Earnings call transcript: Advantage Solutions Q4 2024 sees revenue dip

Advantage Solutions Inc. reported its fourth-quarter and full-year 2024 earnings, revealing a mixed financial performance. The company experienced a slight decline in Q4 revenue, while adjusted EBITDA saw an increase. Despite these results, the stock showed a minor pre-market increase of 0.85%, trading at $2.38. According to InvestingPro analysis, the company maintains a "Fair" overall financial health score, with particularly strong marks in relative value metrics.

Key Takeaways

• Q4 2024 revenue decreased by 3% to $762 million.
• Full-year revenue remained flat at $3 billion.
• Adjusted EBITDA for Q4 rose by 9% to $95 million.
• The stock price increased by 0.85% in pre-market trading.
• The company is focusing on technology upgrades and operational efficiency.

Company Performance

Advantage Solutions faced a challenging Q4 2024, with revenues declining by 3% to $762 million. However, the company managed to improve its adjusted EBITDA by 9%, reaching $95 million. For the full year, revenues remained flat at $3 billion, while adjusted EBITDA increased slightly by 1% to $356 million. The company’s performance was marked by a mixed outcome across its key segments, with Experiential Services showing an 11% increase in revenue, while Branded and Retailer Services saw declines.

Financial Highlights

• Q4 Revenue: $762 million (Down 3% year-over-year)
• Full Year Revenue: $3 billion (Flat year-over-year)
• Q4 Adjusted EBITDA: $95 million (Up 9% year-over-year)
• Full Year Adjusted EBITDA: $356 million (Up 1% year-over-year)

Market Reaction

Following the earnings announcement, Advantage Solutions’ stock saw a modest pre-market increase of 0.85%, trading at $2.38. This movement comes after a 1.26% decline in the previous session, with the stock closing at $2.36. The current price remains close to its 52-week low of $2.22, reflecting broader market challenges and investor caution. InvestingPro analysis suggests the stock is currently undervalued, with analysts setting price targets between $4.00 and $5.50. Notably, the stock has experienced significant volatility, with a beta of 1.7 and a 36.9% decline over the past six months.

Outlook & Guidance

Looking ahead, Advantage Solutions is targeting low single-digit growth in both revenue and adjusted EBITDA for 2025. The company plans to maintain quarterly EBITDA levels similar to those of 2024. Capital expenditures are projected to range between $65 million and $75 million, with significant investments in IT initiatives over the next three years. The company’s strong liquidity position is evidenced by a healthy current ratio of 1.9, though investors should note the debt-to-capital ratio stands at 0.69. For deeper insights into Advantage Solutions’ financial health and growth prospects, InvestingPro subscribers have access to over 30 additional financial metrics and exclusive analysis.

Executive Commentary

CEO Dave Peacock emphasized the company’s strategic transformation, stating, "We will emerge from our transformation in the current market cycle as a more disciplined agile business." He also highlighted the focus on tailored labor solutions, saying, "We are excited by the prospect of helping them achieve their goals with tailored labor solutions in a challenging time."

Risks and Challenges

• Consumer spending uncertainty due to economic factors and rising debt levels.
• Potential impacts from tariff changes on business operations.
• The need for continued investment in technology and infrastructure.
• Competition from other service providers and market saturation.
• Pressure from a tighter labor market and wage growth.

Q&A

During the earnings call, analysts inquired about the company’s strategy to counter potential tariff impacts and explore new service opportunities. The management acknowledged the uncertainty around consumer spending and emphasized their commitment to transformation and investment in technology.

Advantage Solutions remains focused on its strategic initiatives and operational efficiencies as it navigates a challenging market environment. Investors seeking comprehensive analysis can access the full Pro Research Report for Advantage Solutions, along with 1,400+ other US stocks, exclusively on InvestingPro, where expert insights and advanced metrics help transform complex financial data into actionable investment decisions.

Full transcript - Advantage Solutions Inc (ADV) Q4 2024:

Conference Operator: Greetings and welcome to the ADDvantage Solutions Fourth Quarter and Full Year twenty twenty four 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. As a reminder, this conference is being recorded.

It is now my pleasure to introduce Ruben Maiette, Vice President of Investor Relations. Thank you, Ruben. You may begin.

Ruben Maiette, Vice President of Investor Relations, ADDvantage Solutions: Thank you, operator. Welcome to ADDvantage Solutions’ fourth quarter and full year twenty twenty four earnings conference call. Dave Peacock, Chief Executive Officer Chris Growe, Chief Financial Officer and John Choske, Senior Vice President of Strategy and M and 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. During this call, 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 ks filed with the SEC. All forward looking statements are qualified in their entirety by such factors. Our remarks today include certain non GAAP financial measures, which are reconciled to the most comparable GAAP measures in our earnings release. As a reminder, unless otherwise stated, the financial results discussed today will be from continuing operations. Our discussion about revenues will exclude pass through costs and the deconsolidation of the European joint venture, which happened during the fourth quarter of twenty twenty three.

And now, I would like to turn the call over to Dave Peacock.

Dave Peacock, Chief Executive Officer, ADDvantage Solutions: Thanks, Ruben. Good morning, everyone, and thank you for joining us. Before we get started, I want to thank my teammates for their hard work and dedication this past year. I am proud of how our team served our thousands of clients and each other in a challenging year. In 2024, we made solid progress on our multi year transformation, making strides to improve our operating efficiency, while strengthening our business.

These efforts have endured during a difficult macro environment and we continue to position ourselves for long term profitable growth. I’m encouraged by our progress as well as the caliber and resilience of our team. Focusing on results first, our fourth quarter revenues of $762,000,000 were down 3% compared to the prior year, while adjusted EBITDA was up nine percent to $95,000,000 as we realized the benefits of more cost discipline and efficiency across our business. For the full year 2024, our revenues of $3,000,000,000 were flat versus the prior year and our adjusted EBITDA reached $356,000,000 which was up 1% and in line with our expectations given broader market trends and transformation investments. It is also important to note that we had a nearly 2% drag on revenues in the fourth quarter and full year related to intentional client exits.

Starting with some observations on the macro environment in 2024, we saw a significant increase in value seeking shopping behavior. Club stores and mass merchandisers benefited from cost conscious consumers at the expense of regional grocery and other channels where we and others in our industry have significant exposure. While a tighter labor market and wage growth supported overall consumer resiliency, spending behavior became increasingly challenging, particularly at low income levels. Furthermore, consumer debt levels continue to rise, which could pressure spending habits further in 2025. CPG companies and retailers have been addressing muted growth from these headwinds with innovation, price promotions and disciplined vendor cost management, which has impacted our performance.

We have a track record of navigating the cyclical moments and shifts in consumer behavior while retaining over 95% of our key clients. We have historically been able to meet a broad set of client needs and provide them with certainty of cost and timely execution, both critical in this environment. This is a result of our diverse service offerings, technology and data infrastructure and talented workforce. The last two years have been a journey. In 2023, we built a leadership team to find priority work streams for the transformation and began to execute on those work streams, all while stemming declines in the business as evidenced by largely flat adjusted EBITDA performance in 2023 after a roughly 20% decline in the prior year.

2024 was a year of simplification and the beginning of our transformation in earnest. We completed several divestitures to focus on our core capabilities. We re segmented our business for better alignment with our customer base and improved transparency. And we established centralized shared services to better support our three business units in a more consistent and efficient way. We also laid the groundwork for significant IT and data advancements in 2025.

Despite all of this change, we grew adjusted EBITDA. In branded services, while our results were impacted by the challenging consumer backdrop, we made significant progress on key initiatives. During the year, we rightsized our business while deploying new processes and data and upscaling our sales teams to ensure that we have the best approach to serve our clients. We standardized operations, streamlined areas for better, faster workflows and saw a positive response with the retailers we served on behalf of our CPG clients. In experiential services, we delivered strong results in 2024, driven by an increase in events per day and improvements in execution rate, labor utilization and safety.

The experiential segment was able to mitigate wage inflation with price discipline and labor optimization efforts while managing through a persistently tight labor market. In retailer services, we had a solid 2024, meeting our objectives to improve execution and cost discipline while effectively managing higher part time wages to attract and retain talent. Looking ahead, 2025 is the year we implement systems, infrastructure and processes to enhance decision making and client service delivery. These changes are focused on optimizing technology and labor utilization. Our multi pronged approach to technology and data architecture investment will yield significant operational benefits for our business over time.

We have initiated the go live of our ERP system among many anticipated benefits. We expect to see improvement in our DSO management over time by leveraging the systems AR tools to shorten invoice timing. We will continue to execute the ERP migration in phases throughout 2025 and into 2026. We look forward to updating you on our progress and so far our implementation is going well. We have upgraded our enterprise performance management system significantly reducing cycle times for financial planning, forecasting and reporting.

This upgrade streamlines key processes such as our financial close, reporting and scenario modeling while improving driver and trend based analysis, enhancing decision making and agility. We continue to make progress on modernizing and migrating critical services and capabilities to the cloud. Our investment in more efficient data storage in the cloud is enabling us to build a data lake to support our business with key tools including cloud based CRM that will allow sales, marketing and customer service teams to access data from anywhere at any time while eliminating the need for on premise servers and disparate data silos. AI capabilities will help us query information more quickly in response to client needs. Machine learning programs that will generate informed insights such as predictive analytics, lead scoring and customer sentiment analysis and AI driven self audits, route optimization and merchandising recommendations.

We are also in the early stages of a human capital management system implementation with Workday, which will help drive efficiency in our HR processes and improve our teammate experience. This is just a glimpse of what we are doing and we are excited by the prospect of integrating these tools into our workflow throughout 2025 and beyond. Another focus of our transformation in 2025 is improving our labor utilization. We are pleased to have George Johnson join us in a newly created role as Chief of Workforce Operations. George has a proven track record of optimizing labor while enhancing employee experience at companies such as Cisco and Aramark.

George is joining us at the right time to lead our efforts as we execute several key initiatives, including a program to leverage AI assisted staffing with associates in experiential services, which is showing great potential. Separately, we completed a proof of concept of our geographic based talent sharing system across several client banners within a defined geographic radius. For reference, employees historically have been mapped to a single retail location. Based on positive uplift and execution rate, greater internal staff utilization and a reduction in third party labor, we are expanding this pilot to several hundred stores in 2025. If successful, we will leverage this capability across key parts of the company with the goal of significantly increasing the hours per week for our part time frontline teammates by up to 50% and continuing to lower the use of costly third party labor.

This would result in retention improvements yielding better trained teammates, lower talent acquisition costs and more available hours for teammates seeking additional work across the company. We’re still in early days, but efficiently utilizing labor to best serve our customers and enrich our employee experience is a key focus area for us, particularly in the currently challenged macroeconomic environment. As I think about our segments this year, branded services is adapting their go to market strategy and finding ways to integrate our expertise across CPG representation at retailer headquarters and merchandising. As part of that process, we launched our next generation selling model, which enabled us to right size the group and upscale the appropriate individuals to best serve clients and help them navigate the headwinds they are facing. The results are more rapid decision making with single client and customer facing key account managers.

We are increasing our differentiation by equipping our frontline teammates with market leading technologies to offer clients enhanced real time analytics to solve problems faster. Our latest Power BI dashboards provide interactive live data by retailer, aisle and geography to clients in order for them to optimize distribution, price, price, promotion impact and shopper benefit. We are pleased to announce that Dean General will be joining us from Henkel Consumer Brands to run branded services effective March 24. Dean brings with him a wealth of experience and connectivity from different CPGs and across The U. S.

Retail landscape. And we are excited to have him on the team. He has led large teams, successful selling organizations and significant businesses across categories and the go to market spectrum with full P and L management. Jack Pastello has elected to depart the Vantage in order to pursue a return to the retail industry and a leadership position. Jack has been a trusted partner in the process of stabilizing and transforming the branded services segment amidst a competitive backdrop and we are grateful for his insights and dedication.

He will be remaining with Advantage through April to ensure a smooth transition and we are confident we will be working with Jack again. In experiential services, we have strengthened the business over the past four years successfully executing on the recovery coming out of the pandemic and positioning the business for sustainable growth. Going forward, we will continue to focus on operational excellence with our existing clients for traditional sampling and securing new banners. We are also looking to expand our premium brand activation services in venues other than club stores and large format retailers, currently our biggest market. And with the increasing ease of ordering online, we see the opportunity to expand our presence in digital sampling, which will help clients reach consumers where they shop.

Turning to retailer services, our priorities start with continuing to deliver effective in store merchandising for retailers across product types. On the private brand side, while big box retailers drove growth with cost conscious consumers in 2024, we expect regional grocers to increase their participation in 2025. This will enable our Damon business to help clients execute in store and online private brand strategies in ways that offer a point of difference for consumers. We sit between approximately 6,000 North American contract manufacturers and dozens of retailers. We will also remain focused on enhancing the personalized shopping experience through retail media services.

We expect a growing shift from traditional advertising to data driven campaigns that blend physical and digital channels, which will be a tailwind for us as we enhance our in store campaign support with partnerships for digital offers with companies like InLaw and Swiftly. In addition, we are focused on expanding our services across market channels and adjacencies to pursue future growth. Many retailers are struggling to find labor and our in store solutions for more episodic tasks help retailers save money and ensure a positive shopper experience in a difficult market. While we will remain focused on implementing the initiatives I just mentioned, we are targeting low single digit revenue and adjusted EBITDA growth in 2025 with adjusted EBITDA more in line with the growth rate of 2024. Revenue growth continues to be largely influenced by the subdued CPG environment, while our OpEx will be affected by ongoing transformation related investments.

Despite this, our increased focus on labor efficiency and use of technology to enhance service delivery will help us offset the temporal increases in costs related to our transformation. Pivoting to cash flow, there are several one time items that will impact our performance this year, which Chris will discuss. Excluding these items, we’d see unlevered free cash flow closer to 90% and net free cash flow around 25%. Given the nuances to 2025, we expect to be around these normalized levels of cash generation next year. Overall, I am pleased with the progress we are making to strengthen our organization, pursuing initiatives that will position us for accelerated growth in the years to come.

We believe this positions us well to begin achieving more sustainable higher growth over the medium and long term. While there is a lot of uncertainty in the macroeconomic backdrop, we are continuing to efficiently execute against our strategy, improving the foundation of our business for our customers and our shareholders. We will emerge from our transformation in the current market cycle as a more disciplined agile business. I’ll now pass it over to Chris for more details on our performance and guidance.

Chris Growe, Chief Financial Officer, ADDvantage Solutions: Thank you, Dave, and welcome to all of you joining the call today. I will focus my remarks on our full year 2024 performance in branded, experiential and retailer services, cover our capital structure and discuss our 2025 guidance. Let’s start with branded services. Market headwinds most impacted branded services. As a result, 2024 revenues were down by approximately 4% to $1,100,000,000 Adjusted EBITDA was $181,000,000 down 11% and margins declined by 90 basis points.

The reorganization and restructuring actions taken to adapt to soft market conditions resulted in significant expense reduction recognized in the fourth quarter and were the driver for the strong quarterly performance as referenced in our supplementary slides. We continue to be cautious about and reactive to market dynamics in the near term. Experiential services delivered strong results with full year revenues of $945,000,000 an increase of approximately 11%. Adjusted EBITDA was $76,000,000 a 43% increase and margins expanded 180 basis points to 8%. The drivers included a nearly 10% increase in events per day and an execution rate of approximately 92%.

The base business in traditional sampling performed well and benefited from the ramp up of activity with a large retailer we announced early last year, but at a slower than expected rate. As Dave mentioned, our pricing discipline helped us navigate wage inflation and increased operating efficiency through better talent deployment. In the fourth quarter, the softer performance was due to a client loss and one time expenses. Retailer services navigated through the market headwinds with strong execution. Full year revenues were $965,000,000 a 2% decline, while adjusted EBITDA was $99,000,000 up approximately 3% and margins expanded by 50 basis points to over 10%.

The revenue decline was driven by market softness in the regional grocery channel and the intentional decision to exit the customer relationship early in the year. Our teammates improved talent deployment and effectively managed costs, which helped increase adjusted EBITDA dollars and margin. Performance in the fourth quarter was soft also due in part to a timing shift of activity into the third quarter. Overall, it is also worth noting that foreign exchange impacts were an approximately 2% drag on adjusted EBITDA performance in the quarter. Moving to our balance sheet, in 2024, we continued our capital discipline and made progress reducing our debt levels.

We used the portion of the proceeds from the divestitures and internal cash generation to voluntarily repurchase approximately $158,000,000 of debt and approximately 9,000,000 shares. We did not repurchase debt or shares in the fourth quarter. Interest expense for the year was $147,000,000 in line with guidance. Our net leverage ratio was approximately four point zero times adjusted EBITDA, including continuing and discontinued operations. Turning to cash generation, our teammates exceeded expectations and reduced DSOs to about sixty one days, down from nearly sixty five days in the prior year, which led to net working capital generating over $20,000,000 of cash in 2024.

As we discussed last quarter, the timing of cash payments push capital expenditures into 2025. As a result, CapEx in 2024 was $55,000,000 We generated adjusted unlevered free cash flow of $335,000,000 dollars nearly 90% of adjusted EBITDA well ahead of the 55% to 65% guidance. Based on the proceeds from divestitures and strong working capital management, we ended 2024 with $2.00 $5,000,000 of cash on hand. Moving to our 2025 outlook, we expect adjusted EBITDA growth to be similar to the rate of growth in 2024 with the pace of revenue growth slightly higher. We expect the quarterly cadence of adjusted EBITDA to be similar to 2024 in terms of the split between first half contribution and second half contribution.

This seasonality could be further exacerbated by poor weather and retailer inventory patterns consistent with comments you may have heard from many consumer companies. While we continue to focus on cost discipline and executing our transformation initiatives, operating expenses are expected to increase as we implement these initiatives, including licensing fees associated with the new IT systems and staffing needs in certain areas. That being said, related below the line costs are expected to decline meaningfully in 2025. Turning to cash flow in 2025, we expect adjusted unlevered free cash flow to be over 50% of adjusted EBITDA, primarily driven by certain one time items. First, there is a one extra payroll shift that will result in an approximately $50,000,000 drag on working capital.

This will not repeat in 2026. Additionally, given the timing of our anticipated and known new business wins, a significant amount of those collections won’t take place until 2026. We also expect slightly unfavorable short term impacts on DSOs with the implementation of SAP, which should improve in 2026. On a net cash flow basis, these impacts will partially offset by significant year over year reduction in restructuring costs. Assuming we do not repurchase any debt in 2025, interest expense should be $140,000,000 to $150,000,000 This is due to the interest rate hedge that was unwound only being partially offset by a lower debt level and interest rates.

Because of the timing of cash payments from 2024, we expect CapEx in 2025 to be $65,000,000 to $75,000,000 We still expect the three year IT CapEx initiatives to be $140,000,000 to $150,000,000 across 2024 to 2026. We plan to use balance sheet cash to reinvest in the business and opportunistically reduce debt subject to market conditions. We expect the net leverage ratio to be a bit higher in 2025 before tracking in 2026 towards our long term target of less than 3.5 times.

Dave Peacock, Chief Executive Officer, ADDvantage Solutions: Thank you for your time. I will now turn it back over to Dave. Thanks, Chris. I’m pleased with the progress we made in 2024 on our multi year transformation. We continue to improve our operating efficiency, while strengthening our business fundamentals.

In 2025, we remain focused on these initiatives and are confident they are enabling our position as the cost leading provider of choice for customers. While the climate for CPGs and retailers remains uncertain, we are excited by the prospect of helping them achieve their goals with tailored labor solutions in a challenging time. We will continue to maintain our financial rigor and cost discipline with a focus on improving our cash generation in the years to come and we are confident in our path to achieve accelerated, sustainable, long term growth. Operator, we are now ready for questions.

Conference Operator: Thank you. And we will now be conducting a question and answer session. And our first question will take from Joseph Vafi from Canaccord. Please go ahead.

Joseph Vafi, Analyst, Canaccord: Hey guys, good morning. Thanks for the opportunity to ask a couple of questions here. Maybe we just start a little bit on maybe the macro environment tariffs etcetera kind of what you’re seeing here real time. I know we got some commentary on the macro already, but maybe a little bit more on it. Thanks.

Dave Peacock, Chief Executive Officer, ADDvantage Solutions: Thanks, Joe. And thanks for joining early out west. It’s early, Paul. I think if anything, it’s generating uncertainty in the market, which is a word you’re probably seeing a lot. Obviously, we saw yesterday that there may be some scaling back of some of the items that are going to see tariffs at least until April.

And so the kind of on again off again nature of the tariffs is really for some companies and some categories that we work with sort of frozen people a little bit as far as next steps and what they want to do relative to their business. I think most are in a wait and see mode given that. And I do think there’s only certain categories that are significantly affected, but because of brand interactions, product interactions, category interactions, you will see an impact across the store. We’ve seen estimates between $1,200 and $2,000 per year in incremental cost to the average U. S.

Household. And obviously, some of that falls into the categories that we represent. For us, we are paid in parts of our business based on commission. So if pricing flows through, you can see increased commissions coming our way, but you obviously have elasticities and volume declines. You could see supply chains disrupted a bit, which our retail merchandising teams would probably see greater kind of need for their services.

When you have disrupted supply chains, making sure there’s product on shelf is pretty important. And so those are just a few examples of what you could see if these tariffs are both imposed and imposed over a prolonged period of time. But at this point, I think it’s anyone’s guess as to how this is going to play out.

Joseph Vafi, Analyst, Canaccord: Sure. Thanks for that color, Dave. And then maybe just another kind of high level one and kind of is this kind of environment that you think that new logo wins are achievable or is that really more in a growth environment where maybe there’s more appetite and more demand for services? Thanks a lot.

Dave Peacock, Chief Executive Officer, ADDvantage Solutions: Thanks, Joe. Yes, I think it’s really both, right? We’ve got an aggressive business development effort and some new leadership and structure and process in that group over the that was put in place over the last year and really, really excited about the pipeline that we have as it relates to new logos. And then on the on just the services side, there is an opportunity and I’d say if you look across our segments, within the retailer services space, we’re doing a lot to bump out incremental services that we can provide retailers in a constrained labor market. The job support just came out and shows still pretty healthy hiring.

I think overall kind of waiting for the significant softening in the labor market, which is likely to come. And it was a little softer than people expected. But I think there’s services that we can provide at a really a lower cost because of the scale manner and efficiency in which we do them, they can really benefit retailers. So we’re exploring a lot of opportunities in that space. And then if you look at our experiential services space, it’s similar.

There’s other forms beyond in store sampling of product demonstration and product sampling that we are moving into and seeing pretty healthy demand for. And then on the branded services space, I mentioned that the retail merchandising side of the business on behalf of CPGs is an area where there’s real opportunity, especially when you’ve got any disruption to supply chains and or significant growth, especially from kind of mid size or emerging brands.

Joseph Vafi, Analyst, Canaccord: Great. Thanks for that commentary, Dave. Much appreciated.

Conference Operator: We’ll take our next question from Greg Parrish with Morgan Stanley. Please proceed with your question.

Greg Parrish, Analyst, Morgan Stanley: Yes. Hey, thanks. Good morning, guys. And congrats on the full year result. Maybe just start on branded.

Just want to unpack a little bit. There’s some headwinds going on, growth slowed a little bit in the quarter. You expect those to persist in first quarter. So what’s the right way to think about 2025 given the headwinds in the market right now? I mean, it’s down low single digit revenue growth, the right kind of framework or similar to 2024, just help us kind of flesh out what to expect in 2025?

Dave Peacock, Chief Executive Officer, ADDvantage Solutions: Thanks, Greg. And you’re talking for the branded services segment specifically?

Greg Parrish, Analyst, Morgan Stanley: Yes, yes, exactly.

Dave Peacock, Chief Executive Officer, ADDvantage Solutions: Yes, yes. I think some of your assessment is correct. We obviously don’t guide by segment, but you know and everybody is watching and for instance paid attention to what happened at CAGNY most recently, but also other reports from consumer product companies. I’d say it’s kind of a sanguine environment relative to outlook and a little bit of the uncertainty we just talked about as it relates to tariffs, because depending on the category you’re competing in, you could be realizing some pretty significant input costs. You obviously have the really what I call the uncertainty that comes with GLP-one drugs and GLP-one drug adoption.

We know that that can impact household spending on the food as much as 6% higher income households even more. Question is what’s the adoption curve and how long are people going to stay on those drugs and how long does that pattern persist. We know it’s a single digit percentage of the population right now, but recently it came out that those drugs are going to become a little less expensive too. So we have to watch that closely. So all of these things suggest a lot of uncertainty for the consumer space.

That said, I think some of this will depend on our ability to generate new business through logos growth and incremental services provided. And we do have clients who are leaning into some of the things that we provide. I mentioned the retail merchandising side, some of the things we do for them on the e commerce side as that continues to be a growth area for retail. So we’re optimistic. We’re kind of placing our energy invest against the areas where we think we can provide cost efficiency for them and improvement in operations based on the current uncertain environment.

Greg Parrish, Analyst, Morgan Stanley: Yes. That’s a helpful color. And then maybe rolling that into the 2025 guide, how do we think about it and like how conservative this is or vice versa, right? You have these headwinds are persisting in 1Q. So does your guidance contemplate the market getting better after first quarter here or would you be able to hit your EBITDA guide even if these headwinds that we’re currently seeing sort of persist through the year?

Dave Peacock, Chief Executive Officer, ADDvantage Solutions: Yes. When we perform the guidance, we obviously did so kind of eyes wide open to the existing environment. I would say tariffs and how those play out are probably the thing that are the most difficult to predict. But I mentioned there’s some things that we can capitalize on in an environment where you’ve got tariffs or even uncertainty around tariffs. But that’s probably the thing that is the most difficult to determine or estimate relative looking forward.

I’d say one way to look at it in a simple terms is we’re making great progress on transformation. We started two years ago. We focused first on team building for leadership, diagnosing the opportunities that we had in business and where we had a right to win. We quickly then tried to simplify to resegment, obviously, the divestitures we’ve talked to you guys about over the last couple of years, get the portfolio right, get the structure right and some of the processes right. And this year is a big year of system implementation.

It started as late as last year, but a lot of the kind of investment around system implementation is hitting in 2025. So, but for some of the increase in both technology spend to get more modern systems, more reliable systems, more stable systems and data investment because we have invested in getting better, more granular data faster into the hands of our key account managers. If you exclude those, we would be kind of more in the mid single digit growth rate. So we actually feel like the fundamentals of the business are pretty strong. And as Chris alluded to in his comments, from a cash flow standpoint, we have some unique one time items that if they didn’t exist, we’d be seeing unlevered free cash flow and net free cash flow kind of more in line with what we would expect in this business.

So we have an investment year. We’re coming upon, I’d say, the end of what I’ll call the heavy investment and effort around transformation. And, yes, we are gaining a positive outlook and to the degree the markets can stabilize and get back to more of a historical growth rate, we think we’re ready to meet that growth and is a much kind of more lean and cost efficient company.

Greg Parrish, Analyst, Morgan Stanley: Great. Thanks. That’s super helpful color. And maybe one more final one for me. On the client exits, do you anticipate any further client exits that intentionally on your part in 2025?

Is there any of those in the roadmap?

Dave Peacock, Chief Executive Officer, ADDvantage Solutions: No, I don’t think so. Not that I can think of, no. We had a couple of unique circumstances. We’ve worked through those. We’re still kind of feeling those facts a little bit into the first quarter of twenty twenty five as just from a lapping standpoint.

But no, we don’t anticipate any intentional client exits as we move into 2025.

Greg Parrish, Analyst, Morgan Stanley: Okay. Great. Fantastic. Thank you, guys. Thank you.

Conference Operator: Thank you. And there are no further questions at this time. I would like to turn the call back over to Dave Peacock for closing remarks. Please go ahead.

Dave Peacock, Chief Executive Officer, ADDvantage Solutions: Well, we thank you all for joining. We know it’s early on a Friday, so we appreciate the time and attention on our business and we look forward to talking to you in the first quarter. Thank you.

Conference Operator: This concludes today’s teleconference. You may disconnect your lines at any time. Thank you for your participation.

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