Q3 2024 Advantage Solutions Inc Earnings Call
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Speaker Change: It is now my pleasure to introduce Ruben Mella, Vice President of Investor Relations.
Speaker Change: Thank you Ruben you may begin.
Ruben Mella: Thank you operator, welcome to vantage solutions third quarter earnings Conference call, Dave Peacock, Chief Executive Officer, Chris growing Chief Financial Officer, and Changzhou Ski 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.
Speaker Change: Answer session.
Speaker Change: During this call management may make forward looking statements within the meaning of the federal Securities laws.
Speaker Change: 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.
Speaker Change: All forward looking statements are expressly qualified in their entirety by such factors. The company does not undertake any duty to update or revise any forward looking statements except as required by law.
Speaker Change: 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 a reconciliation of these non-GAAP financial measures to the most comparable GAAP measure.
Speaker Change: This call is being webcast and a recording will also be available on the company's Investor Relations website.
Speaker Change: During the prepared remarks, we will refer to a presentation, which can be found in the events and presentations section of the IR website. As a reminder, unless otherwise stated the financial results discussed today will be from continuing operations and now I would like to turn the call over to Dave Peacock. Thank you Ben and good morning, everyone and thank you for joining us.
Dave Peacock: Our discussion this morning will center on the third quarter results and outlook for the year.
Dave Peacock: How we are expanding our relationships with clients and the progress we are making on our transformation journey. We are pleased with our results in the third quarter on an organic year over year basis, excluding the deconsolidation of the European JV and pass through costs revenues increased approximately 2% to $802 million and adjusted EBITDA increased 8%.
Dave Peacock: Two $101 million, we remain committed to delivering our guidance for the year.
Dave Peacock: Experiential services and retailer services delivered healthy performance, resulting in revenue and adjusted EBITDA growth.
Dave Peacock: Timing benefit from the fourth quarter, partly drove their results.
Dave Peacock: And branded services, we continue to navigate the impacts of a challenging consumer environment for our clients, while managing costs and leveraging new tools and technology to enhance our sales and merchandising effectiveness.
Dave Peacock: Advantages positioned squarely at the intersection of brands in retail with a diverse mix of capabilities unique insights and connectivity to help our clients increase profitable sales regardless of market conditions.
Dave Peacock: Our scale and managing over 70000 dedicated teammates who served more than 100000 retail locations nationwide creates a network effect for greater speed agility and precision to the critical services that fuel growth for brands and retailers.
Dave Peacock: Through our transformation initiatives, we are further differentiating our client solutions through technology and analytics, while enhancing cost effectiveness, regardless of economic circumstances.
Dave Peacock: We are confident this will increase the resilience of our operating performance and drive better outcomes for our 4000 strong client base the largest of them have been with us on average for more than 15 years and have a 95% retention rate over time.
Dave Peacock: During the quarter, we continued to grow our client roster and expand advantage of service offerings with existing clients. We did this across both core and adjacent services, while also expanding into new market categories and channels.
Dave Peacock: Starting with retailer services, we aim to better utilize our labor to improve profit growth and margins with our full suite of services with existing clients and adding new clients by expanding into adjacent market segments with our core offerings.
Dave Peacock: During the quarter, we expanded our services with a national grocery chain, where we have been providing merchandising services by adding store remodels and adjacent offering through our trade services team.
Dave Peacock: Trade services represents an expansion of our core capabilities, providing in store construction and build out to bring physical shopping experience to life.
Speaker Change: Okay. So on pricing here and labor areas, you've talked in the past being as aggressive as you can on pricing and it's great to hear and the last question, that's a little more slack in the labor market.
Speaker Change: Maybe talk about that spread between labor and pricing right where is it today.
Speaker Change: And if that spread persist do you think there could be maybe other client exits or do you think that's tied enough now where your sort of near equilibrium, maybe just flesh that out a little bit.
Speaker Change: Yes, I mean, I would say that we continue to have success and I think a lot of our clients are understanding the labor environment more and more.
Speaker Change: Talked about this in past calls.
Speaker Change: If you look back we may not make up for all of the wage inflation that was experienced within our business over the last call. It three years with pricing actions near term.
Speaker Change: But we're getting closer to equilibrium.
Speaker Change: Wage inflation moderates, a bit and we're able to take again with fair pricing.
Speaker Change: At the end of the day, we provide a service to our clients and customers.
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Speaker Change: Yeah, we've seen fluctuating results more broadly in the market on percent of volume sold on deal. You know, we saw it increase, we saw it, you know, recede a bit.
Speaker Change: It's moved around a bit and, you know, I'd have to look at the latest data if we're at kind of pre-pandemic levels. I think we're close if we're not there in the periods we've been a little bit above. You know, the more promotion there is in the marketplace,
Speaker Change: One should drive unit volume. Unit volume is beneficial in our business because while we realize revenue flow through from commission, unit volume is really tied to the work we do. And if you think about how promotions
Speaker Change: While we realize revenue flow through from Commission unit volume is really tied to the work we do and if you think about how promotions are realized in the retail environment. It's typically through display and some of those activities are retail merchandising teams do on behalf of consumer products companies.
Speaker Change: are realized in the retail environment. It's typically through display and some of the activities that our retail merchandising teams do on behalf of consumer products companies.
Speaker Change: So on the margin I think it's generally a positive.
David Peacock,
Speaker Change: So on the margin, I think it's generally a positive if we're at a promotion level that's sort of consistent with where the market had been pre-pandemic. Obviously, during the pandemic, that number dropped pretty dramatically and took some time to build back.
Speaker Change: <unk> added promotion level, that's sort of consistent with where the market had been pre pandemic. Obviously during the pandemic that number dropped pretty dramatically and took some time to build back.
Speaker Change: Got you thanks very much.
Gotcha. Thanks very much.
Speaker Change: Thank you. Our next question comes from Faiza <unk> with Deutsche Bank.
Thank you.
Speaker Change: Thank you. Our next question comes from Faisa Alwi with Deutsche Bank. Please go ahead, your line is open.
Dave Peacock: Go ahead your line is open.
Faisa Alwi: Yes, hi, thank you so much.
Yes, hi, thank you so much.
Speaker Change: I just wanted to ask a little bit more about the timing.
Speaker Change: I just wanted to ask a little bit more about the timing of impact that you mentioned. I think you said an experiential and retailer. Can you give us a bit more color and maybe just help us quantify how much that helped the quarter by?
Speaker Change: Impacts that you mentioned I think you said, an experiential and retailer can you give us a bit more color and maybe just help us quantify how much that helped.
Speaker Change: The quarter Goodbye.
Speaker Change: Yes, I think we're going to fight Thats, a good question and when we anticipated I'd just tell you that.
Speaker Change: Yeah, I think we're going to fight. That's a good question. And when we anticipated, I just tell you that, you know, I said it a bit earlier in a response that, you know, you plan your year, there's an element of our work that is done, you know, call it project work that, you know, you try to model that based on what your expectations are, and
Speaker Change: I said a bit earlier in a response that you play in your year and there's an element of our work that is done I'll call. It project work that you try to model that based on what your expectations are in your plan that closely with all your customers and clients, but you never can get it perfectly right based on the month as an example, so but I would just tell you is for the <unk>.
Speaker Change: You plan that closely with all your customers and clients, but you never can get a perfectly right based on the month as an example. But I would just tell you as
Speaker Change: Third quarter, we did have a little bit of a benefit, especially in experiential retailer on just timing Q3, better than Q4 due to the activity and then what I would tell you is we've tried to be a little more explicit around the expectations for Q4 growth.
Speaker Change: You know, for the third quarter, we did have a little bit of a benefit, especially an experiential and retailer on just timing. You know, Q3 was a little better than Q4 due to that activity. And then what I tell you is we tried to be a little more explicit around the expectations for Q4 growth.
Speaker Change: Growth in line with Q3, so a good quarter, but it may give you some perspective on a little bit of that shift from Q4 to Q3 and how to how to think about quantifying that.
Speaker Change: Growth in line with Q3. So a good quarter, but it may give you some perspective on a little bit of that shift from Q4 to Q3 and and how to, you know, how to think about quantifying that.
Speaker Change: Okay understood.
Speaker Change: And then.
Speaker Change: Okay, understood. And then I, it's you, thank you for putting the slide on the, you know, new business opportunities, the expanding services.
Speaker Change: Thank you for putting the slide on the new business.
Dave Peacock: <unk>.
Dave Peacock: <unk> services.
Dave Peacock: I'm curious, how you would characterize sort of overall new business sales growth relative to history.
Dave Peacock: I'm curious how you would characterize sort of overall new business sales growth relative to history.
Dave Peacock: Like when do you think will we'll start to see the positive impact of some of these initiatives I'm trying to figure out how significant that.
Dave Peacock: And when do you think we'll start to see the positive impact of some of these initiatives? I'm trying to figure out how significant these are or if this is just something that you're highlighting and it's something that you've seen historically.
Dave Peacock: If this is just something that you're highlighting.
Dave Peacock: And that's something that you've seen historically.
Speaker Change: Yes, it's a.
Speaker Change: Great question.
Speaker Change: Yeah, I'd say that some of these are kind of earlier seeds within our strategy to expose.
Yeah, I know. It's a great question, Faiza.
Dave Peacock: You know, I'd say that some of these are kind of earlier seeds within a strategy to expose the part of the company to more growth.
Dave Peacock: Part of the company to more growth.
Dave Peacock: So for instance, when we mentioned the private label side as we expand into these other areas private label business, we have is doing well.
Dave Peacock: So for instance, when we mentioned the private label side, as we expand into these other areas, private label business we have is doing well.
Dave Peacock: Right now just generally, but we recognize the need to expose that business to more growth channels and so thats.
Dave Peacock: Right now, just generally, but we recognize the need to expose that business to more growth channels. And so that's
Dave Peacock: Some early stages.
Dave Peacock: Some of the other things we're doing in the area of cross selling.
Dave Peacock: some early stages. Some of the other things we're doing in the area of cross selling and expanding existing services for clients.
Dave Peacock: And expanding existing services for clients.
Dave Peacock: When did they and everybody knows this is a challenging consumer market, especially for unit growth.
Dave Peacock: You know, and when is a, and everybody knows this, a challenging consumer market, especially for unit growth, the services we provide can bring great value and great benefit to our CPG clients.
Dave Peacock: The services, we provide can bring great value and great benefit to our CPG clients and so we're seeing a lot of new business activity within our teams and.
Dave Peacock:
Dave Peacock: Thank you to varying degrees relative to size and impact on the overall business I'm not going to highlight or or forecast anything for 2025, but.
Dave Peacock: We're very pleased with the level of business development activity, we have in the business right now.
Speaker Change: Great. Thank you for that and then just last one.
Speaker Change: Randy It services top line.
Speaker Change: <unk> declined a little bit, but overall margins were better so I'm curious.
Speaker Change: What led to that I know you've been talking about labor efficiency, whether it was bad or mix or any other color there would be helpful.
Speaker Change: Yes, I mean, I think that Paul this is more on the labor efficiency side within that within that vertical we.
Speaker Change: <unk> been really focused on leveraging combination of technology and even.
Speaker Change: Risk of using a buzzword AI in that sector to be more efficient in how we deploy personnel and how we direct work and then.
Speaker Change: And just kind of overall I think in process and being more consistent in how we do what we do in the branded services space across.
Speaker Change: The Division has helped us drive some efficiency from a labor standpoint, so that's what's contributed to that margin growth.
Speaker Change: Alright, great. Thank you very much.
Speaker Change: Thank you.
Speaker Change: There are no further questions at this time I want to turn the call back over to Dave Peacock for closing comments.
Dave Peacock: Thank you we appreciate everybody joining the call.
Dave Peacock: We're excited about the quarter, we had an.
Speaker Change: Look forward to hopefully, finishing the year strong we appreciate everybody's attention and we look forward to talking to you next quarter. Thank you.
Speaker Change: And this concludes today's teleconference. You may disconnect your lines at this time.
Speaker Change: Thank you for your participation.
Dave Peacock: Okay.
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