Q2 2024 Advantage Solutions Inc Earnings Call

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Operator: Greetings and welcome to the Advantage Solution 2nd quarter 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. If anyone should require operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded.

Operator: Greetings and welcome to the Advantage Solutions second quarter 2024 earnings call. At this time, all participants are in a listen only mode. After the speaker's remarks, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. If anyone should require operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ruben Mella, Vice President of Investor Relations.

Speaker Change: Greetings and welcome to the advantage solutions second quarter 2024 earnings call. At this time all participants are in a listen only mode. After the Speakers' remarks, there will be a question and answer session to ask a question. During the session you will need to press star one.

Ruben Mella: One on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. If anyone should require operator assistance. During the conference. Please press Star Zero as a reminder, this conference is being recorded it is now my pleasure to introduce Ruben Mella, Vice President of Investor Relations.

Ruben Mella: It is now my pleasure to introduce Ruben Mella, Vice President and Ambassador Relations.

Operator: Thank you, Ruben. You may begin.

Speaker Change: Thank you Ruben it you may begin.

Ruben Mella: Thank you, Operator, and thank you for joining us on Advantage Solutions' second quarter earnings conference call. Dave Peacock, Chief Executive Officer, Chris Growe, Chief Financial Officer, and Sean Choksi, Senior Vice President of Strategy and M&A, are on the call today. Dave and Chris will provide their prepared remarks, after which we will open the call for a question and answer session.

Ruben Mella: Thank you, operator, and thank you for joining us on Advantage Solution 2nd quarter earnings conference call. Dave Peacock, Chief Executive Officer; Chris Groey, Chief Financial Officer; and Sean Chosky, Senior Vice President of Strategy and MNA, are on the call today. Dave and Chris will provide their prepared remarks, after which we will open the call for a question and answer session.

Speaker Change: Thank you operator, and thank you for joining us on advantaged solutions second quarter earnings Conference call Dave.

Ruben Mella: Dave Peacock, Chief Executive Officer, Chris, Croatia, Chief Financial Officer, and Sean Celski, Senior Vice President of strategy and M&A or on the call today, Dave and Chris will provide their prepared remarks, after which we will open the call for a question and answer session.

Unknown Executive: 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 of all assumptions, risks, and uncertainties that are difficult to predict. It is important to note that actual outcomes and results could differ materially due to several factors, including those described more fully in the company's Annual Report on Form 10-K filed with the SEC. All forward-looking statements are expressly qualified in their entirety by such factors.

Speaker Change: 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 Change: It is important to note that actual outcomes and results could differ materially due to several factors, including those described more fully in the company's annual report on Form 10-K filed with the SEC.

Ruben Mella: All forward-looking statements are expressly qualified in their entirety by these factors. I want to draw your attention to the fact that our remarks today will focus on certain non-GAAP financial measures. Our earnings release issued earlier today provides a reconciliation of these non-GAAP financial measures to the most comparable GAAP measure. We will also refer to our presentation during the prepared remarks, which can be found in the events and presentation section of the IR website.

Speaker Change: All forward looking statements are expressly qualified in their entirety by such factors.

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

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

Unknown Executive: We want to draw your attention to the fact that our remarks today will focus on certain non-GAAP financial measures. Our earnings release issued earlier today provides the reconciliation of these non-GAAP financial measures to the most comparable GAAP measure.

Speaker Change: We want to draw your attention to the fact that our remarks today will focus on certain non-GAAP financial measures.

Unknown Executive: This call's being webcast, and a recording will also be available on the company's investor relations website. We will also refer to a presentation during the prepared remarks, which can be found in the events and presentation section of the IR website. We filed an AK this morning with a recast of revenues and adjusted EBITDA over the last 10 quarters for the news segments. This includes revenues net-of-passes, who cost and adjusted EBITDA on a continuing operation and discontinued operation spaces.

Unknown Executive: Finally, unless otherwise stated, the financial results discussed today will be from continuing operations.

David Peacock: and now I'd like to turn the call over to Advantage's CEO, Dave Peacock. Thanks, Ruben, and thank you all for joining us this morning. I first want to acknowledge our teammates for their hard work during the second quarter in a dynamic environment across CPG companies and retailers. At the same time, we continue to advance the strategic initiatives that are driving our transformation to reset the bar as a premier conduit for consumer brands and retailers that keep commerce and life moving. These initiatives already yield benefits and will continue to do so through our phases of execution over the next two years.

David Peacock: Thanks, Ruben, and thank you all for joining us this morning. I first want to acknowledge our teammates for their hard work during the second quarter in a dynamic environment across CPG companies and retailers. At the same time, we continue to advance the strategic initiatives that are driving our transformation to reset the bar as the premier conduit for consumer brands and retailers that keep commerce and life moving. We are happy to report that we have largely completed the simplification portion of our transformation.

David Peacock: Over the last 18 months, we have refined Advantage's portfolio to sharpen our focus on the areas where we have a right to win and centralize our corporate functions to drive consistency and efficiency across the enterprise. We are happy to report that we have largely completed the simplification portion of our transformation. This culminated with the recent sale of the June group at the end of July, marking more than 10 largely non-core business investors. Most of the proceeds will be used to pay down debt as we target a net leverage ratio of three and a half times or less over the long term.

Speaker Change: On the areas, where we have a right to win and centralize our corporate functions to drive consistency and efficiency across the enterprise.

Speaker Change: We are happy to report that we have largely completed the simplification portion of our transformation.

David Peacock: This culminated with the recent sale of the June Group at the end of July, marking more than 10 largely non-core business divestments. Most of the proceeds will be used to pay down debt as we target a net leverage ratio of three and a half times or less over the long term.

Speaker Change: This culminated with the recent sale of the June group at the end of July marking more than 10, largely non core business divestitures. Most of the proceeds will be used to pay down debt as we target a net leverage ratio of three five times or less over the long term.

David Peacock: We are midway through our corporate transformation, moving from a fragmented set of businesses focused on their unique service offerings to an integrated enterprise under one umbrella with interconnected service offerings and solutions. During the second quarter, we advance several initiatives, including upgrading our technology data platforms and recently launching our own AI core competency center to better serve clients in areas such as contract management and routing merchandisers, as well as those that serve internal needs like HR workflow and certain analysis of large data sets. Our simplification and enhancements will give teammates the tools to work smarter, faster, and achieve more.

Speaker Change: We are midway through our corporate transformation moving from a fragmented set of businesses focused on their unique service offerings to an integrated enterprise under one umbrella with interconnected service offerings and solutions.

Speaker Change: During the second quarter, we advanced several initiatives, including upgrading our technology data platforms and recently launching our own AI core competency center to better serve clients in areas, such as contract management and routing merchandisers as well as those that serve internal needs like HR workflow and certain analysis of large day.

Speaker Change: The sets.

Speaker Change: Our simplification and enhancements will give teammates the tools to work smarter faster and achieve more.

David Peacock: Advantage's culture is centered on putting people first, which is why we have enduring relationships that result in approximately 95% retention over time among our top 100 clients and inspire the performance that has made us one of Time Magazine's best midsize companies. Last quarter, we announced Advantage's new reporting segments, branded retailer and experiential services, which are linked more to the customer than service activity across a network of over 4,000 clients and nearly all of the top retailers. We believe this structure provides a clear picture of our business and the drivers of financial performance.

Speaker Change: Advantages culture is centered on putting people first which is why we have enduring relationships that result in approximately 95% retention over time, among our top 100 clients and inspire the performance that has made US one of time magazine's best midsized companies.

Speaker Change: Last quarter, we announced advantages new reporting segments branded retailer and experiential services, which are linked more to the customer then service activity across a network of over 4000 clients in nearly all the top retailers.

Speaker Change: We believe this structure provides a clear picture of our business and the drivers of financial performance I want to share how we see those segments evolving because of the transformation.

David Peacock: I want to share how we see those segments evolving because of the transformation. Let's start with branded services, where we serve as an extension of consumer packaged goods company sales and marketing teams. Our primary areas of support to CPGs include selling to retailers not directly serviced by a CPG, including joint business planning, price promotion planning, and category reviews. Retail merchandising for CPG clients to ensure on-shelf availability, the right displays, and accurate pricing, and on the channel services where we can manage fully integrated market programs, including retail media campaigns to connect consumers with brands. Within this segment, our business intelligence capabilities are the foundation of our brand and retail execution.

Speaker Change: Let's start with branded services, where we serve as an extension of consumer packaged goods companies sales and marketing teams.

David Peacock: Our primary areas of support to CPGs include selling to retailers not directly serviced by a CPG, including joint business planning, price promotion planning, and category review, and Omnichannel Services, where we can manage fully integrated market programs, including retail media campaigns to connect consumers with brands. Our real-time insights take our client service to the next level, informing everything from shelf resets to how and where we sample. Not only are we growing our business directly with Amazon, but we also collaborate extensively with the online retailer, serving brands through branded services to help deliver shopper-centric solutions that enabled all of our CPG clients to realize double-digit growth in the last year.

Speaker Change: Our primary areas of support to Cpg's include selling the retailers not directly serviced by a CPG, including joint business planning price promotion planning and category reviews.

Speaker Change: Retail merchandising for CPG clients to ensure on shelf availability, the right displays and accurate pricing and Omnichannel services, where we can manage fully integrated market programs, including retail media campaigns to connect consumers with brands.

Speaker Change: Within this segment our business intelligence capabilities are the foundation of our brand and retail execution with the investments we are making our Intel will become a more meaningful differentiator driving all of the activities across our business, including where we send our teams and how we sell to retailers.

David Peacock: With the investments we are making, our Intel will become a more meaningful differentiator driving all the activities across our business, including where we send our teams and how we sell to retailers. Our real-time insights take our client service to the next level, informing everything from shelf resets to how and where we sample. Our investments and technology are already bringing more speed and precision to their solutions we offer CPG clients through the mountain of proprietary insights we gather. For example, we're collaborating with a retail technology company specializing in image recognition and AI to provide high-speed analytics on inventory tracking.

Speaker Change: Our real time insights take our client service to the next level informing everything from shelf resets to how and where we sample.

Speaker Change: Our investments in technology are already bringing more speed and precision to their solutions, we offer CPG clients through the mountain the proprietary insights we gather.

Speaker Change: For example were collaborating with a retail technology company specializing in image recognition and AI to provide high speed analytics on inventory tracking and seconds. We can turn real time insights into action to improve brand and retail execution, whereas similar process would take days with other providers.

David Peacock: In seconds, we can turn real-time insights into action to improve brand and retail execution, whereas a similar process would take days with other providers. The insights and execution we offer allow us to help clients with their existing products, line extensions, and innovations. We announce the collaboration with LA Libations, a company with emerging and insurgent brands hungry for our expertise. Our collaboration will help get those growth brands onto more shelves and into more retailers nationwide, allowing them to scale faster than ever before.

Speaker Change: The insights and execution, we offer allow us to help clients with their existing products line extensions and innovations, we announced the collaboration with L. A libations accompany with emerging an insurgent brands hungry for our expertise.

David Peacock: Moving on to our experiential services segment, which directly connects shoppers with brands through in-store and online sampling experiences, live events, and digital engagements. Our scale and global leadership position gives us a clear competitive advantage. We are expanding this advantage into new and emerging channels and beyond brick and mortar. Whether it's grocery, mass, or wholesale, our studies show that approximately 85% of shoppers indicate sampling impacts their purchase decision, with approximately 65% making a purchase the same day or later. Shoppers who engage in sampling can increase buy rates in units and dollars while spending up to three times more after sampling events.

David Peacock: Our digital sampling capabilities are another way we help clients generate consumer demand. Clients are looking for omnichannel marketing solutions as part of their overall strategy.

David Peacock: We are proud to have recently received Amazon's inaugural Gold Tier award for excellence in omnichannel performance. Not only are we growing our business directly with Amazon, but we also collaborate extensively with the online retailer, serving brands through branded services to help deliver shopper-centric solutions that enabled all of our CPG clients to realize double-digit growth in the last year. As part of our interconnected offerings, omnichannel services are also vital to each of our business segments. Lastly, retailer services provides end-to-end offerings from private brand strategy to optimizing aisle and shelf spaces to providing retail media and network support.

David Peacock: As part of our interconnected offerings, omni-channel services are also vital to each of our businesses. Lastly, Retailer Services provides end-to-end offerings from private brand strategy to optimizing aisle and shelf space to providing retail media network support. We have enduring relationships with most of the largest North American retailers, serving more than 100,000 stores annually.

David Peacock: We have enduring relationships with most of the largest North American retailers, serving more than 100,000 stores annually. Our teams address our clients' most important matters, such as ensuring products are stocked and positioned on shelves and displays to inspire purchases and enable growth. Our investments in technology will reduce the time needed to diagnose out-of-stock and shelf gaps, while freeing up more time to capitalize on new off-shelf opportunities that command shoppers' attention and convert them into buyers.

Speaker Change: With American retailers, serving more than 100000 stores annually. Our teams address our clients' most important matters such as ensuring products are stocked and positioned on shelves and displays to inspire purchases and enable growth our investments in technology will reduce the time needed to diagnose out of stock and shelf gaps.

David Peacock: Our teams address our clients' most important matters, such as ensuring products are stocked and positioned on shelves and displays to inspire purchases and enable growth. Our investments in technology will reduce the time needed to diagnose out-of-stock and shelf gaps while freeing up more time to capitalize on new off-shelf opportunities that command shoppers' attention and convert them into buyers. Swiftly works with brands and retailers to connect shoppers with targeted promotions, rebates, and ads on their mobile devices.

Speaker Change: While freeing up more time to capitalize on new off shelf opportunities that command shoppers' attention and convert them into buyers.

David Peacock: Just last week, we announced the new strategic collaboration with technology company Swiftly. Swiftly works with brands and retailers to connect shoppers with targeted promotions, rebates, and ads on their mobile devices. Adding this new capability will allow us to offer our retailers scalable and targeted solutions that put brands in front of new audiences and drive more people to stores. Finally, we are best positioned with retailers today and into the future to drive private brand strategy and development, delivering quality and value to the shoppers. Our differentiation helps us understand the entire category for a retailer and CPG, including both branded and private brand dynamics.

Speaker Change: Just last week, we announced a new strategic collaboration with Technology company swiftly swiftly works with brands and retailers to connect shoppers with targeted promotions rebates and ads on their mobile devices, adding this new capability will allow us to offer our retailers scalable and targeted solutions that put brands in front of new audiences.

David Peacock: Adding this new capability will allow us to offer our retailers scalable and targeted solutions that put brands in front of new audiences and drive more people to the store. Our differentiation helps us understand the entire category for a retailer and CPG, including both branded and private brand dynamics. Now, let's turn to our outlook.

Speaker Change: <unk> and drive more people to stores.

Speaker Change: Finally, we are best positioned with retailers today and into the future to drive private brand strategy and development delivering quality and value to the shoppers.

Speaker Change: Our differentiation helps us understand the entire category for our retailer and CPG, including both branded and private brand dynamics.

David Peacock: By further enhancing our competitive advantages, we will leverage our unique position to shape how consumers shop across the entire path to purchase. We expect our evolution to expand our reach and create a more seamless experience for brands and retailers to utilize our collective service offerings.

David Peacock: Now, let's turn to our outlook. As we look to the second half of the year, we expect improved performance while acknowledging that the markets remain uncertain across portions of our business. The seasonality favors this time of year, and we are seeing increased activity for our services. In addition, new business wins from earlier in the year will begin to contribute, especially in experiential services. We are at a point in our transformation where we are aligning the unified organization with our business priorities to fuel long-term profitable growth. We expect these efforts to begin delivering financial benefits in the back half of this year and beyond.

David Peacock: As we look to the second half of the year, we expect improved performance while acknowledging that the markets remain uncertain across portions of our business. Advancing our strategic collaboration, such as Genpak and TCS, moving from implementation and upfront investment to executing and realizing efficiency improvements. Realizing additional opportunities to reduce overhead costs, such as leased office space, after completing the business portfolio rationalization. In conclusion, we are energized by the progress of our strategic initiatives to transform this business.

David Peacock: These actions include right sizing talent resources across the enterprise, most notably in branded services. Advancing our strategic collaboration such as GenPAC and TCS moving from implementation and upfront investment to executing and realizing efficiency improvements, realizing additional opportunities to reduce overhead costs such as least office space after completing the business portfolio rationalization. As the industry continues to deal with wage inflation, we secured additional price increases to help offset the expected impact in the year's second half.

David Peacock: In conclusion, we are energized by the progress of our strategic initiatives to transform this business. We are doing this by focusing on our core capabilities, operating with excellence, strengthening our balance sheets, and investing in leading edge technologies and talent. This strategic approach will enable us to provide our clients with high touch, high tech, and high value services. The beneficiaries of our transformation will be our clients who will work with an even more responsive inside-striven organization, our teammates who will be more empowered to represent advantage and build more successful careers with us, and our shareholders as we realize our full potential.

David Peacock: We are doing this by focusing on our core capabilities, operating with excellence, strengthening our balance sheet, and investing in leading-edge technologies and talent. This strategic approach will enable us to provide our clients with high-touch, high-tech, and high-value services. Our teammates, who will be more empowered to represent Advantage and build more successful careers with us, and our shareholders, as we realize our full potential. With that, I will now pass the call over to Chris to review our financial performance.

Christopher Growe: With that, I will now pass the call over to Chris to review our financial performance. Thank you, Dave, and welcome to all of you joining the call today. In the earnings release and presentation, we provided details regarding our financial performance in the second quarter and the first six months of the year. We were pleased with our performance in a dynamic market for CPGs and retailers driven by more cautious consumer spending behavior. I want to highlight four factors that drove our performance in the quarter. First, experiential services increased events per day by 11% year over year, and the team once again did a terrific job leveraging the existing infrastructure to accommodate the increased activity.

Christopher Growe: In the earnings release and presentation, we provided details regarding our financial performance in the second quarter and the first six months of the year. We were pleased with our performance in a dynamic market for CPGs and retailers, driven by more cautious consumer spending behavior. I want to highlight four factors that drove our performance in the quarter. Second, retailer services was impacted by softness in the traditional grocery channel, which mostly offset the revenue benefits of the Easter holiday shift.

Speaker Change: I want to highlight four factors that drove our performance in the quarter.

Speaker Change: First experiential services increased events per day by 11% year over year and the team once again did a terrific job leveraging the existing infrastructure to accommodate the increased activity.

Christopher Growe: The execution rate defined as the ability to meet event demand exceeded 92%, and event counts overall were 87% of pre-pandemic levels. Second, retailer services was impacted by softness in the traditional grocery channel, which mostly offset the revenue benefits of the Easter holiday shift. The favorable adjusted EBITDA performance was due to pricing actions and solid execution to manage talent deployment in overall costs. We expect increased activity in the second half, consistent with the business's seasonal cadence. Third, branded services performance trajectory improved in the quarter. Keep in mind that the investors include the deconsolidation of our European joint venture and plan client exits impact this segment.

Speaker Change: The execution rate defined as the ability to meet event demand exceeded 92% and event counts overall were 87% of pre pandemic levels.

Speaker Change: Second retailer services was impacted by softness in the traditional grocery channel, which mostly offset the revenue benefits of the Easter holiday shift.

Christopher Growe: The favorable adjusted EBITDA performance was due to pricing actions and solid execution to manage talent deployment and overall cost. We expect increased activity in the second half, consistent with the business's seasonal cadence. Moving to our balance sheet, during the quarter, we voluntarily repurchased approximately $27 million in secured notes at an attractive discount. As of June 30th, our total funded debt outstanding was approximately $1.8 billion, with nearly 90% of our debt hedged or at fixed interest rates. We recently rolled out our debt collars to extend interest rate hedges into 2027 and 2028. Our net leverage ratio was approximately 4.1 times, inclusive of discontinued operations and adjusted EBITDA.

Speaker Change: The favorable adjusted EBITDA performance was due to pricing actions and solid execution to manage talent deployment and overall costs.

Speaker Change: We expect increased activity in the second half consistent with the businesses seasonal cadence.

Speaker Change: Third branded services performance trajectory improved in the quarter.

Speaker Change: Keep in mind that the divestitures, including the deconsolidation of our European joint venture and planned client exits impact. This segment, we continue to engage with existing and new clients to help them navigate a more dynamic market at the same time, we are investing in our capabilities and reshaping the organization to manage costs and maximize efficiency, we realized some of this.

Christopher Growe: We continue to engage with existing and new clients to help them navigate a more dynamic market. At the same time, we are investing in our capabilities and reshaping the organization to manage costs and maximize efficiency. We realize some of the savings in the quarter. Expect that to continue in the second half of the year, with the portion of the savings used to invest in the transformation. Finally, wage inflation driven in part by tight labor markets and statement on wage laws was the headwind in our results, despite price realization across the three business segments. We will continue to find ways to cover labor costs through additional price realization and effective execution.

Speaker Change: Savings in the quarter expect that to continue in the second half of the year with a portion of the savings used to invest in the transformation.

Christopher Growe: Moving to our balance sheet, during the quarter, we voluntarily repurchased approximately $27 million in secured notes at an attractive discount. As of June 30th, our total funded debt outstanding was approximately 1.8 billion, with nearly 90% of our debt hedged or at fixed interest rates. We recently rolled our debt collars to extend interest rate hedges into 2027 and 2028. Our net leverage ratio was approximately 4.1 times inclusive discontinued operations in the Justice of Utah. We expect improved performance in the second half and the paid out of debt at attractive returns to lower our net leverage ratio by the end of the year compared to 2023.

Christopher Growe: With the debt paid out to date and the reduction in the term loan pricing, we now expect net interest expense to be $155 million to $165 million compared to the prior guidance of $170 million to $180 million. We were active in the quarter, spending about $9 million to repurchase shares. This year through the end of July, we repurchased approximately 8 million shares to take advantage of what we believe is an undervalued stock price and to offset employee incentive-related delusion. CAPEX is approximately $15 million in the quarter to support our three-year IT transformation projects and maintenance capital requirements.

Christopher Growe: This year, through the end of July, we repurchased approximately 8 million shares to take advantage of what we believe is an undervalued stock price and to offset employee incentive-related dilution. CapEx is approximately $15 million in the quarter to support our three-year IT transformation projects and maintenance capital requirements. For 2024, we expect CapEx to be $65 million to $80 million versus the original estimate of $90 million to $110 million. We still plan for the spending to taper in 2025 and return to maintenance spending levels in 2026.

Christopher Growe: Our transformation teams routinely assess resource allocation, capital requirements, and project timelines. We've also been able to appropriately review and adjust cash outlays due to completed investors and new partnerships, helping us to optimize our spending. As a result, we are reducing the total three-year IT transformation CAPEX funding range by $20 million to $140 million to $150 million. For 2024, we expect CAPEX to be $65 million to $80 million versus the original estimate of $90 million to $110 million.

Christopher Growe: Partners. We still plan for the spending to taper in 2025 and return to maintenance spending levels in 2026. As we continue to invest in transforming the company, we remained focused on financial discipline. We generated approximately $129 million in adjusted, unlevered free cash flow, or 132% of adjusted EBITDA, inclusive of discontinued operations. The cash conversion was better than we expected to continue success with our working capital initiatives and the timing of capital spending. We remained focused on achieving our business objectives for the year, but we still have a lot of work to do. We are pleased with our improved business performance in the second quarter.

Christopher Growe: As we continue to invest in transforming the company, we remain focused on financial discipline. We generated approximately $129 million in adjusted, unlevered free cash flow, or 132% of adjusted EBITDA, inclusive of discontinued operations. We remain focused on achieving our business objectives for the year, but we still have a lot of work to do. We are pleased with our improved business performance in the second quarter. The year-over-year increase in SG&A during the first half of the year will narrow in the second half as we make the heavier investments in people that started in earnest in last year's second half.

Christopher Growe: We have realistic expectations for a stronger second half of the year, which support our expectations for revenues and adjusted EBITDA to grow low single digits on a continuing operations basis, now that we have substantially completed the investors. The year-over-year increase in SGNA during the first half of the year will narrow in the second half as we left heavier investments in people that started in earnest in last year's second half. We remained focused on efficient cash generation even during the year of significant investment and reorganization. The reduced CAPEX guidance we expect for the full year should allow us to realize adjusted, unlevered free cash flow conversion towards the upper end of the 55 to 65% range, inclusive of discontinued operations.

Speaker Change: Now that we've substantially completed the divestitures.

Speaker Change: The year over year increase in SG&A during the first half of the year will narrow in the second half as we lap the heavier investments in people that started in earnest in last year's second half.

Christopher Growe: We remain focused on efficient cash generation, even during a year of significant investment and reorganization. The reduced CapEx guidance we expect for the full year should allow us to realize adjusted unlevered free cash flow conversion towards the upper end of the 55% to 65% range, inclusive of discontinued operations. Due to the timing of transformation-related activities and the seasonality of revenue, we expect higher capital spending and increased working capital usage to weigh down cash conversion in the back half of the year.

Speaker Change: We remain focused on efficient cash generation, even during a year of significant investment and reorganization.

Speaker Change: The reduced Capex guidance, we expect for the full year should allow us to realize adjusted Unlevered free cash flow conversion towards the upper end of the 55% to 65% range inclusive of discontinued operations.

Christopher Growe: Due to the timing of transformation related activities and the seasonality of revenue, we expect higher capital spending and increased working capital usage to weigh down cash conversion in the back half of the year. Because of the investments, changes to the organization to transform the business, and our cash needs, we expect to generate minimal excess cash in 2024. However, the approximately $280 million in cash proceeds from the investors this year provides sufficient liquidity to continue paying down debt. This includes proceeds of approximately $130 million received on July 31st upon the close of the June group sale.

Speaker Change: Due to the timing of transformation related activities and the seasonality of revenue, we expect higher capital spending and increased working capital usage to weigh down cash conversion in the back half of the year.

Christopher Growe: Because of the investments, changes to the organization to transform the business, and our cash needs, we expect to generate minimal excess cash in 2024. Thank you for your time. I will now turn it back over to Dave.

Speaker Change: Because of the investments changes to the organization to transform the business and our cash needs, we expect to generate minimal excess cash in 2024. However.

Dave: However, the approximately $280 million in cash proceeds from the divestitures. This year provides sufficient liquidity to continue paying down debt. This includes proceeds of approximately $130 million received on July 31st upon the close of the June group sale. Thank you for your time I will now turn it back over to Dave.

Unknown Executive: Thank you for your time.

David Peacock: I will turn it back over to Dave. Thanks, Chris. We are focused on the opportunities ahead of us. With the investments underway and the interconnected service offerings we are creating, we intend to raise the bar we set for service excellence and create a more unified, inside-driven company.

David Peacock: Thanks, Chris. We are focused on the opportunities ahead of us. With the investments underway and the interconnected service offerings we are creating, we intend to raise the bar we set for service excellence and create a more unified, insight-driven company. We will now take your questions. Operator.

David Peacock: There is much more to do, and the leadership team appreciates the hard work of our teammates in accomplishing our strategic and business objectives this year.

Operator: We will now take your questions, Operator. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to withdraw your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to withdraw your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.

Operator: Thank you.

Gregory Parrish: And our first question comes from Greg Parish with Morgan Stanley. Hey, great. Thanks. Good morning.

Unknown Executive: Hey, great. Thanks, and good morning. I guess to start with all the economic headlines this past week, give us an update on consumer shopping activity, what you're seeing, sort of in real time here.

David Peacock: I guess the start with all the economic headlines this past week gives an update on sort of consumer shopping activity, what you're seeing sort of real time here. Thanks, Greg. Yeah, I had a good question, and I'm glad you asked because I think there's a lot of reaction to what's going on, kind of in the news, if you will, over the last couple of weeks. None of this should be surprising, frankly, because we're still living through kind of the economic ripples from COVID. And if you imagine, you know, and all of us know, there's a big drop in demand during.

David Peacock: COVID. And as reopening came on, employment recovery plus some fragile supply chains led to broad-based inflation. And then, while their corrective actions were taken in the market with interest rates increases, inflation persisted, spending remained strong, and employment continued to grow over time. Now what you're seeing with most of that savings being exhausted is demand slowing down, especially for the lower end of the socio-economic spectrum. And we've seen this probably earlier on the lowest end of the socio-economic spectrum, but it's starting to creep up even into the lower middle class, if you will. And so what this has led to more broadly is units being down, a channel shift to some of the more value channels, mass, club, dollar stores.

David Peacock: Inflation persisted, spending remained strong, and employment continued to grow over time. Now, what you're seeing with most of that savings being exhausted. And we've seen this probably earlier on the lowest end of the socioeconomic spectrum, but it's starting to creep up, even in the lower middle class, if you will. And so what this has led to more broadly is units being down, and a channel shift to some of the more value channels, mass, club, and dollar stores.

David Peacock: You're seeing impact on pack size; you're seeing growth of smaller packs being almost double that of kind of standard. And you're seeing a little bit more bought on promo versus recent trends, but more in line with pre-COVID. So not a dramatic change, but more in line with pre-COVID. And so I know there's a lot in the headlines around the challenge consumer. And there is certainly a large set of consumers who are challenged economically right now. And you're seeing unemployment even take up a bit.

David Peacock: You're seeing impact on pack size; you're seeing growth of smaller packs being almost double that of the kind of standard. And you're seeing a little bit more bought on promo versus recent trends, but more in line with pre-COVID. So not a dramatic change, but more in line with pre-COVID. And so I know there's a lot in the headlines around the challenge consumer, and there is certainly a large set of consumers who are challenged economically right now.

David Peacock: And you're seeing unemployment even tick up a bit. At the end of the day, we remain focused on transforming our business to meet what we anticipate as a long-term, what I'll call a more normal cycle within the CPG and retail space, for which we are well positioned given the fact that we've got a private label business. And then you've got a need for better retail planning as it relates to price promotion so that retailers can capture that more economically challenging.

David Peacock: At the end of the day, we remain focused on transforming our business to meet what we envision as a long-term, what I'll call more normal cycle within the CPG and retail space. When we get through this period of ripple impact from COVID, which I think we're still living through, as we go through this year, I think we're well positioned to address that long-term trend, but also things short-term. So you've got need for sampling as people are trying to stimulate demand for units. You've got assortment changes based on some of the pack size dynamics I talked about, and some of the price promotion.

Gregory Parrish: You've got a shift to private label, which we are well positioned given the fact that we've got a private label business. And then you've got need for better retail planning as it relates to the price promotion, so that retailers can capture that more economically challenged consumer. Great, yeah, thanks.

Unknown Executive: Great. Yeah, thanks, Colin.

Gregory Parrish: So next question, I want to answer with a step up here from first quarter to second quarter in EBITDA. I had 20 million up sequentially. A lot of moving parts, a lot going on. I talked about some of it.

Dave: From first quarter to second quarter in EBITDA.

Dave: I think 20 million up sequentially a lot of moving parts a lot going on you talked about some of it.

Christopher Growe: Chris, maybe if you can kind of help this unpack that step up sequentially here and sort of what the big drivers were. Yeah, I think what you'll see is we have a little bit of a timing differential in our retail business. We talked about that last quarter, and we got some of that back this quarter just through the timing of holidays and that kind of thing. At the same time, there has been a real focus in within retail to focus on our costs. And you'll see, therefore, more modest revenue growth, but a pretty strong profit performance.

Unknown Executive: So next question, I want to ask about the step up here from first quarter to second quarter in EBITDA. I think 20 million up sequentially, a lot of moving parts, a lot going on. We talked about some of it. Chris, maybe if you could kind of help just unpack that step up sequentially here and sort of what the big drivers were.

Dave: Maybe if you can.

Speaker Change: I'll, just unpack that step up sequentially here and sort of what the big drivers were.

Christopher Growe: Yeah, I think what you'll see is we have a little bit of a timing differential in our retail business. We talked about that last quarter, and we got some of that back this quarter, just because of the timing of holidays and that kind of thing. At the same time, you know, there has been a real focus within retailers to focus on our costs. And you'll see, therefore, more modest revenue growth but a pretty strong profit performance. Experiential is doing what it does best.

Dave: Yeah, I think what you'll see is.

Speaker Change: We had a little bit of a timing differential in our retailer business, we talked about that last quarter and we got some of that back this quarter just due to the timing of holidays and that kind of thing at the same time, there has been a real focus and within retail or to focus on our cost and youll see therefore, more modest revenue growth, but a pretty strong profit.

Christopher Growe: Experiancial is doing what it does. It's been still, as you know, recovering and frankly being really well managed around pricing, mix, and certainly the underneath that, that great volume growth that we're seeing there still. I also want to note for you there, Greg, that we have really good execution. We talked about this last year, and even probably earlier in the year, but that execution, when you're doing more demonstrations, and we've got plenty of demand there, more than we can even fulfill right now, that's really 18. Our margin profile and that business and that, that's a great benefit to us.

Speaker Change: Performance experiential is doing what it does it's been still recovering and frankly being really well managed around pricing mix.

Christopher Growe: It's still, as you know, recovering and being really well managed around pricing, mix, and certainly underneath that, that great volume growth that we're still seeing there. I also want to point out for you there, Greg, that we have really good execution. We talked about this last year and even probably earlier in the year. But that execution, when you're, you know, doing more demonstrations, and we've got plenty of demand there, more than we can even fulfill right now, that's really aiding our margin profile in that business, and that's a great benefit to us.

Speaker Change: And certainly that underneath that that great volume growth that we're seeing are still I also want to note for you there Greg that we have really good execution, we talked about this last year and even probably earlier in the year, but that execution when youre doing more demonstrations and we've got plenty of demand there are more than we can even fulfill right now that's.

Christopher Growe: And then, while Brandit was still down this quarter, you saw sequential improvement. It's an area really focused on right now, and some of the things Dave outlined just now about kind of where we are in the economic environment and the business environment. I think it's putting us in a good place to really address our cost structure there and move that business to continue to show sequential improvement in that business through the second half.

Christopher Growe: And then, while Brandit was still down this quarter, you saw sequential improvement. That's an area we're really focused on right now. And, you know, some of the things Dave outlined just now about kind of where we are in the economic environment and the business environment, I think it's putting us in a good place to really address our cost structure there and move that business, you know, continue to show sequential improvement in that business through the second half of the year.

Gregory Parrish: of the year.

Gregory Parrish: Sorry, great. And then maybe they just kind of follow that up with the back half of the year. So your target's low single digit still implies, you know, so step up just based on the first half results.

Unknown Executive: All right, great. And then maybe just kind of follow that up with the second half of the year. So your target is low single digits, but it still implies, you know, step up just based on the first half results. So there's a little bit to unpack on the second half, some of it's probably related to what you're just saying. And then, I mean, I guess how much of that is within your control is branded. You talked about increasing client activity, I think you're just talking about seasonality, maybe just kind of confirm that.

David Peacock: So it's unpack a little bit on the second half. Some of this probably related to what you're just saying. And then I mean, I guess how much of that is within your control is branded. You talked about increase in client activity. I think you're just talking about seasonality. Maybe just kind of confirm that. And then I mean, is the guide of low single digits? Does that mean is that beholden in any way to kind of an improvement in the market, or is it all kind of just within your control? Yeah, I think, well, first there is seasonality that's natural on our business.

Unknown Executive: Yeah, I think well, first, there is seasonality that's natural in our business, and then you know Chris mentioned in his prepared remarks that we're lapping investment so as you go sequentially by quarter, the second half of this year, the kind of increase in investment that we saw to support some of the transformation in our shared services areas, the increment is much less than the second.

David Peacock: And then, you know, Chris mentioned in his prepared remarks that we're lapping investment. So, as you go sequentially by quarter, the second half of this year kind of the increase in investment that we saw. To support some of the transformation in our shared services areas, is the improvement is much less than the second half.

David Peacock: We talked about also sort of right sizing the organization to align with where we see the business well called kind of over the near term, but even some in the long term, and technology is helping with that as well as we're doing some things to get. Kind of real-time analysis into the hands of our frontline sales folks through tools like Power BI that helps us to get a lot more efficient as it relates to delivering data and analysis in a customer call. And then we do have some new business that's coming on. So we talked about client exits, which we're obviously continuing to kind of lap over year, but we've got new business now being layered on, was secured in the first half, but actually showing up in the number second half and then we do have some pricing rolling through the second half as well.

Gregory Parrish: Okay, great.

Unknown Executive: Okay, great. I'll pass it on. Thanks.

Gregory Parrish: I'll pass it off. Thanks. Thanks, Greg.

Joseph Daffy: Thank you.

Operator: Thank you. Our next question is from Joseph Vafi with Canaccord. Please proceed with your question. Hey guys.

David Peacock: Our next question is from Joseph Daffy with Canna Court. Please proceed with your question. Hey guys. Good morning and nice to see all the progress on the repositioning, just maybe on the cost side a little bit. I know you're continuing efforts on employee utilization. And the like just be interesting to get an update. I guess on that, you know, large input of cost of kind of where you are in your journey. You think in fully optimizing employee utilization. Now have a quick follow-up.

David Peacock: Hey, thanks, Joe.

Unknown Executive: Hey, thanks, Joe. This is Dave.

David Peacock: This is Dave. So yeah, we are tracking sort of productivity, if you will, in the marketplace across our different business lines. And we are seeing increased productivity. I think Chris mentioned that on the experiential side, as we're starting to see event count growth. That obviously, you know, has a fixed cost coverage aspect within our business because there's a kind of a regional management infrastructure. And then we track closely the hours in all our businesses, and you know, kind of are seeing lower hours across our business meeting. We're able to meet demand, and we talked about.

David Peacock: So yeah, we are tracking sort of productivity, if you will, in the marketplace across our different business lines, and we are seeing increased productivity. I think Chris mentioned that on the experiential side, as we're starting to see event count growth, that obviously, you know, has a fixed cost coverage aspect to it within our business because there's a, there's a kind of a regional management infrastructure. And then we track closely the hours in all our businesses, you know, kind of seeing lower hours across our business, meaning we're able to meet demand, and we talked about the 1% organic revenue growth with less hours, which is obviously the result of productivity initiatives, and technology investments are part of that.

David Peacock: of the 1% organic revenue growth with less hours, which is obviously the result of productivity initiatives and technology investments are part of that. And then we're doing a lot in the area of how we leverage our labor across different tasks within maybe the same store, if you will, or even in the same geography. So a lot of work going on, but we're bullish about being on the front edge of that, so there's only more opportunity to come as it relates to optimizing our utilization of labor.

David Peacock: And then we're doing a lot of this in the area of how we leverage our labor across different tasks. Within maybe the same store, if you will, or even in the same geography. So a lot of work going on, but we're bullish about being on the front edge of that. So there's only more opportunity to come as it relates to optimizing our utilization.

Unknown Executive: Sure. Thanks.

Joseph Daffy: Sure, thanks.

Joseph Daffy: And then just kind of circling back to your comments on the LA libations, JB, you know clearly with your footprint in the marketplace and the broad service offerings you have, I mean you could theoretically do this with kind of other emerging brands. It feels like is, is that part of the growth strategy here over time? Yeah, these other brands and JB structure. Sorry, yes, Joe, yeah, we already have had; you can see it by virtue of the fact that we cite 4,000 clients. A lot of those are emerging or early stage brands. We're trying to be really smart and actually even working in some cases with investment firms that focus in that area and to make sure we're finding those businesses that are going to have consistent backing and the ability to invest in growth to keep up with any demand we may help generate.

David Peacock: And then Just kind of circling back to your comments on the LA Libation JV, you know, clearly with your footprint in the marketplace and the broad service offerings you have, I mean, you could theoretically do this with, kind of other emerging brands. It feels like is, is that part of the growth strategy here over time? Some of these other brands and the JV Structure.

David Peacock: Sorry, yes, Joe, yeah, we already have had, and you can see it by virtue of the fact that we have 4,000 clients; a lot of those are emerging or early stage brands.

David Peacock: But the partnership with LA Libations is a great opportunity to get in. You know, it's not just beverage; it's a lot of beverage, some a little bit of snacking, but primarily beverage business where we were, frankly, underexposed and underrepresented. And so it feels like app for us, so as we have always been had a business that has supported emerging brands, we now can expand and do it in a bigger way with LA Libations in the emerging beverage space.

Joseph Daffy: Great, thanks a lot, guys.

Unknown Executive: Thank you.

Operator: Thank you. And our next question comes from Faiza Alwy with Deutsche Bank. Please proceed with your question.

Faiza Alwy: And our next question comes from Faiza, always with Deutsche Bank. Please proceed with your question. Yes, hi, good morning. So I wanted to ask about sort of inflation and pricing because I think you said that wage inflation is still a headwind as price realization is not covering those pressures. And I think you referenced sort of additional pricing in the back half of the year. So just curious if we're going to see sort of this price cost gap shrink later this year. And at what point do you think we're going to be aligned in terms of pricing and inflation?

Unknown Executive: Yes, hi, good morning. So I wanted to ask about some sort of inflation and pricing. I think you said that wage inflation is still a headwind as price realization is not covering those pressures, and I think you referenced some additional pricing in the back half of the year. So just curious if we're going to see sort of this price/cost gap shrink later this year and at what point do you think we're going to be aligned in terms of pricing and inflation?

Christopher Growe: Hi Faiza, it's Chris. I'll take a stab at that, and maybe Dave can add in as well. So you're right, in the second quarter and the first half, our pricing was a little short of our inflation. Just to be clear, we do have pricing coming through. We noted that. But at the same time, we have seen obviously more aggressive labor-based inflation early in the year. Some of that is just statutory.

Christopher Growe: Hi, Faiza, Chris. I'll take a stab at that, and maybe Dave can add in as well. So you're right in the second quarter; in the first half, our pricing was a little short of our inflation. Just to be clear, we do have pricing coming through. We've noted that. But at the same time, we have seen obviously more aggressive labor-based inflation early in the year. Some of that is just statutory. It's minimum wage laws. That's driven inflation overall for our workforce. I think we're being as aggressive as we can, and appropriately so with our pricing. At the same time, as I've mentioned before, I think to you and others that there's other ways that we can address that inflation, be it our cost structure, our business mix, our product mix.

Greg: Youre right in the second quarter and the first half our pricing was a little short of our inflation just to be clear, we do have pricing coming through we noted that.

Christopher Growe: It's minimum wage laws that have driven inflation overall for our workforce. I think we're being as aggressive as we can and appropriately so with our pricing. At the same time, as I've mentioned before, I think you and others can address inflation through other ways, be it our cost structure, our business mix, our product mix. And I think we're using that whole suite of levers there to try to control inflation. I think you'll see overall a better profit performance from our business this quarter. I think that reflects some other levers we're using.

Greg: But at the same time, we have seen obviously more aggressive labor based inflation early in the year. Some of that is just statutory minimum wage laws that convert driven inflation overall for for our workforce.

Greg: I think we're being as aggressive as we can and appropriately so with our pricing at the same time as I've mentioned before I think to you and others that there is other ways that we can address that inflation beat our cost structure, our business mix, our product mix and I think were using like that whole suite of.

Christopher Growe: And I think we're using like that whole suite of levers there to try to control the inflation. You'll see overall from our business this quarter a better profit performance. I think that reflects some other levers we're using. Actually, a good example, that's our retailer services segment where we had relatively flat revenues but a strong profit performance. That's coming from inherently better management of our business, a little mix improvement, that kind of thing. I think that's the way we have a look at it. And yes, we're going to continue to push pricing, and we have more inflation that we're going to have to address.

Greg: The levers there to try to control the inflation youll see overall from a business this quarter right a better <unk>.

Christopher Growe: Actually, a good example of that is our retailer services segment, where we had relatively flat revenues but a strong profit performance. That's coming from inherently better management of our business, a little mix improvement, that kind of thing. I think that's the way I would look at it. And yes, we're going to continue to push prices, and we have more inflation that we're going to have to address. We're doing that in a number of different ways.

Greg: Performance I think that reflects some other levers we are using actually a good example, thats our retailer services segment, where we had relatively flat revenues, but a strong profit performance thats coming from inherently better management of our business a little mix improvement that kind of thing. So I think that's the way I would look at it and yes, we're going to continue to push pricing.

Greg: We have more inflation that we're going to have to address we're doing that and number three ways.

Christopher Growe: We're doing that in a number of ways.

Faiza Alwy: Thank you. Great. Thank you.

David Peacock: Great, thank you. And then just on the transformation, maybe timeline, it sounds like you've taken another look at, you know, the technology which has resulted in sort of lower capex outlays. I'm curious about, you know, sort of what's different, just share some, I know you touched on this, but share some of the learning so far. And just want to clarify, like, is the capex reduction simply due to divestitures or, you know, did, are you, are you looking at sort of some of the spending and, you know, sort of rethinking how you should go about it? And also curious if maybe the operating expenses around that transformation are also a bit, a bit lower.

Speaker Change: Great. Thank you and then just on the transformation maybe.

David Peacock: And then just on the transformation, maybe timeline, it sounds like you've taken another look at, you know, the technology, which resulted in sort of lower capex outlays, and curious if, you know, sort of what's what's different, just share some, I know you touched on this, but share some of the learning so far. And just want to clarify, I guess the capex reduction, you know, simply due to divestitures or, you know, did, are you looking at sort of some of this spending and, you know, sort of rethinking how you should go about it and also curious if maybe the, how you were thinking about sort of operating expenses around that transformation are also a bit, a bit lower.

David Peacock: Yeah, this is Dave, on the IT side. The capex reduction is a little timing aspect to it, but I'll say that it's also a byproduct of the great work our IT team is doing and finding ways to accomplish the same objectives for less. You know, as I always say, you, when you're building a house, you can spend the whole range of, have a whole range of expense relative to how you build that house. And I give our IT team a lot of credit for finding efficient ways to build the house we need for our business, and do so that we're not giving up on capabilities.

David Peacock: Yeah, this is Dave, Faiza. On the IT side, the GAPX reduction has a little timing aspect to it, but I'll say that it's also a byproduct of the great work our IT team is doing in finding ways to accomplish the same objectives for less. You know, as I always say, when you're building a house, you can spend a whole range of money, have a whole range of expenses relative to how you build that house.

David Peacock: And I give our IT team a lot of credit for finding efficient ways to build the house we need for our business and do so so that we're not giving up on capabilities. And so I think that's part of it.

David Peacock: And so, I think that's part of it.

David Peacock: And then, as I mentioned, there's a little bit of phasing, but we do see CAPEX, as we look forward, getting to more normal levels in the kind of 2026 timeframe. And then on the OPEX side, as we mentioned, the investments we made in the second half of last year to position ourselves to manage through the transformation are starting to pay off. And so they were more of an increment to our OPEX in the first half of 2024 than they will be in the second half.

David Peacock: And then, as I mentioned, there's a little bit of a phasing to it, but we do see capex, you know, as we look forward, getting to more normal levels in the kind of 2026 timeframe. And then on the op-x side, as we mentioned, the investments we made in the second half of last year to position ourselves to manage through the transformation, we are starting to lap. And so, they were more of an increment to our op-x in the first half of 2024 than they will be in the second half.

David Peacock: And we're very focused now on looking at organization and kind of assessing spans and layers and making sure that we have the right structure and recognizing that we've got technology systems and some very strong analytic tools coming to bear and letting that help us determine, you know, how we should be organizing and how that might impact our OPEX.

David Peacock: And we're very focused now on looking at organization and kind of assessing spans and layers and making sure that we have the right structure and recognizing that we've got technology systems and some very strong analytic tools coming to bear and letting that help us determine, you know, how we should be structuring and how that might impact our op-x into the future.

David Peacock: Great. And then just one question around, you know, I guess it and the things that you're investing in. What are you seeing from competitors, right? Because there is sort of MMA within the space.

David Peacock: Curious how you would reach yourself, what you're hearing from your customers in terms of, you know, where this would position you competitively. Are there specific areas where maybe you were behind and you're catching up. I know you mentioned some, you know, AI investments, things like that. Where do you think you'll end up from a competitive perspective? What are you seeing in the marketplace? Yeah, I mean, obviously number two, number three competitors have come together; won't speculate on sort of what their plans are as far as their integration. and how that goes. I will say that historically, and even obviously today, we've had very strong technology, especially in our retail merchandising space, as it relates to the poing labor in a very precise way that can demonstrate meaningful demand generation in the market.

David Peacock: Yeah, I mean, obviously, number two and number three competitors have come together. I won't speculate on sort of what their plans are, as far as their integration and how that goes. I will say that historically, and even, obviously, today, we've had very strong technology, especially in our retail merchandising space as it relates to deploying labor and in a very precise way that can demonstrate meaningful demand generation in the market. And we're building on that.

David Peacock: And so I'd say a lot of our investment has been, and we were open about it in the first half, as it relates to ERP and then what I'll call foundational systems that we needed to just modernize. And doing the same in the HR space, given the vast number of people we're dealing with and the advancements that have occurred within HR operating systems, just overall, as an industry, allows us to capitalize on that to better manage and more efficiently manage our large labor pool. And then, yeah, AI is very exciting. We're working with a number of partners; we've developed our own AI competence center.

David Peacock: And we're building on that. And so I'd say a lot of our investment has been, and we've been open about it in the first half, as it relates to ERP, and we all call foundational systems that we needed to just modernize, and doing the similar in the HR space, given the vast number of people we're dealing with, and the advancements that have occurred within HR operating systems, just overall, as an industry, kind of allows us to capitalize on that, to better manage and more efficiently manage our large labor pool. And then, yeah, AI is very exciting.

David Peacock: We're working with a number of partners. We've developed our own AI competency center. We've used AI in the past. We're going to be using in things like contract management, which will help us, you know, both query contracts when necessary, but also be a little more consistent in how we contract and more efficient in the process of contracting. You can imagine we have thousands per year that we're generating. We're using an HR workflows internally. And we've been using it in the routing of labor, and they're doing so, I'd say, at a more advanced level as we look forward.

David Peacock: So those are just a few examples. And, you know, my vision, our vision is to expand on that dramatically. I think AI can be a real differentiator for businesses like hours when you're dealing with a significant number of hours, tens of millions of labor hours, and large data sets, and helping drive efficiency within the business.

Unknown Executive: Great. Thank you so much.

Unknown Executive: Thank you.

David Peacock: Thank you. Our next question is from Tyler Pierce with BNP Paribas. Please proceed with your question.

Tyler Pierce: Our next question is from Tyler Pierce with B&P Parabas. Please proceed with your question. Hi, good morning, Dave and Chris. Just a quick one for me. You know, looking through your slide deck here, there's mention of share repurchases. You know, I think this is the first time that I'm seeing this being mentioned in recent history. Obviously, the focus has been on de-leveraging, but just one understand if any priorities have changed, just given where your stock is trading. Thank you.

Christopher Growe: Yeah, hi, it's Chris. I can address that. We have been repurchasing shares since the latter part of last year, and the intent, and we'll continue with that, is really around, you know, the dilution related to incentive award that we give to our employees. So therefore, you know, look, we've got an overline over our team view on our stock price and our valuation, which is giving us the confidence to continue to buy shares here, but the intent is to try to just limit dilution from incentive awards to our employees. So you saw some share repurchases that occurred even into July, and at the beyond that will be, you know, continuing to monitor the market and expectations.

Christopher Growe: I also want to reiterate, though, that, you know, we've got a lot of cash coming the door related to investors that will be using, you know, mostly for debt reduction. So I think that's the intent is to be a little bit more focused on that and continue to balance that against inductances and making the business. The little share repurchase and then continue to lose our debt with that three and a half times leverage still in our site. Yeah. Great.

And I just also want to reiterate though that we've got a lot of cash come in the door related to divestitures that will be using mostly for debt reduction. So I think thats. The intent is to be a little bit more focused on that and continue to balance that against investments we make in the business a little share repurchase and then continue to reduce our debt with a three five times leverage still in our <unk>.

Speaker Change: Sure.

Unknown Executive: Great, thank you. I just, there's a little change in the language within your release, I believe, before he said the majority of, you know, cash from the divestiture would be used for debt pay down. And I think you might have said most in today's release.

Christopher Growe: Thank you. I just, there's a little change in the language within your release. I believe you before he said majority of, you know, cash from the investor would be used for that paydown. And I think you might have said most in today's release. So just wanted to see if, you know, there is any intent with the change of language. And if that, you know, could have implied more cash being used for sure purchases. But I think that answers it. Thank you. Yeah. I think you'd be the other way around if you see most there. And then, not only that, there's really no intent on the change there.

Speaker Change: Great. Thank you I, just there's a little change in the language in your release I fully get before he said majority of.

Speaker Change: Cash from the divestiture would be used for debt pay down and I think you might have said most in today's release. So just wanted to see if.

Speaker Change: There is any intent with the change of language and if that could have an implied more cash being used for share purchases, but.

Speaker Change: That answers it thank you.

Unknown Executive: So just wanted to see if, you know, there was any intent with the change of language and if that, you know, could have implied more cash being used for share purchases. But I think that answers it. Thank you.

Unknown Executive: Yep, I think it'd be the other way around if you were.

Speaker Change: Yes, I think it would be all the way around if you see most there and then not only that there's really no incentive change the areas. We're focused on debt reduction largely so.

Unknown Executive: I think it would be the other way around if you saw most of them there. And not only that, there's really no intent to change there. We're focused largely on debt reduction.

Christopher Growe: We're focused on debt reduction largely.

Unknown Executive: Great. Thank you. Yes.

Speaker Change: Great. Thank you guys.

Operator: Thank you. There are no further questions at this time.

Speaker Change: Yes.

Operator: Thank you. There are no further questions at this time. I want to turn the floor back over to Dave Peacock for closing comments. Thank you, Matt.

Speaker Change: Thank you there are no further questions at this time I want to turn the floor back over to Dave Peacock for closing comments.

David Peacock: ?? ?? ?? ??

David Peacock: I want to turn the floor back over to Dave Peacock for closing comments. Thank you, Madison. We appreciate your time this morning and your interest in advanced solutions. We look forward to updating you on our progress in the coming months.

Dave Peacock: Thank you Madison, we appreciate your time this morning, and your interest in advantaged solutions, we look forward to updating you on our progress in the coming months, we will attend the Canaccord growth Conference next week August 13th in Boston to look forward to connecting with you. There again, thanks for your time today.

David Peacock: We will attend the Canacore Growth Conference next week, August 13th in Boston. We look forward to connecting with you there. Again, thanks for your time today.

Operator: Thank you.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.