Q1 2025 Advantage Solutions Inc Earnings Call

May 12, 2025

Question to ask a question during the session Press Star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.

If you 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. Thank you Reuben you may begin.

Christopher Growe: I just want to also add at the same time, Faiza, we are going through a pretty aggressive look at our cost structure here, and I think there's some cost reduction programs and ideas we have to push through the business that we're executing now that I think will be very helpful for the second half as well. So a little more exaggerated first half, second half, and then you're going to see the lower shared service costs and the cost reduction programs really play out in the second half of the year.

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Speaker Change: Thank you operator welcome to advantage solutions first quarter 2025 earnings Conference call, Dave Peacock, Chief Executive Officer, and Chris Growe, <unk> Chief Financial Officer are on the call today, Dave and Chris will provide the prepared remarks, after which we will open the call for a question and answer session. During this call.

Speaker Change: Management may make forward looking statements within the meaning of the federal securities laws 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 qualified in their entirety by such factors our remarks.

David Peacock: And then maybe just last one, you know, just with all of the tech transformation that you're going through, like, how are you ensuring that there's, you know, no execution issues that that that come from it? You know, we've often come across situations where, as you go through this IP implementation, the issue. So just curious how you're managing. Yeah, this is Dave. The team one has been really well organized and has done a great job, especially with our year. obviously bring in a top-tier systems integrator. so we're leveraging all the external. what I'd say expertise would not.

Speaker Change: Thank you operator welcome to advantage solutions first quarter 2025 earnings Conference call, Dave Peacock, Chief Executive Officer, and Chris Growe, a chief financial Officer are on the call today, Dave and Chris will provide the prepared remarks, after which we will open the call for a question and answer session. During this call.

Speaker Change: Today include certain non-GAAP financial measures, which are reconciled to the most comparable GAAP measure in our earnings release.

Speaker Change: As a reminder, unless otherwise stated the financial results discussed today will be from continuing operations and revenues will exclude pass through costs and now I would like to turn the call over to Dave Peacock.

Speaker Change: Sure Ben Good morning, everyone and thank you for joining us before we get started I want to thank my teammates for their relentless commitment to our clients in this highly unprecedented time.

David Peacock: Experience, having done this before, and frankly, more complex businesses. When you do something like this, and you undergo the step. Manufacturing Environment, which I've lived through in my past, or a retail environment where you've got, you know, stoplight Bass T-Log Data, and all kinds of things, inventory across thousands. Use, there's a lot of risk. In our business, while it's never simple, it's a little bit easier and a little less risk. The where you're seeing it manifest is on the cash flow side, which we know is short term because it has to do with. Billing Cycles, and how we're able to.

Speaker Change: Their unwavering focus on our clients and customers is commendable.

Speaker Change: Our first quarter revenues of $696 million and adjusted EBITDA of $58 million were down, 5% and 18% respectively from the prior year.

Speaker Change: Today include certain non-GAAP financial measures, which are reconciled to the most comparable GAAP measure in our earnings release.

Speaker Change: The headline figures highlight a year over year decline intentional client exits in anticipated transformation related investments represented the majority of the adjusted EBIT declined in the quarter.

Speaker Change: Sure Ben Good morning, everyone and thank you for joining us before we get started I want to thank my teammates for their relentless commitment to our clients and this highly unprecedented time.

Speaker Change: We were also negatively impacted by the calendar with a late Easter and one less working day weighing on Q1 results as we expected.

Speaker Change: As the quarter progressed consumer confidence waned, followed by increased uncertainty caused by tariff concerns.

Speaker Change: Their unwavering focus on our clients and customers is commendable.

Speaker Change: Our first quarter revenues of $696 million and adjusted EBITDA of $58 million were down, 5% and 18% respectively from the prior year.

David Peacock: helps us compress our time. and improve our data. that hiccup in the first in the first quarter. And then as it relates to visibility, I can tell you that the visibility we'll have within a granular level of our business is going to be much greater than where we've been with disparities. And we're already seeing the benefits of faster and richer data. So what used to take several hours for our team in FB&A to run a full run of our financials is now... and all these things will come with a fish.

Speaker Change: This led to lower than expected consumer purchases, resulting in some clients and customers reevaluating their spending levels and the timing of events and programming.

Speaker Change: While the headline figures highlight a year over year decline intentional client exits in anticipated transformation related investments represented the majority of the adjusted EBIT declined in the quarter.

Speaker Change: We also saw lower year over year order volumes in many CPG categories as consumers pulled back and retailers reduced inventories. The result was a softer environment in the first quarter, which created some near term volatility for our business, particularly driven by channel shift trade down and overall reduced consumption, while we primarily service <unk>.

Speaker Change: We were also negatively impacted by the calendar with a late Easter and one less working day weighing on Q1 results as we expected.

Speaker Change: As the quarter progressed consumer confidence waned, followed by increased uncertainty caused by tariff concerns.

Speaker Change: Sumer staples categories, where product demand is traditionally more stable, we are not immune to shifts in consumer sentiment and pricing all of that said the environment also brings potential opportunity for our business as we partner more closely with our clients and customers to focus on solutions that help them reduce their costs and drive overall efficiency.

Speaker Change: This led to lower than expected consumer purchases, resulting in some clients and customers reevaluating their spending levels and the timing of events and programming.

David Peacock: Over time, and then I'd also want to add that as we're implementing these new systems. And I'd say there's really, kind of think about it in a few ways, there's foundational systems. Our EPM. last year, our ERP, and then our human capital management system, which the project kicks off in the second half of this year, so it's a smaller effort. And then we've got our cloud migration and the data lake that we've constructed that will enable All kinds of AI use cases and then leverage the speed of data. These will come with efficiencies in the overall some of which Chris We're trying to pull forward as we look to realize cost benefits this year and then as we implement new more modern Over the next two to three years, we'll actually.

Speaker Change: We also saw lower year over year order volumes in many CPG categories as consumers pulled back and retailers reduce inventories. The result was a softer environment in the first quarter, which created some near term volatility for our business, particularly driven by channel shift trade down and overall reduced consumption, while we primarily service <unk>.

Speaker Change: At this point despite turbulence in the macroeconomic environment, our near term new business pipeline is robust and we will continue to help existing clients navigate any tariff impacts through our breadth of product offerings.

Speaker Change: We will continue to monitor the situation very closely and while we make experienced challenges in the near term we remain optimistic about the future advantage has a track record of performing well through recessionary environments and is a largely domestic services business with no manufacturing, we do not have meaningful direct tariff exposure from a supply chain are.

Speaker Change: Cost perspective.

Speaker Change: The first quarter performance was impacted by a more challenging labor market, which resulted in difficulties fully staffing events and projects across both our experiential and retailer services segments.

David Peacock: shutting down. that will save us the expense that we've added to our P&L. So you've got the benefit of ultimately having older systems. being decommissioned, effectively paying the price for the new systems and then ultimately the effect of that. on the Streamline Operation. Great, thank you.

Speaker Change: These shortfalls were exacerbated by intentional turnover and attrition designed to Upskill, our talent acquisition teams and some of our field management.

Speaker Change: We will continue to monitor the situation very closely and while we make experienced the challenges in the near term we remain optimistic about the future advantage has a track record of performing well through recessionary environments and is a largely domestic services business with no manufacturing, we do not have meaningful direct tariff exposure from a supply chain or.

Speaker Change: We've implemented new processes and have added resources to our talent acquisition teams to help close the gap.

Speaker Change: These process enhancements are already beginning to yield benefits in Q2, and we are confident that our high volume talent recruitment optimization and broader labor utilization of investments will drive greater access to talent, a higher level of retention and enhanced efficiency in the back half of this year and beyond.

Speaker Change: Cost perspective.

William Reuter: And we'll go next to William Reuter with Bank of America. Please proceed with your question. Hi. Just a couple follow-ups. The first, is there ever any way to figure out what the impact of staffing shortages would have been on EBITDA in the first quarter had you had sufficient labor? Yes. I mean, I think if you look at the first quarter and I look at our execution rates, for example, across our retailer and experiential segment, I would just say the vast majority, actually probably more than the decline in EBITDA, is associated with the staffing shortages. So when I think about other cost pressures or other items that are affecting those segments, I think the main driver of the weakness and decline in profitability was related to the staffing shortages.

Speaker Change: Turning to our segments and branded services, we're seeing expected headwinds related to a contraction in consumer spending retail inventory destocking and reductions in discretionary marketing budgets.

Speaker Change: These shortfalls were exacerbated by intentional turnover and attrition designed to Upskill, our talent acquisition teams and some of our field management.

Speaker Change: We've implemented new processes and have added resources to our talent acquisition teams to help close the gap.

Speaker Change: In response, we are continuing to adapt and invest behind our go to market and next generation selling model and feel very good about the state of our business development efforts.

Speaker Change: These process enhancements are already beginning to yield benefits in Q2, and we are confident that our high volume talent recruitment optimization and broader labor utilization investments will drive greater access to talent, a higher level of retention and enhanced efficiency in the back half of this year and beyond.

Speaker Change: Retail merchandising and supply chain support in particular are examples of services that we provide our CPG clients to help manage their P&L with a tangible cost advantaged during this uncertain environment.

Speaker Change: We are confident in those businesses continuing to perform well throughout this year.

Speaker Change: And experiential services demand remains strong for our solutions across regions and retail banners. The momentum outside of traditional sampling also continues to grow that being said, we experienced temporary headwinds related to last quarter's customer loss and the aforementioned staffing challenges our staffing and execution rates are already.

David Peacock: Got it. And then secondarily, is the de-stocking that you had previously, or you saw, I think you mentioned a one and a half percent increase, or headwind in the first quarter, are you continuing to see de-stocking into the second quarter, or is that largely I know that it certainly got better as the quarter went on, but I want to just say I've not seen like April data yet, for example, to say that it stopped or is not occurring. I just want to also add that we saw this a year ago in the first quarter, and it went even lower this first quarter of 25.

Speaker Change: In response, we're continuing to adapt and invest behind our go to market and next generation selling model and feel very good about the state of our business development efforts.

Speaker Change: Improving in Q2.

Speaker Change: And retailers services ongoing effective price and cost discipline were offset by regional staffing shortages, which limited activity in some places in the quarter.

Speaker Change: We are confident in those businesses continuing to perform well throughout this year.

Speaker Change: We remain optimistic in our outlook as a client demand remains solid and our teams continue to make progress executing our strategy to expand in adjacent services and channels.

Speaker Change: And experiential services demand remains strong for our solutions across regions and retail banners the momentum outside of traditional sampling also continues to grow.

David Peacock: So I think what we're seeing is just a tighter lock on inventory by the retailers that is causing the year-over-year effect. My point then would be that it's unlikely we're going to see that continue at certainly the same rate in Q2, but I just have not seen the data yet to validate that. Yeah, the other thing to think about, William, is you've got... And that can play a part. and HowWay's Specialist Graphic. have a much more efficient supply chain. Raw. So Theoretically, you should see more of a Flushing out of that volume by Got it.

Speaker Change: Our support for retailers is especially important in this moment as they seek to rapidly reset assortments are spaced on disruptions to traditional product supply in some categories.

Speaker Change: That being said, we experienced temporary headwinds related to last quarter's customer loss and the aforementioned staffing challenges.

Speaker Change: Our staffing and execution rates are already improving in Q2.

Speaker Change: Turning to our investments we are pleased to highlight that we are making significant progress on our efforts to modernize our tech infrastructure and enhance our ability to leverage analytics and to drive effectiveness and efficiency.

Speaker Change: And retailer services ongoing effective price and cost discipline were offset by regional staffing shortages, which limited activity in some places in the quarter.

Speaker Change: We remain optimistic in our outlook as a client demand remains solid and our teams continue to make progress executing our strategy to expand in adjacent services and channels.

Speaker Change: April we successfully rolled out phase two of our ERP implementation across our international operations without notable disruption.

Speaker Change: Our support for retailers is especially important in this moment as they seek to rapidly reset assortments based on disruptions to traditional product supply in some categories.

William Reuter: And then the last one for me, and this is kind of a big picture question. Branded services, the breakdown of consumer products versus food companies, is there kind of a rough estimate you could give me on how that breaks down? And you said food versus, like, beverage, healthful product. Is that what you're getting at? Well, I was thinking more like food consumables that I think would have largely more consistent demand versus, I'm sure there's consumer products in there as well that, and when I say consumer products, I'm thinking about, I don't know, batteries or, you know, non-consumables, but Yeah, I mean, the vast majority of our portfolio is going to be in the food and look all person It's 70% food, and then we've got a very strong presence within the personal care and household.

Speaker Change: We are on pace to complete the implementation of our foundational data platform in the second half of 2025 and the broader cloud migration by the first quarter of 2026.

Speaker Change: We have ingested significant syndicated and internal data into our recently established data Lake, which is enabling more rapid deployment of AI use cases, as we aim to drive more precision and speed through insights with our sales and field teams.

Speaker Change: We remain committed to establishing a leading data architecture and system foundation to yield operational savings for advantage and better and more cost efficient service for our clients and customers in April we successfully rolled out phase two of our ERP implementation across our international operations without notable disruption.

Speaker Change: This is manifest in how we review categories with buyers to how we determine the next best action that retail for our clients to how we deploy labor in a retailer and experiential segments.

Speaker Change: We are on pace to complete the implementation of our foundational data platform in the second half of 2025 and the broader cloud migration by the first quarter of 2026.

We have begun the process of rationalizing duplicative and outdated systems, which will result in significant opex savings over the next two to three years, specifically, we believe the savings from this effort will offset the degree of incremental costs. We are absorbing in 2025 for more modern systems.

David Peacock: So, we're not as exposed to things like, you know, electronics. Very helpful. Okay, that's all for me. Thanks again.

Speaker Change: In addition, we also expect to achieve broader business efficiencies as a result of our new simplified ecosystem.

Speaker Change: Our I T and data investments are foundational to helping support our teammates and better serving our clients from the deployment of proprietary analytics and our selling process to greater utilization of field personnel through enhanced scheduling and routing.

Operator: There are no further questions at this time.

Speaker Change: We have begun the process of rationalizing duplicative and outdated systems, which will result in significant opex savings over the next two to three years, specifically, we believe the savings from this effort will offset the degree of incremental costs. We are absorbing in 2025 for more modern systems.

David Peacock: I want to turn the call back over to Dave Peacock for closing remarks. Yeah, we thank everybody for joining the call. And we appreciate your attention, your questions, and we look forward to connecting with you for This concludes today's teleconference.

Speaker Change: Another focus area of our transformation in 2025 is improving our labor utilization, we have mobilized a task force to take immediate action in both driving efficiencies across the millions of labor hours, we manage at retail and improving the overall teammate experience.

Operator: You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: In addition, we also expect to achieve broader business efficiencies as a result of our new simplified I T ecosystem.

Speaker Change: We have several related strategic initiatives underway.

We are seeing positive results from our pilot of a new field operating organizational structure and experiential services with the effort scaling to larger markets. This quarter. The benefits include higher than execution rates and better teammate retention.

Speaker Change: We continue to have confidence in our target of over 30% uplift in availability of hours for a part time teammates that are looking for additional hours.

Speaker Change: Our broad scale initial rollout for a centralized labor model remains on track for the second half of 2025. This program will cover the majority of our total part time labor hours and near to medium term.

Speaker Change: We have several related strategic initiatives underway.

Speaker Change: We are seeing positive results from our pilot of a new field operating organizational structure and experiential services with the efforts scaling to larger markets. This quarter. The benefits include higher than execution rates and better teammate retention.

Speaker Change: We feel confident in our ability to be a cost leading solutions partner to cpg's and retailers in this challenging environment.

Speaker Change: Despite the confidence we have in our people and investments we must be realistic and acknowledged a softer growth environment in the broader consumer market. Therefore, we are lowering our revenue and adjusted EBITDA outlook to flat to down low single digits.

Speaker Change: We continue to have confidence in our target of over 30% uplift in availability of hours for a part time teammates that are looking for additional hours.

Speaker Change: From where we stand today, we believe the tariffs and the corresponding CPG and consumer reactions can have a modestly adverse net impact on the business.

Speaker Change: While we may experience benefits from growth in private label in supply chain services. These can be offset by demand softness in certain brokerage retail and sampling services.

Speaker Change: We feel confident in our ability to be a cost leading solutions partner to cpg's and retailers in this challenging environment.

Speaker Change: We can reiterate our adjusted Unlevered cash flow guidance of greater than 50% of adjusted EBITDA, noting that the ERP implementation could bring greater cash flow benefit through the year as we better utilize our new systems and processes.

Speaker Change: Despite the confidence we have in our people and investments we must be realistic and acknowledge a softer growth environment in the broader consumer market. Therefore, we are lowering our revenue and adjusted EBITDA outlook to flat to down low single digits from.

Speaker Change: Well this year and especially the first half of this year continues to be affected by transformation investment and intentional client exits. We are confident about the long term earnings power and cash generation potential of advantage.

Speaker Change: From where we stand today, we believe the tariffs and the corresponding C. P. G and consumer reactions can have a modestly adverse net impact on the business.

Speaker Change: While we may experience benefits from growth in private label in supply chain services. These can be offset by demand softness in certain brokerage retail and sampling services.

Speaker Change: Now pass it over to Chris for more details on our performance and guidance. Thank you, Dave and welcome to all of you joining the call today I will take through our first quarter 2025 performance by segment discuss our cash flow and capital structure and reinforce Dave's guidance commentary.

Speaker Change: In branded services, we generated $257 million of revenues and $28 million of adjusted EBITDA down, 9% and 19% on a year over year basis, respectively.

Speaker Change: Results were driven by the aforementioned intentional client exits and client loss, partially offset by continued cost discipline.

Speaker Change: Now pass it over to Chris for more details on our performance and guidance. Thank you, Dave and welcome to all of you joining the call today I will take through our first quarter 'twenty twenty-five performance by segment discuss our cash flow and capital structure and reinforce Dave's guidance commentary.

Speaker Change: Additionally, we continue to see challenges from CPG spending pullbacks, most notably in our omni commerce marketing business.

Speaker Change: And experiential services, we generated $221 million of revenues and $12 million of adjusted EBITDA down, 1% and 28% on a year over year basis, respectively. We experienced the ongoing impact from last year's customer loss as well as the headwinds from staffing issues as Dave mentioned earlier.

Speaker Change: In branded services, we generated $257 million of revenues and $28 million of adjusted EBITDA down, 9% and 19% on a year over year basis, respectively.

Speaker Change: Demand for our services in this segment remains healthy as exemplified by 3% year over year growth in events per day, excluding the client loss on execution rates of approximately 93%.

Results were driven by the aforementioned intentional client exits and client loss, partially offset by continued cost discipline.

Speaker Change: Additionally, we continue to see challenges from CPG spending pullbacks, most notably in our omni commerce marketing business.

Speaker Change: In retailer services, we generated $218 million of revenues and $18 million of adjusted EBITDA down, 3% and 7% on a year over year basis, respectively. This segment was impacted by staffing challenges as well as softness in our agency business. We are starting to see dollars flow into advisory services and feel good about our staffing recover.

Speaker Change: And experiential services, we generated $221 million of revenues and $12 million of adjusted EBITDA down, 1% and 28% on a year over year basis, respectively.

Speaker Change: We experienced the ongoing impact from last year as a customer loss as well as the headwinds from staffing issues as Dave mentioned earlier.

Speaker Change: Efforts moving to the balance sheet and cash flow in the first quarter. We continued our capital discipline and made progress opportunistically, reducing our debt levels, we voluntarily repurchased $20 million of debt and $1 million of shares at attractive levels.

Speaker Change: Our net leverage ratio was approximately 4.4 times adjusted EBITDA, including discontinued operations higher than year end 2024 as expected our new ERP system rollout in Q1 went smoothly overall, but resulted in a use of cash as we anticipated. We ended the quarter at approximately 70 days of sales outstanding up.

Speaker Change: From 61 days at the end of 2024 due to the system implementation.

Speaker Change: This was more than expected and our team is quickly addressing this and other minor inefficiencies.

Speaker Change: In fact, we already see improvements to reporting forecasting and transaction management in Q2, which gives us confidence that dsos will come down meaningfully in the back half of 2025.

Speaker Change: Our net leverage ratio was approximately 4.4 times adjusted EBITDA, including discontinued operations higher than year end 'twenty 'twenty four as expected our new ERP system rollout in Q1 went smoothly overall, but resulted in a use of cash as we anticipated. We ended the quarter at approximately 70 days of sales outstanding up.

Speaker Change: Notably in the first quarter, we reduced restructuring and reorganization costs by $16 million on a year over year basis, and $10 million on a quarter to quarter basis. We're optimistic that these costs will continue to be lower over the balance of the year as we move along our transformation journey.

Speaker Change: From 61 days at the end of 'twenty 'twenty four due to the system implementation.

Speaker Change: We ended the quarter with $121 million of cash on hand, we view the current debt and equity trading levels as attractive opportunities for value creation with our excess cash.

Speaker Change: This was more than expected and our team is quickly addressing this and other minor inefficiencies in fact, we already see improvements to reporting forecasting and transaction management in Q2, which gives us confidence that dsos will come down meaningfully in the back half of 2025.

Speaker Change: As Dave highlighted we are lowering our guidance to reflect the current market environment I will focus my comments on the quarterly weighting of performance and touch on balance sheet and cash flow guidance.

Speaker Change: As expected seasonality. This year is exacerbated by a few discrete items. These items include retailer inventory destocking trends weather pattern fewer working days and a late Easter all impacting Q1, as well as less transformation expense and known business wins reinforcing in the back half of the year.

Speaker Change: We ended the quarter with $121 million of cash on hand, we view the current debt and equity trading levels as attractive opportunities for value creation with our excess cash.

Speaker Change: We are also proactively implementing cost reduction programs across the company.

Speaker Change: Consequently, we continue to believe that this year will be more back half weighted relative to 2024.

Speaker Change: As Steve highlighted we are lowering our guidance to reflect the current market environment I will focus my comments on the quarterly weighting of performance and touch on balance sheet and cash flow guidance.

Speaker Change: Turning to cash flow in 2025, we continue to expect adjusted Unlevered free cash flow to be over 50% of adjusted EBITDA with a potential for upside from improved working capital management as we more fully utilize our new systems and build back from our ERP implementation earlier in the year. We continue to expect interest expense to be 140 million.

Speaker Change: $250 million and capex to be $65 million to $75 million in the year.

Speaker Change: We are also proactively implementing cost reduction programs across the company.

Speaker Change: Depending on how the macroeconomic environment evolves, we will selectively consider adjusting our discretionary capex spend.

Speaker Change: Consequently, we continue to believe that this year will be more back half weighted relative to 2024.

Speaker Change: We plan to use balance sheet cash to reinvest in the business and opportunistically reduce debt subject to market conditions in order to track towards our long term target of less than three and a half times. We would also note that from a liquidity perspective, we ended the quarter with an untapped revolving credit facility of nearly $400 million, we feel confident.

Speaker Change: Our liquidity position and ability to manage the macroeconomic climate.

Speaker Change: $250 million and capex to be $65 million to $75 million in the year.

Dave Peacock: Thank you for your time I will now turn it back over to Dave.

Dave Peacock: Thanks, Chris despite the challenging quarter and volatile operating backdrop I remain pleased with our team's efforts and transformation progress we are committed to investing behind our strategic initiatives and look forward to being the best equipped service provider for our clients and customers, while generating meaningful cash flow for our shareholders. Once we emerge from our trans.

Speaker Change: Depending on how the macroeconomic environment evolves, we will selectively consider adjusting our discretionary capex spend.

We plan to use balance sheet cash to reinvest in the business and opportunistically reduce debt subject to market conditions in order to track towards our long term target of less than three and a half times. We would also note that from a liquidity perspective, we ended the quarter with an untapped revolving credit facility of nearly $400 million, we feel confident our liquidity position and ability to me.

Dave Peacock: [noise] formation.

Dave Peacock: Operator, we are now ready for questions.

Speaker Change: 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'd like to withdraw your question for participants using speaker equipment picking up your handset before pressing the star keys may be necessary.

Speaker Change: Manage the macroeconomic climate.

Dave Peacock: Thank you for your time I will now turn it back over to Dave.

Dave Peacock: One moment, please while we poll for questions.

Speaker Change: Thank you and our first question is from Joseph <unk> with Canaccord. Please proceed with your question.

Joseph: Hey, guys. Good morning, Thanks for the opportunity to ask a couple of questions I thought we'd first.

Dave Peacock: Formation.

Dave Peacock: Operator, we are now ready for questions.

Speaker Change: Thank you we will now be conducting a question answer session. If he 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'd like to withdraw your question for participants using speaker equipment picking up your handset before pressing the star keys may be necessary.

Speaker Change: Maybe check in on the macro here where tap.

Joseph: Halfway through the second quarter any kind of notable changes.

Speaker Change: That you are seeing kind of <unk>.

Speaker Change: Real time versus kind of the Q1 print and then secondly, if we could maybe drill down a little bit.

Speaker Change: One moment, please while we poll for questions.

Speaker Change: On some of the labor challenges in Q1 kind of more specifically.

Speaker Change: Thank you and our first question is from Joseph <unk> with Canaccord. Please proceed with your question.

Speaker Change: Certain geos.

Speaker Change: Areas of the country and kind of a little more detail on the progress to get those.

Joseph: Hey, guys. Good morning, Thanks for the opportunity to ask a couple of questions I thought we'd first.

Speaker Change: Thanks, guys.

Speaker Change: Hi, Joe This is Dave.

Speaker Change: You know maybe check in on the macro here, we're kind of.

Speaker Change: Let me probably answer both questions with the same information.

Joseph: Halfway through the second quarter any kind of notable changes.

Speaker Change: We put a task force together pretty quickly and actually have anticipated a little kind of lumpiness relative to labor.

Speaker Change: That you're seeing kind of.

Speaker Change: Real time versus kind of the Q1 print and then secondly, if we could maybe drill down a little bit.

Speaker Change: In the first quarter as we were making some changes.

Speaker Change: On some of the labor challenges in Q1 kind of more specifically you know certain G O R.

Speaker Change: Some of our managers and our experiential business, but also on our talent acquisition team.

Speaker Change: Areas of the country and kind of a little more detail on the progress to get those.

Speaker Change: And both of them and some in process in southern leadership.

Speaker Change: The good news is the is yielding from that work.

Speaker Change: Thanks, guys.

Dave Peacock: Hi, Joe. Thanks, This is Dave.

Speaker Change: Already in this quarter, we're seeing.

Dave Peacock: Let me probably answer both questions with the same information.

Speaker Change: Much better.

Speaker Change: If you will.

Dave Peacock: We put a task force together pretty quickly and actually had anticipated a little kind of lumpiness relative to labor.

Some of these anomalies that we saw in certain regions and certain geographies are starting to smooth out.

Speaker Change: And wherever we see.

Dave Peacock: In the first quarter as we were making some changes.

Speaker Change: Dispersion relative to.

Speaker Change: Our ability to acquire talent in a certain geography.

Dave Peacock: Some of our managers and our experiential business, but also on our talent acquisition team.

Speaker Change: I think a nimble enough and agile enough now to go address it pretty quickly and we've always had in our business I mean, if you look at our business.

Dave Peacock: And both in southern process, and some leadership and it's.

The good news is that there is yielding from that work.

Speaker Change: Had kind of better or worse hiring in different areas. It was a little more exaggerated in the first quarter, but safe.

Dave Peacock: Already in this quarter, we're seeing.

Dave Peacock: Much better.

Safe to say that we feel very good about how things are playing out in the second quarter.

Dave Peacock: Hearing rates if you will.

Dave Peacock: And some of the anomalies that we saw in certain regions and certain geographies are starting to smooth out.

Speaker Change: Important to note as well that those businesses that are most exposed to labor.

Speaker Change: That we have.

Dave Peacock: And wherever we see.

Speaker Change: Actually have more seasonality in second and third quarter. So we have an ability to make up more ground to a degree we can continue this hiring.

Dave Peacock: Dispersion relative to.

Dave Peacock: Our ability to acquire talent in a certain geography.

Dave Peacock: I think a nimble enough and agile enough team now to go address it pretty quickly and we've always had in our business. I mean do you have if you look at our business, you've had kind of better or worse hiring in different areas. It was a little more exaggerated in the first quarter, but safe.

Joe: Hey, Joe I might add a comment there.

Joe: For example, an experiential our execution rate in the first quarter was around 93% and that's so that's an improved rate we're seeing that in a good place. However, it's just not where we thought it should be or where it could be as Dave mentioned due to some of the hiring constraints. There. So I think we see that improve in Q2, not only the hiring within the.

Safe to say that we feel very good about how things are playing out in the second quarter.

Dave Peacock: Important to note as well that those businesses that are most exposed to labor that.

Joe: Kind of knock on effects for execution, we should see a much stronger performance, especially in experiential.

Dave Peacock: That we have.

Dave Peacock: Actually have more seasonality in second and third quarter. So we have an ability to make up more ground to a degree we can continue this hiring.

Joe: Alright, Thanks, a lot guys.

Speaker Change: And we'll take our next question from William Reuter with Bank of America. Please proceed with your question.

Joe: Hey, Joe I might add a comment there.

William Reuter: Good morning.

Speaker Change: I have two so the first.

William Reuter: Issues with staffing in.

William Reuter: In the previous question you mentioned.

William Reuter: Event managers talent acquisition, you said southern processing some leadership.

Speaker Change: As Dave mentioned due to some of the hiring constraints. There. So I think we see that improve in Q2, not only the higher even than the kind of knock on effects for execution, we should see a much stronger performance, especially in experiential.

William Reuter: Have there been meaningful increases in your labor cost.

William Reuter: That has allowed your staffing levels to improve over the last month or two was that part of the problem and what types of labor inflation that you're seeing.

Joe: Alright, Thanks, a lot guys.

Speaker Change: And we'll take our next question from William Reuter with Bank of America. Please proceed with your question.

Speaker Change: Thanks for that.

William Reuter: <unk>.

William Reuter: We're not seeing.

William Reuter: Good morning.

William Reuter: Differentiated labor costs from first quarter to second quarter necessarily.

Speaker Change: Have two so the first the issues with staffing.

William Reuter: We're seeing labor cost inflation in line with the macro market for high volume pallet.

Speaker Change: In the previous question you mentioned.

Speaker Change: Event managers talent acquisition, you said salmon processing salmon leadership.

William Reuter: A lot of that is a byproduct.

William Reuter: Regulatory minimum wage laws in select states.

Speaker Change: Have there been meaningful increases in your labor cost.

William Reuter: And then obviously you gave some markets that are more competitive and have been for a long time, one example might be items.

Speaker Change: That has allowed your staffing levels to improve over the last month or two was that part of the problem and what types of labor inflation are you seeing.

William Reuter: But yes from quarter, one quarter, two we're not seeing real difference and it wasn't our wages.

Speaker Change: Thanks for that.

Speaker Change: We are not seeing.

William Reuter: Issue I think it was a little bit on our side relative to our talent acquisition strategy and some of the changes we were making and like I said, we signaled a soft first quarter.

Differentiated labor costs from first quarter to second quarter necessarily.

Speaker Change: We're seeing labor cost inflation in line with the macro market for high volume.

William Reuter: In the fourth quarter call three or four months ago and part of that was knowing that we're going to go into this quarter.

Speaker Change: A lot of that is a byproduct.

Speaker Change: Regulatory minimum wage laws in select states.

William Reuter: A little bit at risk on the later side, but the good news is the <unk>.

Speaker Change: And then obviously you get some markets are more competitive and have been for a long time. One example might be like the southeast of the U S.

William Reuter: <unk>.

William Reuter:

William Reuter: What underway are really starting to take hold.

Speaker Change: Yes from quarter, one to quarter, two we're not seeing real difference and it wasn't our wages.

William Reuter: Got it and then in.

William Reuter: Terms of the debt reduction in the quarter.

William Reuter: Repurchase term loan.

Speaker Change: I think it was a little bit on our side relative to our talent acquisition strategy and some of the changes we were making and like I said, we signaled a soft first quarter.

Speaker Change: Or was it bonds and I guess, how are you thinking about that.

Speaker Change: You mentioned something about kind of like a balanced approach I think in the capital allocation discussion at the end of the prepared remarks, but just thoughts on debt reduction versus share repurchases.

Speaker Change: In the fourth quarter call three or four months ago and part of that was knowing that we're going to go into this quarter a little bit at risk on the later side, but the good news is the initiatives that we've.

Speaker Change: Yes, we are we did repurchase some debt in the quarter. Obviously, we have a narrow window to do that and I think going forward as you know.

Speaker Change: Put underway are really starting to take hold.

Speaker Change: In a year, which we're not going to generate a lot of incremental cash we are focused on.

Speaker Change: Got it and then in terms of the debt reduction in the quarter did you repurchase term loan or was it bonds and I guess, how are you thinking about that Hugh you mentioned something about kind of like a balanced approach I think in the capital allocation discussion at the end of the prepared remarks, but.

Speaker Change: Okay.

Speaker Change: On our.

Speaker Change: On balancing the cash we have available to use that to repurchase debt. So I think what I'd. Just say is we're going to be balanced around debt and cash and I think we'll be kind of focused on making sure we utilize our cash appropriately for that.

Speaker Change: Just thoughts on debt reduction versus share repurchases.

Speaker Change: Okay and was it the term loan or the bonds that you repaid or repurchased in the quarter.

Yes, we are we did repurchase some debt in the quarter. Obviously, we have a narrow window to do that and I think going forward. You know as you know we're in a year, which we're not going to generate a lot of incremental cash we are focused on.

Speaker Change: We repurchased the bonds.

Speaker Change: Great. Okay. That's all for me thank you.

Speaker Change: We will take our next question from Visa Ali with Deutsche Bank. Please proceed with your question.

Speaker Change: On our on balance sheet, the cash we have available to use that to repurchase debt. So I.

Visa Ali: Yes, hi, Thank you good morning, I wanted to ask about.

Visa Ali: The macro impact and you alluded to.

Speaker Change: I think what I'd, just say is we're gonna be balanced around debt and cash and I think it will be kind of focused on making sure we utilize our cash appropriately for that.

Visa Ali: So curious if you could talk about what youre seeing there and whether youre starting to see.

Visa Ali: <unk> business as it relates to private label and then maybe on the brand side I don't know maybe it impacts all of the <unk>.

Speaker Change: Okay and was it the term loan or the bonds that you repaid or repurchased in the quarter.

Visa Ali: Segment, but what are you seeing are there specific categories, where you've seen a change in consumer or retailer or manufacturer.

Speaker Change: We repurchased the bonds.

Speaker Change: Great. Okay. That's all for me thank you.

Speaker Change: We will take our next question from Visa Ali with Deutsche Bank. Please proceed with your question.

Visa Ali: <unk>.

Visa Ali: Demand.

Visa Ali: Yeah, Hi, Thank you good morning.

Visa Ali: Yes, great.

Visa Ali: Question, an important one.

Visa Ali: Wanted to ask about you mentioned the macro impact and you alluded to child chefs. So curious if you could talk about what youre seeing there and whether you're starting to see increased business as it relates to private label and then maybe on the brand side or I don't know maybe it impacts.

Visa Ali: One we all see that consumer sentiment I think the lowest it's been in 12 years and consumer sentiment is affecting their shopping behavior.

Visa Ali: We saw retail sales that were below expectation for instance in February March they rebounded, but they were on large ticket items largely.

And we deal with fast moving consumer goods so.

Visa Ali: All the segments, but what are you seeing are there specific categories, where you've seen a change in consumer or retailer or manufacturer.

Visa Ali: With kind of limited discretionary spend.

Visa Ali: We're seeing in certain categories, where consumers may fear tariffs.

Visa Ali:

Visa Ali: <unk>.

Visa Ali: They demand.

Visa Ali: <unk>.

Visa Ali: Yes.

Visa Ali: Or are there is even in some cases somewhat exaggerated inflation.

Visa Ali: Good question, an important one so while we all see that consumer sentiment is I think the lowest it's been in 12 years and consumer sentiment is affecting their shopping behavior. We saw retail sales that were below expectation for instance in February March rebounded, but they were on large ticket items largely.

Visa Ali: In the media.

Visa Ali: They will start buying up they're stocking up in those categories and that just affects overall movement of goods.

Visa Ali: Across all categories you had retailers.

Visa Ali: Destocking a bit.

Visa Ali: Other words, reducing inventory.

Visa Ali: Again that goes back depending on the category and the categories, where we operate being fast moving consumer goods.

Visa Ali: And we deal with fast moving consumer goods so.

Visa Ali: With kind of limited discretionary spend.

Visa Ali: You did see a little bit of Destocking there.

Visa Ali: Seeing certain categories, where consumers may fear tariffs or beer inflation.

Visa Ali: Even though you may find other categories like electronics or large durables that there was actually more inventory just trying to get ahead of tariffs. So.

Visa Ali: Or are there is even some cases somewhat exaggerated inflation.

Visa Ali: Part of that is how they're leveraging their overall working capital and their inventory dollars.

Visa Ali: In the media they will start buying up they're stocking up in those categories not just effects overall movement of goods.

Visa Ali: As it relates to our business.

Visa Ali: The macro that we have seen is that reduction in orders.

Visa Ali: Across all categories you had retailers.

Visa Ali: This commission based business much of our branded services area and then.

Visa Ali: Destocking a bit.

Visa Ali: In other words, reducing inventory.

Visa Ali: Again that goes back to depending on the category and the categories, where we operate being fast moving consumer goods.

Okay.

Visa Ali: On the private label side.

Visa Ali: See an increase in shifting to private label and the macro when you look at the IRI data, but.

Visa Ali: See a little bit of Destocking, there, even though you may find other categories like electronics or large durables that there was actually more inventory just trying to get ahead of tariffs. So.

We are exposed more regional grocery and a lot of that private label growth is occurring with larger retailers mass merge club stores.

Visa Ali: Part of that is how they're leveraging their overall working capital and their inventory dollars.

Visa Ali: We have some exposure to but not as much exposures you have to.

Visa Ali: As it relates to our business.

Visa Ali: The macro that we have seen is that reduction in orders because where it is commission based business and our much of our branded services area and then.

Visa Ali: The grocery channel in some other channels like that so.

Visa Ali: I'd say on the other side when you look at the macro and the reason we gave kind of broader guidance as it relates to our our revised outlook is.

Visa Ali: On the private label side, you do see an increase in shifting to private label and the macro when you look at the IRI Alright, that's extra mobile data but.

Visa Ali: We do provide services that are really necessary for retailers and consumer products companies.

Visa Ali: We are exposed more to regional grocery and a lot of that private label growth is occurring with larger retailers mass merge club stores.

Visa Ali: And we can help them navigate this difficult time and so the discussions we're having a lot of our clients and customers are just around that with uncertainty in the market and we provide some level of certainty whether thats an expense line item or in a specific service to help them navigate and manage.

Visa Ali: Have some exposure to but not as much exposures you have to.

Visa Ali: The grocery channel.

Visa Ali: Other channels like that so.

Speaker Change: I'd say on the other side when you look at the macro and the reason we gave kind of broader guidance as it relates to our our revised outlook is weak.

Visa Ali: <unk>.

Visa Ali: The unexpected and so we can do that with our supply chain services.

Visa Ali: You referenced some of our private label advisory for retailers and then some of the merchandising work as a lot of consumer products companies and retailers are looking at.

Visa Ali: We do provide services that are really necessary for retailers and consumer products companies.

Speaker Change: Yes.

You rationalization that would be great work by our team so.

Speaker Change: We can help them navigate this difficult time and so the discussions we're having a lot of our clients and customers are just around that with uncertainty in the market can we provide some level of certainty whether thats an expense line item or in a specific service to help them navigate and manage.

Visa Ali: We gave a little bit of a broader outlook range as far as the outcomes for the year because it really is unknown.

Visa Ali: Unknown, how the consumer and then, thereby the CE <unk> and the retailers are going to behave, but we do see some opportunity to leverage our services.

Speaker Change: The unexpected and so we can do that with our supply chain services.

Visa Ali: Where they intersect with the specific needs of the consumer segment right now.

Speaker Change: And some of our private label advisory for retailers and then some of the merchandising work as a lot of consumer products companies and retailers are looking at.

Speaker Change: I can add a little bit of color here in relation to just a couple of things quickly we.

Visa Ali: We did see.

Speaker Change: Few rationalization Beckman great work by our team so.

Visa Ali: In retailer inventories about a one five point drag on orders in the first quarter, we have the benefit of some data from both our retailer and our branded services segment that allowed us to get a pretty good read on that and just an item just to give you some perspective for what we're seeing across the business.

Speaker Change: We gave a little bit of a broader outlook range as far as the outcomes for the year because it really is unknown.

Speaker Change: Unknown, how the consumer and then, thereby the CPE cpg's and retailers are going to behave, but we do see some opportunity to leverage our services.

Dave Peacock: And then just a follow on Dave's comment.

Speaker Change: This environment private label supply chain as a service. There is these are services that are nice little offset our balanced system of the lead issue have you seen on the retailer inventory Destocking side. So we are seeing some improvement there and some nice growth there and then underneath that of course I would just say we're seeing some good demand signals on the.

Speaker Change: Where they intersect with the specific needs of the consumer segment right now.

Speaker Change: Alright, so I can add a little bit of color here in relation to just a couple of things quickly we.

Speaker Change: We did see.

Speaker Change: In retailer inventories are about a one five point drag on orders in the first quarter, we have the benefit of some data from both our retailer and our branded services segment that allowed us to get a pretty good read on that and just an item just to give you some perspective for what we're seeing across the business.

Speaker Change: The initial side for example, where we're seeing good demand just skip the execution up get the hiring up we've got the kind of demand there too if we can get the hiring up to feed that.

Speaker Change: Yes.

Speaker Change: Alright, great.

Speaker Change: And then just a follow on Dave's comment.

Speaker Change: And then Jay.

Speaker Change: And then by that.

Speaker Change: This environment private label supply chain as a service. There is yes. These are services that are nice little offset our balance to some of the leadership have you seen on the retailer inventory Destocking side. So we are seeing some improvement there and some nice growth there and then underneath that of course I would just say we're seeing some good demand signals on the.

Speaker Change: Given where we came in in the fall.

Speaker Change: First quarter, just help us a little bit of the quarterly phasing because my impression is that we should be expecting in a much stronger EBITDA growth in the backhaul.

Speaker Change: And I think you've talked about that as being more sort of new business related. So just give us an update on that in terms of how you're expecting that to play out from here.

Speaker Change: <unk> side for example, where we're seeing good demand just to get the execution up get the hiring up we've got the kind of demand there too if we can get the hiring up to feed that.

Speaker Change: Yes, so obviously, a little softer first quarter here overall, but I think a couple of things that come to mind in relation to that so I think about the seasonality factor will be a little more exaggerated first half second half.

Speaker Change: Okay.

Speaker Change: Alright, great. That's very helpful and then Jim.

Speaker Change: The Guy that Bryan just given where we came in in the first quarter.

Speaker Change: There was one phenomenon, we talked about last quarter as we talked about our outlook for the year, which was a much heavier level of shared service cost increases year over year in the first half a lot of that's driven by <unk> and our new systems and that is that persist if I can say it that way, obviously with a little softer revenue in the first quarter of those those costs or not.

Speaker Change: Help us a little bit of the quarterly phasing because my impression is that we should be expecting in a much stronger EBITDA growth in the backhaul.

Speaker Change: And I think you've talked about that as being more sort of new business related. So just give us an update on that in terms of how you're expecting that to play out from here.

Speaker Change: Yes, so obviously, a little softer first quarter here overall, but there are a couple of things that come to mind in relation to that so I think about the seasonality factor will be a little more exaggerated first half second half.

Speaker Change: Also at the same time, we are going through a pretty aggressive.

Speaker Change: Look at our cost structure here and there's some cost reduction programs and ideas, we have to push through the business that we're executing now that I think will be very helpful. For the second half as well so little more exaggerated first half second half and then youre going to see the lower shared service costs and the cost reduction programs really play out in the second half of the year.

Speaker Change: <unk> so as a result, it did weigh on Q1, those do come down actually come down in the second half of the year and we should be in a much better place in that regard and should allow for stronger growth. Yes, I just want to also at the same time, we are going through a pretty aggressive look at our cost structure here I think there is some cost.

Speaker Change: And then maybe just last one just with all of the tech transformation that youre going through like how are you ensuring that there.

Speaker Change: No execution issues that come from that.

Speaker Change: We often come across situations, where as you go through this IV implementation.

Speaker Change: <unk> programs and ideas, we have to push through the business that we're executing now that I think will be very helpful. For the second half as well so little more exaggerated first half second half and then youre going to see the lower shared service costs and the cost reduction programs really second half of the year.

Speaker Change: Sure. So just curious how you're managing through that.

Speaker Change: Yes.

Dave Peacock: Hi, This is Dave the team won has been.

Speaker Change: Really well organized and has done a great job, especially with our ERP implementation.

Speaker Change: And then maybe just last one just with all of the tech transformation that you're going through like how are you ensuring that there is.

Speaker Change: Obviously, you bring in a top tier systems integrator.

Speaker Change: Leveraging all of the external resources as well as having what I would say expertise within our business and experience having done this before and frankly more complex businesses.

Speaker Change: No execution issues that come from that.

Speaker Change: We often come across situations, where as you go through this IP implementation.

When you do something like this you undergo this effort.

Speaker Change: In a manufacturing environment, which I've lived through in my past.

Speaker Change: Sure. So just curious how you're managing through that.

Speaker Change: Retail environment, where you've got.

Speaker Change: Yes.

Speaker Change: Stock ledgers, and vast few lung data and all kinds of things inventory.

Speaker Change: Hi, This is David the team won has been.

Speaker Change: Really well organized and has done a great job, especially with our ERP implementation.

Speaker Change: Across thousands and thousands of Skus. There is a lot of risks in our business, while its never simple, it's a little bit easier and a little less risk.

Speaker Change: Obviously, you bring in a top tier system integrator.

Speaker Change: Leveraging all the external resources as well as having what I would say expertise within our business and experience having done this before and frankly more complex businesses.

Speaker Change: Where youre seeing it manifest as.

The cash flow side, which we know are short term because it has to do with.

Speaker Change: Billing cycles, and how we're able to actually use a system, that's actually going to help us compress our time to invoice.

Speaker Change: When you do something like this you undergo this effort in.

Speaker Change: And in a manufacturing environment, which I've lived through in my past.

Speaker Change: <unk> improved our dsos over time, but you see that hiccup in the first.

Speaker Change: Retail environment, where you've got.

Speaker Change: Scott Ledgers, and vascular data and all kinds of things inventory.

Speaker Change: First quarter or two and you're implementing and then as it relates to visibility.

Speaker Change: I can tell you that the visibility will have within a granular level of our business is going to be much greater than where we've been with disparate systems and we're already seeing the benefits of faster and Richard data. So what used to take several hours for our team at <unk>.

Thousands and thousands of Skus theres, a lot of risk in our business, while its never simple, it's a little bit easier and a little less risk.

Speaker Change: Where youre seeing it manifest.

Speaker Change: On the cash flow side, which we know is short term because it has to do with.

Speaker Change: Billing cycles, and how we're able to actually use a system, that's actually going to help us compress our time to invoice.

Speaker Change: <unk> to run a full run of our financials and now can take minutes and all these things will come with efficiencies over time, and then I'd also add that as we're implementing these new systems and I would say it is really kind of think about in a few ways foundational systems like our.

Speaker Change: And improve our Dsos over time would you see that hiccup in the first in the first quarter or two and you're implementing and then as it relates to visibility.

Speaker Change: I can tell you that the visibility will have within a granular level of our business is going to be much greater than where we've been with disparate systems.

Speaker Change: Our ATM.

Speaker Change: Which was finished last year, our ERP and then our human capital management system, which will project kicks off in the second half of this year, it's a smaller effort, but an important one for our people and then we've got our cloud migration and the data Lake that we've constructed and will enable us.

Speaker Change: And we're already seeing the benefits of faster and Richard data. So what used to take several hours for our team and SG&A to run at full run of our financials and now can take minutes and all these things will come with efficiencies over time and then.

Speaker Change: To perform all kinds of AI use cases.

Speaker Change: Leverage the speed of data.

Speaker Change: These will come with efficiencies in the overall business some of which Chris just mentioned.

Speaker Change: I'd also add that as we're implementing these new systems and I would say it is really kind of think about in a few ways foundational systems like.

Speaker Change: We're trying to pull forward as we look to realize cost benefits. This year and then as we implement new more modern systems over the next two to three years, we will actually be.

Speaker Change: Our Etfs.

Speaker Change: Shutting down systems that will save us the expense that we've added to our P&L relative to newer systems. So you have got the benefit of ultimately having older systems.

Speaker Change: To perform all kinds of AI use cases, and then leverage the speed of data.

Speaker Change: <unk> decommissioned effectively paying the price for the new systems, and then ultimately the efficiencies within the business.

Speaker Change: These will come with efficiencies in the overall business some of which Chris just mentioned that we're trying to pull forward as we look to realize cost benefits. This year and then as we implement new more modern systems over the next two to three years, we will actually be.

Speaker Change: The streamline operations and better data visibility.

Speaker Change: Okay.

Speaker Change: Great. Thank you.

Speaker Change: And we will go next to William Reuter with Bank of America. Please proceed with your question.

Speaker Change: Hi, just a couple of follow ups.

Speaker Change: Shutting down systems that will save us the expense that we've added to our P&L relative to newer systems. So you've got the benefit of ultimately having older systems.

William Reuter: The first is there any way to figure out what the impact of staffing shortages would've been on EBITDA in the first quarter have you had sufficient labor.

Speaker Change: <unk> decommissioned effectively paying the price.

William Reuter: Yes, let me I think if you look at the first quarter and I look at our.

William Reuter: Execution rates for example across our retailer and experiential segment.

Speaker Change: When it comes to streamline operations and better data visibility.

William Reuter: I would just say the vast majority actually probably more than the decline in EBITDA is associated with the staffing shortages. So when I think about other cost pressures or other items that are affecting those segments. I think the main driver of the weakness in the decline in profitability was related to the staffing shortages.

Speaker Change: Great. Thank you.

Speaker Change: And we'll go next to William Reuter with Bank of America. Please proceed with your question.

Speaker Change: Hi.

Speaker Change: Just a couple of follow ups.

Speaker Change: The first is there ever any way to figure out what the impact of staffing shortages would've been on EBITDA in the first quarter have you had sufficient labor.

William Reuter: Got it.

William Reuter: And then secondarily.

Speaker Change: Is the Destocking that you had previously I think you mentioned, a one 5% increase.

Speaker Change: Yes, I mean, I think if you look at the first quarter and I look at our.

Speaker Change: Execution rates for example across our retailer and experiential statement.

Speaker Change: The headwind in the first quarter are you continuing to see destocking into the second quarter or is that largely complete.

Speaker Change: I would just say the vast majority actually probably more than the decline in EBITDA is associated with the staffing shortages. So when you think about other cost pressures or other items that are affecting those segments. I think the main driver of the weakness in the decline in profitability was related to the staffing shortages.

Speaker Change: I'd also add that we saw this ago year ago in the first quarter and it went even lower this quarter. This first quarter of <unk> 25. So I think what we're seeing is just a tighter lock on inventory by the retailers that is causing the year over year effect. My point, then would be that.

Speaker Change: Got it.

Speaker Change: And then secondarily.

Speaker Change: Is the Destocking that you had previously or you saw I think you mentioned, a one 5% increase or a headwind in the first quarter are you continuing to see destocking into the second quarter or is that largely complete.

Speaker Change: Unlikely, we're going to see that continue at certainly at the same rate in Q2, but just have not seen the data yet to validate that the other thing to think about the way and as you have got an Easter shift which was pretty substantial.

Speaker Change: I know that it's certainly got better as the quarter went on but I wanted to just say I have not seen like April data. Yet for example to say that it stopped or is not not occurring I. Just want to also add that we saw this ago a year ago in the first quarter and it went even lower this quarter. This first quarter of 25, So I think what we are.

Speaker Change: And that can play a part in a retailer and how they staff, especially fast moving consumer goods.

Speaker Change: Have a much more efficient supply chain.

Speaker Change: And they tend to carry less inventory overall so.

Speaker Change: Theoretically you should see more of a.

Speaker Change: Washing out of that volume with consumer demand in April.

Speaker Change: Seeing as just a tighter lock on inventory by the retailers that is causing the year over year effect. My point, then would be that.

Speaker Change: And shipments starting to kind of catch up again.

Speaker Change: Got it and then a last one for me and this is kind of a big picture question.

Speaker Change: Unlikely, we're going to see that continue at certainly at the same rate in Q2, but just have not seen the data yet to validate that the other thing to think about way and as you have got an Easter shift which was pretty substantial.

Speaker Change: Branded services the breakdown of consumer products versus food companies is there kind of a rough estimate you could give me on how that.

Speaker Change: And that can play a part in a retailer and how they stop especially fast moving consumer goods.

Speaker Change: Breaks down.

Speaker Change: And you said food versus like.

Speaker Change: Have a much more efficient supply chain.

Speaker Change: Beverage household products.

Speaker Change: Right.

Speaker Change: They tend to carry less inventory overall so.

Speaker Change: Well I was thinking more like food consumables that I think would have largely more consistent demand versus I'm sure. There is consumer products in there as well.

Speaker Change: Theoretically you should see more of a.

Speaker Change: Out of that volume with consumer demand in April.

Speaker Change: Shipments starting to kind of catch up again.

Speaker Change: No I think them through our products I'm thinking about I don't know batteries or non consumable of that nature.

Speaker Change: Got it and then a last one for me and this is kind of a big picture question.

Speaker Change: Yes, I mean, the vast majority.

Speaker Change: Branded services the breakdown of consumer products versus food companies is there kind of a rough estimate you could give me on how that breaks.

Speaker Change: Of our portfolio is going to be in the food and look all personal care.

Speaker Change: It's 70% food and then we've got a very strong presence within the personal care and household.

Speaker Change: Breaks down.

Speaker Change: And you said food versus like.

Beverage household products. So if you are getting that.

Speaker Change: <unk> segments as well so.

Speaker Change: Well I was thinking more like food consumables that I think would have largely more consistent demand versus I'm sure. There's consumer products in there as well, but and why I think I'm sure products I'm thinking about I don't know batteries or non consumable of that nature.

Speaker Change: We're not as exposed to things like.

Speaker Change: Electronics are or kind of these other consumer obviously that apparel and things like that it's much more fast moving consumer goods.

Speaker Change: Perfect very helpful. Okay. That's all from me Thanks again.

Speaker Change: There are no further questions at this time I want to turn the call back over to Dave Peacock for closing remarks.

Speaker Change: Yes, I mean, the vast majority.

Speaker Change: Of our portfolio is going to be in the food and look all personal care.

Speaker Change: Yes, we thank everybody for joining the call and we appreciate your attention and your questions and we look forward to connecting with you for second quarter.

Speaker Change: A 70% food and then we've got a very strong presence within the personal care and household.

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

Speaker Change: <unk> segments as well so.

Speaker Change: We're not as exposed to things like.

Speaker Change: Electronics are or kind of these other consumer obviously that apparel and things like that it's much more fast moving consumer goods.

Speaker Change: Perfect very helpful. Okay. That's all for me Thanks again.

Speaker Change: There are no further questions at this time I want to turn the call back over to Dave Peacock for closing remarks.

Speaker Change: Yes, we thank everybody for joining the call and we appreciate your attention and your questions and we look forward to connecting with you for second quarter.

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

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Hum.

Speaker Change: Hello, Matt.

Speaker Change: Okay.

Speaker Change: Uh huh.

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