanded our scope and are launching key pilot programs over the course of the year. We also entered into two new agreements with third-party technology companies to help optimize back office costs in the coming years, reduce complexity, and enhance the suite of capabilities we offer clients. The first with Genpact, a global leader in business and technology services, gives us access to their expertise and advanced AI-powered technology and automation, which complements our client management capabilities and connectivity across the consumer goods and retail industry.

We feel good about the momentum heading into 2024 more than 95% of our T enterprise clients re ups with us this year with the majority, adding new services and many enhancing their respective annual spending.

For example, we sign an agreement to leverage the broad range of services, we provide with one of the leading global food health and beauty CPG companies, where we expanded our scope and are launching key pilot programs over the course of the year.

We also entered into two new agreements with third party technology companies to help optimize back office costs in the coming years reduce complexity and enhance the sweet of capabilities we offer clients.

But first with Genpact, a global leader in business and technology services gives us access to their expertise and advanced AI power technology, and automation, which complements our client management capabilities and connectivity across the consumer goods and retail industries.

David A. Peacock: We are modernizing our IT support services in collaboration with an award-winning provider of business services, Tata Consultancy Services. PCS is known for its expertise in digital technologies, innovation, and commitment to delivering customer value. They will transform and modernize our IT services to benefit the team, clients, and customers. We have also completed several divestitures and continue to evaluate opportunities to simplify our operations further so we can focus more resources on our core businesses and enable growth. In January, we sold our collection of businesses serving the food service industry, most notably Waypoint, to Prospect Hill Growth Partners.

Separately, we are Modernising, our I T support services in collaboration with an award winning provider of business services Tata consultancy services.

Tcs is known for its expertise in digital technologies innovation and commitment to delivering customer value. They will transform and modernise, our I T services to benefit the team clients and customers.

We have also completed several divestitures and continue to evaluate opportunities to simplify our operations. Further so we can focus more resources on our core businesses and enabled growth.

In January we sold our collection of businesses, serving the food service industry, most notably way points of prospects still growth partners. The food service businesses were combined with key impact sales and systems is a part of that sale advantage received a total gross proceeds of approximately $100 million, representing mostly cash and an ongoing.

David A. Peacock: The food service businesses were combined with key impact sales and systems as a part of that sale. Advantage received a total gross proceeds of approximately $100 million, representing mostly cash and an ongoing 7.5% stake in the new entity, Action Food Service. The sale further streamlines our portfolio, enables us to partner in core adjacent categories, and helps us de-lever our balance sheet. We've also taken steps to optimize our European joint venture. We reduced our majority stake in Advantage Smullin Limited, a joint venture with the Smullin Group, to a minority stake of 49.6% in exchange for cash and other considerations.

75% stake in the new entity action foodservice the sales further streamlines our portfolio enables us to partner in core adjacent categories and helps us delever our balance sheet. We've also taken steps to optimize our European joint venture, we reduce the majority stake an advantage smaller limited a joint venture with Smullen group to a minority.

Steak of 49.6% in exchange for cash and other considerations. This.

David A. Peacock: This transaction will ultimately simplify our reporting and help Advantage reduce back office complexities and expenses while allowing us to continue our constructive partnership with the smaller company. Finally, last October, we sold Atlas Technology Group to CRISP, which will empower CPP brands with better data and serve as the data acquisition technology platform for Advantage clients. With its cloud-based data sharing platform, Advantage will collaborate with CRISP to offer clients sophisticated supply chain analytics with an expanded retail footprint. All of these transactions, from our recent divestitures to new collaborations with world-class providers, will make Advantage stronger, more nimble, more competitive, and better enable us to drive our brand clients' and retail customers' businesses. We have a record of success with client relationships that have lasted for decades. In fact, among our top 100 clients, the average relationship duration is north of 15 years, with over 90% retention over time.

This transaction will ultimately simplify a reporting and help advantage reduced back office complexities and expenses, while allowing us to continue our constructive partnership with the smaller group.

Finally last October we sold outlets technology group to Kris, which will empower CPG brands with better data and serve as the data acquisition technology platform for advantage clients with its cloud based data sharing platform, we will collaborate with Chris to offer clients sophisticated supply chain analytics with an expanded retail footprint.

All of these transactions from a recent divestitures to new collaborations with World class providers will make advantage stronger more nimble more competitive and better enable us to drive our brand clients and retail customers businesses. We have a record of success with client relationships that have lasted for decades in fact, among our top one.

Hundred clients. The average relationship duration is north of 15 years with over 90% retention over time.

David A. Peacock: This track record of client retention and these recent divestitures and collaborations serve as the foundation that will allow us to focus our efforts and reinvest in enhancing our capabilities from talent to technology. As a critical accountability lever, our enhanced processes and platforms will enable us to strengthen relationships and be our clients' strategic partner of choice. We know our long-term success is tied to the people we employ and the talent we develop. That's why we're committed to putting people first and building an environment of belonging where our teams can work and win together.

This track record a client retention and knees recent divestitures in collaboration serve as the foundation that will allow us to focus our efforts and reinvest in enhancing our capabilities from talent to technology.

Is a critical accountability lever are enhanced processes and platforms will enable us to strengthen relationships and their client strategic partner of choice. We know our long term success is tied to the people we employ and the talent redevelop that's why we're committed to putting people first and building an environment of belonging where our teams can.

Work and wind together.

David A. Peacock: Recently, Newsweek recognized Advantage as one of America's greatest workplaces for diversity in 2024. We are creating a culture that attracts top talent and remains committed to improving retention across our business. We hired over 2,800 net new employees in 2023, supporting continued improvements in our in-store merchandising and demonstration business. We continue to prioritize reducing turnover across our enterprise, with significant improvements among our part-time employees over the year. Most notably, the year over year turnover rate improved in the fourth quarter by approximately 10% in our sampling and demonstration business and approximately 20% in our retailer merchandising. We are pleased with these improving trends as Advantage employs tens of thousands of teammates, most of whom are on the frontlines with them. Our transformation roadmap is based on a comprehensive understanding of the macro environment, market trends, and competitive landscape. Nearly every major trend we're seeing in the market today aligns with the services and expertise we offer to our customers. Put simply, with our position at the intersection of brands and retailers, brick and mortar, and e-commerce, we believe we have an unparalleled understanding of the challenges and opportunities our clients and customers face.

Recently, Newsweek recognize advantage as one of America's greatest workplaces for diversity in 2024.

We're creating a culture that attracts top talent and remains committed to improving retention across our business.

We hired over 2800 net new employees in 2000 twenty-three supporting continued improvements in our in store merchandising and demonstration businesses.

We continue to prioritise, reducing turnover across our enterprise with significant improvements with our part time employees over the year <unk>.

Most notably the year over year turnover rate improved in the fourth quarter by approximately 10% in our sampling and demonstration business approximately 20% in a retailer merchandising business.

We are pleased with these improving trends of the advantage employs tens of thousands of teammates most of whom are on the frontlines with consumers.

Our transformation roadmap is based on a comprehensive understanding of the macro environment market trends and competitive landscape.

Nearly every major trend, we're seeing in the market today aligns with the services and expertise we offer to our customers.

Put simply with our position that the intersection of brands and retailers and brick and mortar and E. Commerce. We believe we have an unparalleled understanding of the challenges and opportunities our clients and customers space.

David A. Peacock: That means we can provide strategic services and solutions faster, more efficiently, and, in many cases, better than they can do for themselves. Our depth of experience, agility, and speed can help offset some of the headwinds their businesses face while identifying new paths to grow. Here are some of the trends we're seeing today and advising our clients and customers about. First, from retailers, we see an appetite for innovation and a growing desire to expand private brands as encouraging indicators for the food and personal care industry. This bodes well for our private brand business, which continues to serve as a key partner to dozens of retailers. Additionally, with broader inflation reverting to more normal levels, pricing in the food category is stabilizing, encouraging more typical shopping patterns.

That means we can provide strategic services and solutions faster more efficiently and in many cases better than they can themselves.

Our depth of experience agility and speed can help offset some of the headwinds their businesses space well.

Dentist buying new path to growth.

Here's some of the trends, we're seeing today and advising our clients and customers on.

First from retailers, we see an appetite for innovation and a growing desire to expand private brands of encouraging indicators for the food and personal care industry. This bodes well for our private brand business, which continues to serve as a key partner that dozens of retailers.

Second with broader inflation reverting to more normal levels pricing in the food category of Stabilising encouraging more typical shopping patterns.

David A. Peacock: In 2024, we expect the focus for CPGs and retailers to be on unit volume growth, given the declines in most categories in 2023. And we are seeing early signs of this with innovation and SKU count increasing. Our Q1 2024 Advantage Outlook survey of nearly 100 retailers and CPG manufacturers indicates that almost 80% of manufacturers are planning for unit growth, listing innovation and expanded distribution as top drivers. Our retail merchandising teams support both innovation and distribution growth through their unparalleled capabilities in capturing opportunities at retail. Retailers, on the other hand, are less optimistic. Just 44% are planning for unit volume growth.

In 2024, we expect a focus for Cpg's and retailers on unit volume growth given the declines in most categories in 2023, and we are seeing early signs of this with innovation and eschew account increases.

R Q1, 2024 advantage outlook survey of nearly 100 retailers and CPG manufacturers indicates that almost 80% of manufacturers are planning for unit growth listing innovation and expanded distribution is top drivers or retail merchandising team support both innovation and distribution growth through their unparalleled Cape.

Abilities and capturing opportunities at retail.

Retailers on the other hand are less optimistic just 44% are planning for unit volume growth, they're relying on promotions and the expansion of the private brands as the drivers in fact, 60% of retailers in our survey names private brands as one of their top three strategies to deliver value to their shoppers over the next six months.

David A. Peacock: They're relying on promotions and the expansion of private brands as the drivers. In fact, 60% of retailers in our survey named private brands as one of their top three strategies to deliver value to their shoppers over the next six months. And promotions are on the rise. Last year, almost 30% of units sold at retail were on promotion, a number that's risen each year since 2020 but remains below pre-pandemic levels.

And promotions are on the rise last year, almost 30% of units sold at retail Ron promotion, a number that has risen each year since 2020, but remains below pre pandemic levels.

David A. Peacock: Next, we continue to see food away from home pricing outpace food at home. Given the different cost dynamics and competitive aspects of retail and restaurants, this trend will likely continue and serve as a tailwind for growth in retail food sales. Finally, U.S. consumers appear incredibly resilient.

Next we continue to see food away from home pricing outpace food at home given the different costs dynamics and competitive aspects of retail and restaurants. This trend will likely continue and serve as a tailwind for growth in retail food sales.

Finally U S consumers appear incredibly resilient. However, there is persistent uncertainty and growing pockets of financially strained shoppers.

David A. Peacock: However, there is persistent uncertainty in growing pockets of financially strained shops. The return of student loan repayments and high interest rates are expected to continue impacting this segment of the U.S. consumer. Manufacturers and retailers are recognizing the need to cater to two distinct sets of consumers at the same time while managing costs. Two-thirds of manufacturers and retailers surveyed indicate they are satisfied with current staffing levels and plan no meaningful changes over the next 12 months.

The return of student loan repayments and high interest rates are expected to continue impacting this segment of the U S consumers Manny.

Manufacturers and retailers are recognizing the need to cater to two distinct sets of consumers at the same time, while managing costs.

Two thirds of manufacturers and retailers surveys indicate they are satisfied with current staffing levels and plan no meaningful changes over the next 12 months. This.

This requires retailers to scrutinize their self sets to meet different consumer needs in different stores, and we are able to help them execute more strategic planograms in store through our retailer services team.

David A. Peacock: This requires retailers to scrutinize their shelf sets to meet different consumer needs in different stores, and we are able to help them execute more strategic planograms in stores through our retailer services. Let me conclude by stating we are excited about the opportunities ahead in 2024 as we ramp up activities to execute our strategy for growth acceleration. We also expect revenue and adjusted EBITDA growth, excluding the in-year impact of the completed divestment. We are steadfast in our mission to generate demand for consumers, brands, and retailers, converting shoppers into buyers in every way they shop. Advantage is uniquely positioned at the intersection of CPG brands and retailers, physical retail and e-commerce, and national and private brands.

Let me conclude by stating we are excited about the opportunities ahead in 2024, as we ramp up activities to execute our strategy for growth acceleration. We also expect revenue and adjusted EBITDA growth excluding the in your impact of the completed divestitures.

We're steadfast in our mission to generate demand for consumers brands and retailers converting shoppers in the buyers in every way. They shop advantage is uniquely positioned at the intersection of CPG brands and retailers physical retail and e-commerce and national and private brands, we leveraged leading capabilities spanning the path to purchase.

That are essential and sticky no matter the market conditions and cultivate and during relationships across the national retail ecosystem, serving as a strategic consultant and delivering customized solutions fueled growth.

David A. Peacock: We leverage leading capabilities that span the path to purchase that are essential and sticky no matter the market conditions, and cultivate enduring relationships across the national retail ecosystem, serving as a strategic consultant and delivering customized solutions to fuel growth. We know that when end-to-end demand generation is done right, shoppers turn into buyers. With that, I'll turn it over to Chris for more on our financial performance. Thank you, Dave.

We know that when and to and demand generation has done right shoppers turn into buyers with that I'll turn it over to Chris for more on our financial performance and outlook.

Thank you Dave.

A recent divestitures and new collaborations underscore the discipline of our talented team and transforming our business I remain excited about what is to come for advantage with 2023 services are strong baseline for the expected growth.

You've seen our financial results. So allow me to highlight for insights into our performance.

First our team is delivered and improves adjusted EBITDA performance in 2000 twenty-three, especially in the fourth quarter.

Christopher Robert Growe: Our recent investors and new collaborations underscore the discipline of our talented team in transforming our business. I remain excited about what is to come for Advantage, with 2023 serving as a strong baseline for that expected growth. You've seen our financial results, so allow me to highlight four insights into our performance. First, our teammates delivered an improved adjusted EBITDA performance in 2023, especially in the fourth quarter. Adjusted EBITDA was $424 million for the year and $115 million in the fourth quarter.

Adjusted EBITDA was $424 million for the year and $150 million in the fourth quarter <unk>.

Excluding foreign exchange and Divestures the year over year change was a decline of 1.7% in 2023, and an increase of 4.4% in the fourth quarter.

The growth driver came from the marketing segment due to the continued recovery in store sampling of demonstrations.

As a reminder, advantages and most of the largest U S grocery and big box retailers and many shoes advantage is the exclusive in store sampling and experiential marketing provider.

In store event counts increased 21% year over year in 2023, which represented approximately 79% of 2019 total pre pandemic sampling volume in.

Christopher Robert Growe: Excluding foreign exchange and divestitures, the year-over-year change was a decline of 1.7% in 2023 and an increase of 4.4% in the fourth quarter. The growth driver came from the marketing segment due to the continued recovery of in-store sampling and demonstrations. As a reminder, Advantage is in most of the largest U.S. grocery and big box retailers, and many choose Advantage as their exclusive in-store sampling and experiential marketing provider.

In the fourth quarter event counts reached 83% of 2019 levels, representing nearly 11000 events per day.

We expect to 2024 to showcase continued sequential recovery and if that counts.

In a recent retailer study, 91% of shoppers sampling of product Influencer purchase decision and approximately two thirds reported making repeat purchases of that item.

Second we implement a pricing initiatives and both segments help offset the majority of the $120 million, a wage and benefit inflation incurred in 2023.

Christopher Robert Growe: In-store event counts increased 21% year over year in 2023, which represented approximately 79% of 2019 total pre-pandemic sampling volume. In the fourth quarter, event counts reached 83% of 2019 levels, representing nearly 11,000 events per day. We expect 2024 to showcase continued sequential recovery in event counts. In a recent retailer study, 91% of shoppers said sampling a product influenced their purchase decision, and approximately two-thirds reported making repeat purchases of that

These pricing actions represented more than one third of the revenue growth over the course of the year, excluding FX and investors.

We feel good about continued pricing actions and the wrap around benefit they will produce and 2024 relatives a tape for inflation.

Third the actions taken to simplify the business had an impact on our comparable financial performance.

For context in year 2023 impact from completed divestitures on revenue and adjusted EBITDA, including the deconsolidation of our European joint venture was approximately $532 million and $17 million, respectively. We are actively exploring additional opportunities in 2024 to focus efforts on our core capabilities even further.

Christopher Robert Growe: Second, we implemented pricing initiatives in both segments to help offset the majority of the $120 million of wage and benefit inflation incurred in 2023. These pricing actions represented more than one-third of the revenue growth over the course of the year, excluding FX and divestitures. We feel good about continued pricing actions and the wraparound benefit they will produce in 2024 relative to tapering inflation. Third, the actions taken to simplify the business have had an impact on our comparable financial performance. For context, the in-year 2023 impact of completed divestitures on revenue and adjusted EBITDA, including the deconsolidation of our European joint venture, was approximately $532 million and $17 million, respectively. We are actively exploring additional opportunities in 2024 to focus our efforts on our core capabilities even further. Finally, partially offsetting the benefits to our performance was a decline in activity due to budget cuts from a large customer, the intentional exit of a client, and the aforementioned inflationary cost pressures. These offsets and the divestitures explain the reported revenue, adjusted EBITDA, and margin year-over-year decline in the sales segment in the quarter and for the full year.

Finally, partially offsetting the benefits to our performance was a declining activity due to budget cuts from a large customer.

Sentinel exit of a client and the aforementioned inflationary cost pressures.

These offsets and as investors explain the reported revenue adjusted EBITDA margin year over year decline in sales segment in the quarter and for the full year.

Moving to our balance sheet we.

We continue to prioritise opportunities to reduce the net leverage ratio at a higher interest rate environment for.

For the fourth quarter, our net debt to adjusted EBITDA was approximately $4 two times relative to $4 five times at the beginning of 2023.

Our longterm objective is to reduce the net leverage ratio from current levels to below 3.5 times.

We continue to emphasize working capital management, which allowed us to convert approximately 101% of adjusted EBITDA two adjusted Unlevered free cash flow for 2023.

In line with the prior quarter, our debt profile remains healthy and we have no meaningful maturities in the next three years.

During the quarter, we voluntarily repurchased approximately $57 million in a combination of term loans and secured notes and and attracts a discount.

Christopher Robert Growe: Moving to our balance sheet, we continue to prioritize opportunities to reduce the net leverage ratio in a higher interest rate environment. For the fourth quarter, our net debt to Adjusted EBITDA was approximately 4.2 times relative to 4.5 times at the beginning of 2023. Our long-term objective is to reduce the net leverage ratio from current levels to below 3.5 times. We continue to emphasize working capital management, which allowed us to convert approximately 101% of adjusted EBITDA to adjusted unlevered free cash flow in 2023. In line with the prior quarter, our debt profile remains healthy, and we have no meaningful maturities in the next three years. During the quarter, we voluntarily repurchased approximately $57 million in a combination of term loans and secured notes at an attractive discount.

We will continue to monitor opportunities to deploy capital that the leverages the balance sheet, while generating a favorable rate of return.

As of December 31, or total funded debt outstanding was approximately 1.9 billion with nearly 89 per cent of that debt hedged or at a fixed interest rate.

Turning to our I'll look for this year.

Pleased by the deliberate steps to improve our financial discipline combined with the study economic backdrop as.

As such we are planning for low sing legit growth in revenues and adjusted EBITDA after considering the impacts of the completed investors.

We currently expect adjusted EBITDA performance to be weighted towards the second half of the year due to accelerate investments in technology and talent in the first half.

Our guidance contemplates to continue realisation of pricing, which we believe can help offset persistent wage inflation, which is currently running at a low <unk> single digit rate.

Christopher Robert Growe: We will continue to monitor opportunities to deploy capital that deleverages the balance sheet while generating a favorable rate of return. As of December 31, our total funded debt outstanding was approximately $1.9 billion, with nearly 89% of that debt hedged or at a fixed interest rate. Now, turning to our outlook for this year. We remain pleased by the deliberate steps to improve our financial discipline, combined with a steady economic backdrop. As such, we are planning for low single-digit growth in revenues and adjusted EBITDA after considering the impacts of the completed divestitures. We currently expect Justity Bedell's performance to be weighted towards the second half of the year due to accelerated investments in technology and talent in the first half. Our guidance contemplates the continued realization of pricing, which we believe can help offset persistent wage inflation, which is currently running at a low domestic single-digit rate.

We expect to grow in store sampling and demonstration events as we recover toward prepaid debit levels in 2019.

We continue to assess our portfolio to ensure we leverage our core strengths for profitable growth.

To that end, we have chosen to exit two client relationships in the first quarter.

These client exits will weigh on revenues and have a more muted impact on adjusted EBITDA throughout 2024 and R for the avoidance of doubt incorporated into our outlook for the year.

As a reminder, or operational scales unmatched with more than 3500, CPG brand clients across over 15 trade channels we.

We support nearly 100000 stores, allowing us to evaluate retailer needs and effectively enable them to address their priorities.

Despite the benefits of this breath of offering there are times in which we view client exits is necessary and economically attractive for us to achieve our long term strategic goals.

Our guidance also considers the completed divestitures in 2023 and year to date.

Christopher Robert Growe: We expect to grow in-source sampling and demonstration events as we recover toward pre-pandemic levels in 2019. We continue to assess our portfolio to ensure we leverage our core strengths for profitable growth. To that end, we have chosen to exit two client relationships in the first quarter. These client exits will weigh on revenues and have a more muted impact on adjusted EBITDA throughout 2024 and are, for the avoidance of doubt, incorporated into our outlook for the year. As a reminder, our operational scale is unmatched, with more than 3,500 CPG brand clients across over 15 trade channels. We support nearly 100,000 stores, allowing us to evaluate retailer needs and effectively enable them to address their priorities.

However, our guidance does not include the impact of additional divestitures that may be contemplated simplify the business further.

Share repurchases remain part of our capital structure strategy, mainly to offset employee incentive related dilution and take advantage of what we believe is an undervalued stock price and.

2023, we repurchased approximately 2 million shares for $6.4 million <unk>.

<unk> traded a small foreign assets for over 2 million incremental shares in the fourth quarter.

We've repurchase more than 2.5 billion shares so far in 2024.

2024 will be at the beginning of a three year period of investment to Modernise differentiate and transform the organization.

Under our new shared services model between the Bill technology platforms for data modernization cloud based capabilities, including AI and other tools to improve operating efficiencies.

Christopher Robert Growe: Despite the benefits of this breadth of offering, there are times in which we view client exits as necessary and economically attractive for us to achieve our long-term strategic goals. Our guidance also considers the completed divestitures in 2023 and the year to date. However, our guidance does not include the impact of additional divestitures that may be contemplated to simplify the business further.

A significant portion of the planned investment is to upgrade old systems to enable enterprise wide operations compared to the Siloed way, we operate in the past and migrate information to the cloud.

The largest of those initiatives will be ERP upgraded as our current system is approaching the end of its useful life.

We expect to complete the implementation sometime in 2026, and we believe the upgrade is necessary to ensure that we deliver best in class service to our clients.

Christopher Robert Growe: Share repurchases remain part of our capital structure strategy, mainly to offset employee incentive-related dilution and to take advantage of what we believe is an undervalued stock price. In 2023, we repurchased approximately 2 million shares for $6.4 million and traded a small foreign asset for over 2 million incremental shares in the fourth quarter. We've repurchased more than 2.5 million shares so far in 2024. 2024 will be the beginning of a three-year period of investment to modernize, differentiate, and transform the organization. Under our new shared services model, we plan to build technology platforms for data modernization, cloud-based capabilities, including AI, and other tools to improve operating efficiencies. A significant portion of the planned investment is to upgrade old systems to enable enterprise-wide operations compared to the siloed way we operated in the past and migrate our information to the cloud. The largest of those initiatives will be an ERP upgrade as our current system is approaching the end of its useful life.

Once complete we expect a fully integrated modern system to simplify internal operations and improve our responsiveness to our clients.

We believe the system operated will result in a DSO reduction along with cost savings and business efficiencies by 2026.

In terms of upfront financial considerations respect to spend approximately $160 million to $170 million of Capex related to all these technology initiatives through 2026.

As a result, we expect capex this year to be $90 million to $110 million compared to the 46 million spent in 2023.

This represents enhanced spend related to the aforementioned ERP program other.

Other icy initiatives, including the data modernization capabilities retail execution platforms, the genpact in Ccs outlays.

And ramp up related to our new sampling demonstration account.

We expect capital expenditures to taper in 2025 and returned historical levels in 2026 is project related spending admissions.

Christopher Robert Growe: We expect to complete the implementation sometime in 2026, and we believe the upgrade is necessary to ensure that we deliver best-in-class service to our clients. Once complete, we expect a fully integrated modern system to simplify internal operations and improve our responsiveness to our clients. We believe the system upgrade will result in a DSO reduction, along with cost savings and business efficiencies by 2026. In terms of upfront financial considerations, we expect to spend approximately $160 to $170 million on CapEx related to all these technology initiatives through 2026. As a result, we expect CapEx this year to be $90 million to $110 million compared to $46 million spent in 2023.

The total investment for the ERP project is estimated to be 78 million to 80 million split 70, 525 between capital and operating expenses, the majority of which will occur as one time expenses.

This investor will be phased in over the next three years with over 40 per cent of total spend occurring in 2024.

The investments and actions we plan to take will not only heightened capex in the near term, but also opex and one time expense implications. Luckily resulted in an unfavourable comparisons to last year for net income and EPS.

For the avoidance of doubt our adjusted EBITDA guidance does contemplate these investments.

Despite the significant capital outlays, which we view to be critical to our business, we expect to make significant progress or a longterm net leveraged targeted over the course of 2024 and 2025.

Christopher Robert Growe: This represents enhanced spend related to the aforementioned ERP program and other IT initiatives, including data modernization and AI capabilities, retail execution platforms, the GenPAC and TCS outlays, and Ramp-Up related to our new sampling demonstration account. We expect capital expenditures to taper in 2025 and return to historical levels in 2026 as project-related IT spending diminishes. The total investment for the ERP project is estimated to be $70 million to $80 million, split 75-25 between capital and operating expenses, the majority of which will occur as one-time expenses.

We are looking forward to an exciting year in 2024.

As a reminder, replaying the report financial results with our three new segments experiential branded and retailers services on our next quarterly earnings.

Thank you for your time I'll now turn it back over to Dave's. Thanks.

Thanks, Chris.

People, who have advantage of done tremendous work growing the company to what it is today are teammates wake up daily focusing on serving the brands, we represent and retailers where they were while enriching lives in our communities.

It's our job to enable their efforts and help them realize their personal and professional goals critical step to becoming the employer of choice we endeavor to be.

Christopher Robert Growe: This investment will be phased in over the next three years, with over 40% of total spend occurring in 2024. The investments and actions we plan to take will not only huddling CapEx in the near term but also have OpEx and one-time expense implications, likely resulting in unfavorable comparisons to last year for net income and EPS. For the avoidance of doubt, our Justity Bedah guidance does contemplate these investments. Nevertheless, despite these significant capital outlays, which we view to be critical to our business, we expect to make significant progress to our long-term net leverage target over the course of 2024 and 2025. We are looking forward to an exciting year in 2024. As a reminder, we plan to report financial results for our three new segments, experiential, branded, and retailer services, in our next quarterly earnings. Thank you for your time. I'll now turn it back over to Dave. Thanks, Chris.

We're always proud to celebrate our strengths and successes, we remain unsatisfied that healthy tension creates the energy and momentum we need to realize a better future for advantage solutions.

We will now take your questions operator.

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One moment, please while the perfect question.

Thank you. Our first question comes from the line of Greg parish.

Morgan Stanley. Please proceed with your question.

Hey, good morning, Thanks for taking my questions and thanks for the slide on there.

Pitcher detail as well as enhance guidance.

Helpful.

I just wanted to start with a strategic review her portfolio review I guess more specifically you've done a lot in a short amount of time and I don't mean to minimize that.

David A. Peacock: The people of Advantage have done tremendous work growing the company to what it is today. Our teammates wake up daily focusing on serving the brands we represent and retailers where they work while enriching lives in our community. It's our job to enable their efforts and help them realize their personal and professional goals, critical steps to becoming the employer of choice we strive to be. We are always proud to celebrate our strengths and successes.

But these were there clearly non-core assets at least from the outside so.

I asked her I'm here do you think the portfolio optimization is largely complete and it's maybe only small divestitures from here that.

Does that prime is not correct at all.

Greg This is <unk>. Thanks for the question.

I would say that's probably not correct. We are continuing to go through our portfolio, we see opportunities in areas as we refine what our core business capabilities are and.

David A. Peacock: We remain unsatisfied. That healthy tension creates the energy and momentum we need to realize a better future for Advantage Solutions. We will now take your questions, Operator. Thank you.

Obviously don't want to comment on any.

Processes are activities underway, but I would say that is that is probably not true that we only have smaller divestitures going forward.

Greg I could just adds Chris grill, either I just wanted to add a comment about being prudent as we go through the portfolio and certainly a lot of things can affect that.

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Focus on the core finding businesses that are not such a distraction to management and then I just want to be clear that you know any sort of proceeds will come from divestitures would be used for debt pay down so just to reiterate that point.

Yep, Okay, great no that's harper color. So thank you.

Operator: One moment, please, while we pull for questions. Transcribed by https://otter.ai. Thank you. Our first question comes from the line of Greg Parrish with Morgan Stanley. Please proceed with your question. Hey, good morning.

I wanted to ask about that the system's investments here I guess, one point of clarity. So I guess this is slide 15, the 160 to 70, that's all inclusive. So that's inclusive of the E. R P as well Clara.

Gregory Scott Parrish: Thanks for taking my questions. And thanks for the slide on the divestiture detail, as well as the enhanced guidance slide. Those were helpful. I just wanted to start with a strategic review or portfolio review, I guess, more specifically.

Clarify that and then I guess second part of it.

I mean, how are you thinking about payback on this right, it's kind of a big investment and did you see payback just on the efficiency side, where you have a huge expense space. Obviously, so maybe it's bringing that down or do you need to see some of the revenue opportunities I think he put on a slot here unlocking value of data and analytics and creating new opportunities. So do you need those to come through to kind of.

Gregory Scott Parrish: You've done a lot in a short amount of time, and I don't mean to minimize that. But these were clearly non-core assets, at least on the outside. So, from here, do you think the portfolio optimization is largely complete, and it's maybe only small divestitures from here? Is that? Or is that premise not correct at all?

David A. Peacock: Greg, this is Dave Peacock. Thanks for the question. I would say that's probably not correct. We're continuing to go through our portfolio. We see. Unknown Executive, Sean Choksi, David Peacock, Unknown Executive, Sean Choksi, Unknown Executive. Obviously, they don't want to comment on any processes or activities underway, but I would say it is probably not true, only have smaller. Greg, I can just add that it's Chris Growe.

See payback on this thanks.

Yeah to some degree yes, Greg you know I think.

You've got a couple of things going on first the ERP system, which is going to significantly streamline our financial processes.

Improve our speed and boys.

And really just improve the information flow within our finance groups that then it goes out to our business groups business units.

Quicker decision better decision, making I think.

And then when you look at what I'll call data modernization, which is the day leg club migration.

Some of this comes and the avoidance of expenditures on costly data centers and equipment when you're using the cloud and then a lot of it comes from and.

Enabling things like AI and I know, that's a buzzword right now but.

Already doing that in areas like.

Christopher Robert Growe: I just wanted to add a comment about being prudent as we go through the portfolio and certainly, you know, a lot of things can affect that. I think focus on the core, finding businesses that are not such a distraction to management. And then I just want to be clear that, you know, any sort of proceeds that would come from divestitures would be used for debt pay down. So just to reiterate that. Yep, okay, great. No, that's a helpful color.

For employees.

We're looking at payroll inquiries and policies accelerator candidate screening the quicker we can get the higher the better as it relates to both attraction and retention contract management and then for customers is a lot. We can do as it relates to the validation of the work we do.

And using AI and photos and a more.

In the morning.

Advanced way than we are today.

To determine patterns and helpful. Their routing the personnel so we get more efficiency on that as well.

Greg I can just add a little bit more color there.

From the financial side just that.

The level of spending we put it in the in the release in the script.

Over 40 per cent of the spends it's going to be this year. So it'll it'll cheaper and twenty-five then again and by 26 year essentially back to historical levels, So that'll get us.

Gregory Scott Parrish: So thank you. I want to ask about the systems investments here. I guess one point of clarification. So the, I guess this is slide 15, the 160 to 70, that's all inclusive.

There's a bit of a surge this year a little bit more next year, and then a little tissue I should say, we will next year incrementally and then we'll be back to normal level and 26.

There are efficiencies that come from this thurs DSO improvement.

Gregory Scott Parrish: So that's inclusive of the ERP as well. Clarify that. And then, I guess, the second part of it. I mean, how are you thinking about payback on this, right?

Is this will help support our our cost reduction programs. But this is also is Dave Southern enabler right. This is going to help US you know really is better support our customers and our business and that that's where the the key area of upgrading the previous system. That's gonna really really kind of hopefully support incremental growth of the business.

Gregory Scott Parrish: It's kind of a big investment. I mean, do you see payback just on the efficiency side, right? You have a huge expense base, obviously, so maybe it's bringing that down. Or do you need to see some of the revenue opportunities? I think you put that on the slide here, unlocking the value of data and analytics and creating new opportunities. So do you need those to come through to kind of see payback on this thing?

I think beyond that just that you know the level of spending will be a little higher this year and then we'll see less investment going forward.

Okay, great. Thanks.

Super helpful I guess.

David A. Peacock: Yeah, to some degree, yes, Greg. I think you've got a couple things going on in the first year, going to the Unknown Speaker and really just improving the information flow that then goes out. Unknown Speaker, and then when you look at what I'll call data modernization, Data Lake, and Cloud Migration. Some of this comes in the avoidance of expenditures on costly data.

One more step and I just want to talk about the client access I think you called out to more of this quarter is the big one last year does it give some color on those you know are there 100 per cent initiate it from your end kind of what are the competitive dynamics that are at play I know you.

Client accents, but.

Whom competitors are still competing on cost as they've done in the past.

David A. Peacock: [inaudible] and then a lot of it comes from enabling things like AI, and I know that's a buzzword right now. You know, we're already doing that in areas like employees, payroll inquiry. Accelerator, Candidate, the quicker we can get the higher the better. Customers, there's a lot we can do as it relates to Validation. AI, photos in a more. Unknown Speaker, Determine Patterns, and help with our routing.

Kind of.

Are they ramping up they're sort of cost competitiveness and you review that is a risk going for thanks.

I would just as Chris grow your Greg I would just say that you know we've talked about a relatively calm competitive environment I think it remains that way frankly. These are decisions. We made internally to exit clients that will have an effect on the business and so I'll just say that you know think of the <unk>.

Christopher Robert Growe: Greg, I can just add a little bit more color there, and maybe more from the financial side, just that the level of spending, we put it in the release and the script, you know, so over 40% of the spend is going to be this year. So it'll taper off, 25, and again, and by 26, you're essentially back to historical levels. So that'll get us, you know, there's a bit of a surge this year, a little bit more next year, and then, this year, I should say, a little next year, incrementally, and then we'll be back to normal in 26. There are efficiencies that come from this, there's DSO improvement, which will help support our, you know, our cost reduction programs. But this is also, as Dave said, an enabler, right?

Top line affected you know less than 2% of revenue, but but it's you know meaningful enough number we wanted to call. It out I. Just think you are going to see less of an effect on EBITDA as a result and that might help explain why there's some decisions being made here on some of these these client exits.

Alright, that's helpful. Thank you very much.

Thanks, Greg.

Our next question comes from the line of Joseph <unk> with <unk>. Please proceed with your question.

Hey, guys. Good morning, Thanks for all the information and the relief and presentations Uhm, maybe it would just start at a high level and maybe David go back to you know your prepared remarks around.

Gregory Scott Parrish: This is going to help us, you know, really better support our customers and our business, and I guess we're the, you know, key area of upgrading the previous systems. It's going to really, really, you know, kind of hopefully support incremental growth of the business. I think beyond that, just the level of spending will be a little higher this year, and then we'll see less investment going forward. Okay, great. Thanks. It's super helpful. I guess one more I'll slip in. I just want to talk about client exits. I think you called out two more this quarter. It was a big one last year.

Where you sit at the intersection of.

These businesses just wondering where are you where are you would kind of largely bucket.

Revenue that touches e-commerce today, and how you see how you might define that bucket of revenue N.

Maybe compare and contrast, it you know other pieces of business in terms of growth opportunity and and things for C. N. N. You know obviously, you're just bringing in a new chief revenue officer as well for that May tie in to this question as well and then all of a follow up.

Gregory Scott Parrish: If you give some color on those, you know, are they 100% initiated from your end? Kind of what are the competitive dynamics that are at play? I know you call them client exits, but assume competitors are still competing on costs as they've done in the past. Do you kind of, you know, is that, are they ramping up their sort of cost competitiveness? And do you view that as a risk going forward? Thanks.

No I appreciate Joh uhm.

So on e-commerce as a couple of things first.

Kind of maybe around if not a little less than 10% of revenue. If you look at R. E Commerce.

It is an area, where I think we have a lot of opportunity and it's an area where we're investing.

And this would kind of be and what I would say is our normal kind of investment level. So in other words as Chris said, we've got increases for ERP data modernization, which will also help R.

Christopher Robert Growe: I would just, it's Chris Growe here, Greg. I would just say that, you know, we've talked about a relatively calm competitive environment, and it remains that way, frankly. These are decisions we made internally to exit clients that will have an effect on the business. And so I just say that, you know, think of the kind of the top line effect, less than 2% of revenue, but it's, you know, a meaningful enough number that we wanted to call it out. We think you're going to see less of an effect on EBITDA as a result, and that might help explain why there are some decisions being made here on some of these client exits. Okay, that's helpful. Thank you guys very much.

E Commerce efforts data modernization and then we have some capex increases to keep up with our the demo business but.

I'm, both very bullish on ecommerce site now what I will say, though which is interesting.

Commerce has returned back to sort of that 10% growth rate dipped a bit in the fourth quarter overall, not just for us I am talking about over all industry.

And it's still a pretty small share of total at grocery sales if you will so.

Sure growth is pretty <unk>.

For.

Research with our CPG partners and a lot of a retail partners and I Gotta say e-commerce.

Comes in fifth sixth as far as what they see as a lever to drive growth. So we see a lot of opportunity. There. We think we've got a lot of headroom in the industry and an opportunity frankly to hopefully capture share of that space.

Joseph Safi: Our next question comes from the line of Joseph Safi with Canaccord Genuity. Please proceed with your question. Hey guys, good morning.

At the same time I think we have to be realistic to the fact that brick and mortar is still critical both to the industry into our business.

Joseph Safi: Thanks for all the information in the release and presentations. Maybe we just start at a high level and maybe, David, you could go back to, you know, your prepared remarks around where you sit at the intersection of, you know, some of these businesses. Just wondering where you would kind of largely bucket revenue that touches e-commerce today and how you see, how you might define that bucket of revenue and, you know, maybe compare and contrast it to, you know, other pieces of the business in terms of growth opportunity and things you're seeing. And, you know, obviously, you're just bringing in a new chief revenue officer as well. So that may tie into, you know, this question as well. And then I'll have a follow-up. No, I appreciate it Joe.

Fair enough a good color and then secondly, drill down a little bit I know.

Maybe.

Maybe with a crush mentioned the employee turnover with down.

Pretty strongly.

Two four.

Wondering where are there any specific changes you did there to bring that employee turnover down or you know just.

How do you see that employee turnover outlook here in 2024, thanks, a lot guys.

Thanks, Joe Yeah, Yeah, I would say we're on the front edge of a lot of our work relative to high volume talent. Your turnover is improving I'd say a lot of that is macro market. The labor markets are.

David A. Peacock: So on e-commerce, a couple things. First, kind of maybe around, if not a little less, Unknown Speaker 0.0.0.0. It is an area where I think we have a lot.

Are loosening a little bit in there so tight tighter.

David A. Peacock: And this would kind of be what I'd say is our normal kind of IT investment level. So in other words, as Chris said, we've got increases for ERP, data monetization, which will also help our eCommerce efforts, data modernization, and then we have some... Unknown Speaker, Demo.

Stuart basis, but they're loosening a little bit.

There have been there's been less job growth and kind of the retail and professional services spaces.

And the last most recent quarters.

Kind of broadly in the U S.

Which is probably giving us more availability of labor, but there's a lot of initiatives, we have under way and I mentioned the speed. The higher is a critical one we're looking a lot.

David A. Peacock: Bye. I'm very bullish on the e-commerce side. Now, what I will say, though, which is interesting, is e-commerce has returned to sort of that 10% growth rate it did in the 40s, overall, not just for us, I'm talking about overall. Transcription by CastingWords, and it's still a pretty small share of total grocery sales. So... Unknown Speaker.

Doing things around the first 90 days I mean like most businesses as you can imagine.

Hi volume talents space. If you can keep someone 90 days your your likelihood of retention is much higher so there another initiatives we have against that so we're.

We're very bullish about the ability to leverage better talent management to drive retention and I think the other thing you had you didn't ask it but I think it comes up a lot is on the way it side and you know.

David A. Peacock: We've done research with our CPG partners and a lot of our retail partners, and I have to say, e-commerce kind of comes in fifth or sixth as far as what they see as a lever to drive growth. So, we see a lot of opportunity there. We think we've got a lot of headroom in the industry and an opportunity, frankly, to hopefully capture a share of that space. At the same time, I think we have... Realistic to the fact that brick and mortar is still critical both to the industry and to our, Fair enough. That's a good color.

Obviously wage inflation still is high relative to historic averages. It's we do see it improving a bit our overall wage inflation is kind of in line with broader retail.

From an hourly standpoint, but.

There are opportunities for efficiency as far as in the process of what we do and store and obviously, if we can reduce our turnover reading a recruiting costs down pretty dramatically, which is which is really important for our business as well.

Joseph Safi: And then secondly, I just wanted to drill down a little bit. I think, maybe, maybe it was Chris mentioned that, you know, employee turnover was down pretty strongly in Q4. And just wondering, you know, were there any specific changes you did there to bring that employee turnover down? Or, you know, how do you see the employee turnover outlook here in 2024? Thanks a lot, guys. Thanks, Joe.

Great. Thanks, a lot.

Thank you.

Our next question comes from the line of <unk> with Deutsche Bank. Please proceed with your question.

Yes, hi, good morning.

So I wanted to talk about the three pieces that you had previously mentioned that a branded retail and experiential N. I think I heard you say that next quarter, we're gonna start getting.

David A. Peacock: Yeah, um, yeah, I would say we're on the front edge of a lot of our work relative to High Volume Talent. Your turnover is improving. I'd say a lot of that is the macro market, you know, the labor market is loosening a little bit. They're still tight, tighter on a historic basis, but they're loosening a little bit.

He was in a segment on that basis. So just curious if you can give us an overview of how those individual pieces have performed.

You know in 23 and what the expectation is it's 424.

Yeah. So we'll give that information in the first quarter, Pfizer and I, just would say that you know.

David A. Peacock: You know, there's been less job growth in kind of retail and professional services. Transcripts by Transcription Outsourcing, LLC, or more broadly in the U.S., which is probably giving us more availability, but there's a lot of initiatives we have underway. And I mentioned, you know, speed to hire. You're looking a lot at doing things around First Ninety, like most. High Volume Talent Space. If you can keep someone for 90 days, you're likely to be successful. So they're another.

Businesses, we run it out of the year you know within the old format will have the new the new segments going forward you know just to say that the sales segment as you think about it.

Largely lines with brain of services with some pieces that would go into retailers services and then experiential.

David A. Peacock: So we're very bullish about the ability to leverage better talent management to drive business outcomes. I think the other thing, and you didn't ask it, but I think it comes up a lot, is on the wage side. And, you know, obviously wage inflation still is high relative to historical rates, but our overall wage inflation is kind of in line with broader retail from an hourly standpoint, but you know, there are opportunities for efficiency as far as Unknown Executive, Sean Choksi, David Peacock, Unknown Executive, Sean Choksi, David Peacock, Unknown Speaker, Great. Thanks a lot, Gabe.

As a chunk of the marketing a segment. So I think here. It's gonna it's gonna be you know kind of pieces of each one that then move into each segment.

I don't have the information I can share with you on the 2023 performance I know, we have a sly and the deck that outlines kind of rough revenue breakdown by segment.

But I think until we report that way and frankly, you know cut the numbers that way.

Hold off and giving you much perspective on those individuals segment performances.

Okay. That's fine and then just like side five where you talk about what you show the data on sampling and demonstration it sounds like.

Faiza Alwy: Our next question comes from the line of Faiza Alwy with Deutsche Bank. Please proceed with your question. Yes, hi, thanks, and good morning.

Faiza Alwy: So I wanted to talk about, you know, the three pieces that you had previously mentioned that are branded, retail, and experiential. And I think with what I heard you say that next quarter, we're going to start getting, you know, you're going to segment on that basis. So just curious if you can give us an overview of how those individual pieces have performed, you know, in 23 and what the expectation is for 24.

You know what it was it was picked out like how are you thinking about those trends are we I guess are we at at at at more Normalised level.

We are continuing to see event recovery with some of our week. He customers. Although we've made a lot of progress and we have some key customers were well over 90%.

Christopher Robert Growe: Yes, so we'll give you that information in the first quarter, Faiza. And I just would say that, you know, the businesses, we run it out the year, you know, within the old format, we'll have the new, you know, the new segments going forward. I just would say that, you know, the sales segment, as you think about it, largely aligns with branded services, but some pieces that would go into retailer services, and then experiential, you know, is a chunk of the marketing segment. So I think you're gonna it's going to be, you know, kind of pieces of each one that then move into each segment. I don't have any information I can share with you on the 2023 performance.

Which is great and those are the customers that kind of turned those businesses back on a few well with you will earlier, so when different customers chose to kind of re engage an experiential services very little bit so.

I'll be honest, we were very optimistic about this business and perform very well for us in 2023, and we're optimistic around 2024 bottom initiatives as I mentioned against the high volume talent, which affects that area a lot.

The more talent, we can get in and keep the better our execution rate is and as we progress into reporting out first quarter 24 and forward, we're going to start sharing information. It's not just a look back at how we compare to 2019. So we're gonna get through you know it's been almost five years, so we're getting to a point where.

Faiza Alwy: I know we have a slide in the deck that outlines kind of the rough revenue breakdown by segment, but I think until we report that way, and frankly, you know, cut the numbers that way, I'll have to hold off on giving you much perspective on those individual segment performances. Okay, that's fair. And then just on slide five, where you talk about where you show the data around sampling and demonstration, it sounds like, you know, was there a tick down there? Like, how are you thinking about those trends?

We probably have to look at that may be a little bit other data and other we're going to have new segments. It gives better indication of how those businesses are performing.

Cause I can just add a little color there.

If a if I go back to chose question about turnover and the other side of that the retention.

David A. Peacock: Are we, I guess, at a more normalized level now? We are continuing to see event recovery with some of our key customers. Although we've made a lot of progress, and we have some key customers who are well over 90. Unknown Speaker, Unknown Executive, Sean Choksi, David Peacock, Unknown Executive, Sean Choksi, David Peacock, Unknown Executive, varies a little bit.

It's it's the less turnover, obviously more employees it allows us to execute more of these events more of this in store work. So there was a direct benefit to the company by having less drove over and having more employees on the payroll we did make good progress in the fourth quarter, we got over 80% or 83%.

Christopher Robert Growe: So, I'll be honest; we were very optimistic about this business idea. It performed very well for us. World, or a lot of initiatives, as I mentioned again, for high volume talent, which affects that area. The more talent we can get in and keep, the better our execution rate, we progress into, you know, reporting out the first quarter of 24 and then forward, we're going to start sharing information that's not just a look back at how we compare to 2019, we're going to get to, you know, it's been almost five years, so we're getting to a point where we probably have to look at maybe a little bit other data now Faiza, I can just add a little color there.

So you're sort of end of the year on events versus 2019 is base is that the right measure I think there's other ways to better measure that business, but we got back to 83% I just would say that in 2024, you know we should exit the year somewhere that 90% range. So we'll make progress throughout the year.

And then I just also wanted to add that there's we talked about and are prepared remarks.

Q customer largely a customer that worthy.

Experience a partner for them, so that that'll be ramping throughout the year and Frank for this part of our capital that we're spending this year. So.

I want to make sure I make that note. There. So there's some really good progress there and that'll be a continued growth driver and 24.

Faiza Alwy: If I go back to Joe's question about turnover and the other side of that, retention, it's the less turnover; obviously, more employees, it allows us to do more of these events, more of this in-store work, so there's a direct benefit to the company by having less turnover and having more employees on the payroll. We did make good progress in the fourth quarter. We got over 80%; I think we were 83% as we sort of ended the year on events versus 2019. As Dave said, is that the right measure? I think there are other ways to better measure that business, but we got back to 83%. I just would say that in 2024, we should exit the year somewhere in that 90% range, so we'll make progress throughout the year.

Alright, Okay, and then just I'm going back to the client exits are they in a particular area or you know particular service areas are the retailers can you give us a bit more color around so what type of services you are providing where you know <unk>.

<unk>, where you're finding that you're not getting a credit card.

Thanks Bye.

I'd say, it's primarily in areas that is in the retail merchandising space not exclusively but primarily and as you are looking at what we have is a is a hybrid model about dedicated teams where they're dedicated to a specific client and then you've got syndicated teams it's really off.

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Routing and frankly, the the kind of.

The hours of those those syndicated teams we're tracking this down to sort of the hour utilization.

Faiza Alwy: And then I just also want to add that we talked about in our prepared remarks about a new customer, a large new customer that we're the experiential partner for them, so that'll be ramping throughout the year. In fact, that's part of our capital that we're spending this year, so just want to make sure I make that note there. So there's been some really good progress there, and that'll be a continued growth driver in 2024. Great, OK. And then just going back to the client exits, are they in a particular area or, you know, particular service areas? Are they retailers?

Detail and that's when those exits are determined and they're done obviously in conjunction with the client does not something where we pull.

Pull the rug out from under them, we have kind of detail conversations and ultimately come to the decision to move on and ensure that we're focusing.

Focusing and taken care of the clients that we're entertaining.

Got it and then just the last one progress I know you haven't provided cash flow guide.

Just curious given <unk>.

Some of these one time charges around technology investment how should we think about free cash flow kind of person and 24.

Yes, so we did offer free cash flow guidance for this year. So I know, it's the first time, we've done that so maybe they caught you by surprise, but.

David A. Peacock: Can you give us a bit more color around sort of what type of services you're providing where? You know, where you're finding that you're not getting a good return. Thanks, Faiza. I'd say it's primarily in areas that are in the retail sector. Not exclusively, but primarily, is you're looking at, you know, what we have is a hybrid model of both dedicated, Unknown Speaker, and then you've got syndicates. It's really optimizing routing and Frankly, the Unknown Speaker tracking.

Sorry.

That's okay now so I'm happy to give you some color on that if either so we're gonna.

<unk>, 55% to 65% of our EBITDA will be unlevered free cash flow, so that'll incorporate all that incremental capex.

David A. Peacock: And that's when I realized it. Exits are determined, and they're done, obviously, in conjunction with pulling the rug out from under them. We have a kind of detailed conversation. Unknown, focusing on taking care of. Got it. And then just last one for Chris. I know you haven't provided a cash flow guide. I'm just curious, given sort of you're going to incur some of these one-time charges around technology investment, how should we think about, you know, free cash flow conversion in 24? Yes, so we did offer free cash flow guidance for this year. So I know it's the first time we've done that, so maybe that caught you by surprise.

You know I also want to add that for the year. We've assumed that are DSO holds constant.

Look I wanted to reiterate we had great progress on working capital in 2023.

By the way on this metric of Unlevered free cash flow, we were 101% of EBITDA and 23, so a lot of that being driven by this really strong working capital for them. So it's gonna be hard to lab that no question, but there's a lot of process change in in real emphasis and focus internally on improving our DSO to hopefully drive stronger working capital for once again.

Faiza Alwy: But I'm sorry. That's okay. No. So I'm happy to give you some color on that, Faiza. So we call out 55% to 65% of our EBITDA will be unlevered free cash flow. So that'll incorporate all that incremental capex. I also want to add that for the year, we've assumed that our DSO holds constant.

I, just don't want want to commit to that just yet as we're doing some work and we made such great progress in 2003, So I think you'll still still see a very good unlevered free cash flow performance for the year, even inclusive the capex. We're gonna we're gonna grower EBITDA, what we're spending on this this on this capital and we're Gonna. We're gonna we're gonna have very strong I think unlevered free cash flow.

Christopher Robert Growe: Look, I want to reiterate, we had great progress on working capital in 2023. By the way, on this metric of unlevered free cash flow, we were 101% of EBITDA in 23. So a lot of that is being driven by this really strong working capital performance. So it's going to be hard to match that, no question, but there's a lot of process change and real emphasis and focus internally on improving our DSO to hopefully drive stronger working capital performance again. I just don't want to commit to that just yet as we're doing some work, and we made such great progress in 23.

Alright. Thank you so much no worries. Thanks, thanks Bye.

Our next question comes from the line of Tyler Pierce with Bnb part back. Please proceed with your question.

Hey, good morning, Thanks for taking my questions cause I'm very promising to see your leopard shark it here.

To continue that paid but any reason to prioritize your notes going forward as a trade it a larger discount relative to your term loan. Thanks.

Christopher Robert Growe: So I think you'll still see a very good unlevered free cash flow performance for the year, even inclusive of the capex. We're going to grow our EBITDA while we're spending on this capital, and we're going to have a very strong, I think, unlevered free cash flow. Great, thank you so much.

So the.

The answer to that is will will kind of assess the market conditions that I can say it that way as we go through the year and as you'll see in the fourth quarter. We did repurchase some notes the basically the the trading levels allowed us to do that and it made for the proper return in relation to our first lien term loan. So I would just say that throughout the year will assess that.

Tyler Pierce: No, we're, Our next question comes from the line of Tyler Pierce with BNB Parba. Please proceed with your question. Hey, good morning.

Tyler Pierce: Thanks for taking my questions, guys. Very promising to see your leverage target here. You alluded to continued debt paydown, but any reason to prioritize your notes going forward as they traded at a larger discount relative to your term loan?

And and I would just say that we're looking at all of that I do want to reiterate that will use cash we have the end of the year 126 plus million dollars cash will use internal cash flow generation through the year and that proceeds all of those will be you know earmarks are kind of pointed towards debt reduction through the.

Christopher Robert Growe: Thanks. So, the answer to that is we'll kind of assess market conditions, if I can say it that way, as we go through the year. And as you'll see, in the fourth quarter, we did repurchase some notes because, basically, the trading levels allowed us to do that, and it made for the proper return in relation to our first-link term loan. So I would just say that throughout the year, we'll assess that, and I would just say that we're looking at all of that. I do want to reiterate that we'll use cash. We have $126-plus million in cash at the end of the year. We'll use internal cash flow generation through the year and debt proceeds. All of those will be earmarked or kind of pointed towards debt reduction through the year. So we'll have those opportunities to make those choices as we go through, and we'll look at that in terms of trading levels and determine if that makes sense. Great, thank you.

So we will have those opportunities to make those choices as we go through and and we'll look at that and kind of trading levels are determined then.

Great. Thank you just one more in kind of a context.

Your your answers there you know how should we think of a minimum cash balance as we go forward.

Yeah, I think that you know in the range. We're in today are a little below that is probably a realistic level of cash for us. So I think you know and that sort of $100 million plus range is probably the best way to think about that I I don't see is necessarily dipping below that we always could of course, we have an avi almost while we can tap into for cash flow needs. So.

Tyler Pierce: Just one more in kind of the context of your answer there: how should we think of a minimum cash balance as we go forward? Yeah, I think that, you know, in the range we're in today or a little below that is probably a realistic level of cash for us. So I think, you know, in that sort of $100 million plus range is probably the best way to think about that. I don't see us necessarily dipping below that; we always could, of course, we have an AVL as well, we can tap into for cash flow needs.

We've got a lot of flexibility here today and again, that's a reiterated.

Again, but just no real mature it easier in the short term. So we've got the ability to be a little a little bit more aggressive on that so I think I think that 100 million dollar range is a good level to think about it.

Cool. Thank thank you guys are great corner.

Thank you.

Thank you there are no further questions at this time I would like to try and pull her back over to Kate Peacock for closing comments. Thank.

Thank you operator, we believe there is so much valued unlock your advantage led by a great team of committed people, which is competitive advantage for our company. We have a right to win with a central services talented teammates deep relationships significant upside to grow the business and create more value for our stakeholders together, we're making swift progress in implementing the right plans to enable this organs.

Christopher Robert Growe: So we've got a lot of flexibility here today. And again, not to reiterate it, you know, again, but just no real maturities here in the short term. So we've got the ability to be a little bit more aggressive on that. So I think I think that the $100 million range is a good level to think about it.

Tyler Pierce: Cool. Thank you, guys, and a great quarter. Thank you. Thank you. There are no further questions at this time. I would like to turn the floor back over to David Peacock for closing comments. Thank you, operator. We believe there is so much value in unlocking your advantage led by a great team of committed people, which is a competitive advantage for us. We have a right to win with essential services, talented teammates, and deep relationships. Unknown Speaker 0, create more value first.

Nation to evolve and grow focusing on simplifying restructuring processes, enhancing our capabilities and strengthening our financial discipline and analytical rigor.

So thank you again for your time today I look forward to speaking further on our first quarter fall in May.

This concludes today's teleconference. He may disconnect. Your lines at this time. Thank you for your <unk> for your participation.

[music].

David A. Peacock: Together we're making swift progress in implementing the right plans to enable this organization to evolve and grow, focusing on simplifying our structure and process. Thank you again for your time today. I look forward to speaking further on our first quarterly call. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.