Earnings call transcript: Advantage Solutions sees Q1 2025 revenues dip, stock gains

Advantage Solutions Inc. reported a 5% year-over-year decline in revenues to $696 million for the first quarter of 2025, with adjusted EBITDA falling by 18% to $58 million. Despite the earnings miss, the company’s stock saw a 6.52% boost in premarket trading, closing at $1.47. According to InvestingPro analysis, the company appears undervalued based on its Fair Value assessment, with a "Fair" overall financial health score. The company’s revised guidance suggests a flat to slightly negative performance for the year, with a focus on strategic innovations and operational efficiency.

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Key Takeaways

• Revenue for Q1 2025 was $696 million, a 5% decline YoY.
• Adjusted EBITDA dropped by 18% to $58 million.
• Stock price increased by 6.52% in premarket trading.
• Revised full-year guidance indicates flat to slightly negative growth.
• Strategic focus on modernizing technology and operational efficiency.

Company Performance

Advantage Solutions experienced a challenging first quarter, with a notable decline in both revenue and adjusted EBITDA compared to the same period last year. The company attributed these declines to weak consumer sentiment, inventory destocking by retailers, and macroeconomic pressures affecting consumer spending. Despite these challenges, Advantage Solutions remains a strong player in the food and personal care sectors, which make up 70% of its business.

Financial Highlights

• Revenue: $696 million, down 5% YoY
• Adjusted EBITDA: $58 million, down 18% YoY
• Branded Services revenue: $257 million
• Experiential Services revenue: $221 million
• Retailer Services revenue: $218 million
• Cash on hand: $121 million
• Net leverage ratio: 4.4x adjusted EBITDA

Market Reaction

Despite the earnings miss, Advantage Solutions’ stock rose by 6.52% in premarket trading, reaching $1.47. This positive market reaction could be attributed to investor confidence in the company’s strategic initiatives and its ability to navigate the challenging market environment. InvestingPro data shows the stock has delivered a strong 10.53% return over the past week, though it remains down 58.12% over the past year. The stock trades within its 52-week range, with a high of $4.16 and a low of $1.11.

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Outlook & Guidance

The company has revised its full-year guidance to reflect flat to slightly negative growth, with more performance expected in the latter half of the year. Advantage Solutions plans to focus on modernizing its technology infrastructure, implementing a centralized labor model, and achieving operational efficiencies. The company also aims to maintain a long-term leverage target of less than 3.5x adjusted EBITDA.

Executive Commentary

CEO Dave Peacock expressed confidence in the company’s long-term earnings potential and cash generation capabilities. CFO Chris Growe highlighted the benefits of focusing on private label and supply chain services as offsets to market weaknesses. Peacock also noted the impact of consumer sentiment on shopping behavior.

Risks and Challenges

• Consumer sentiment at a 12-year low could continue to affect sales.
• Retailer inventory destocking may drag on orders by 1-5%.
• Macro environment pressures could lead to further consumer spending pullbacks.
• Labor challenges, though improving, remain a concern.
• Potential for increased interest expenses, projected at $140-150 million.

Q&A

Analysts questioned the company’s labor challenges, which were primarily in Q1 but are expected to improve in Q2. Execution rates, particularly in Experiential Services, are reportedly on the rise. There was also discussion on the macroeconomic impacts leading to channel shifts and inventory adjustments.

Full transcript - Advantage Solutions Inc (ADV) Q1 2025:

Conference Operator: Greetings, and welcome to the Advantage Solutions First Quarter twenty twenty five 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 Mayer, Vice President of Investor Relations.

Thank you, Ruben. You may begin.

Ruben Mayer, Vice President of Investor Relations, Advantage Solutions: Thank you, operator. Welcome to Advantage Solutions first quarter twenty twenty five earnings conference call. Dave Peacock, Chief Executive Officer and Chris Growe, 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, 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 measure in our earnings release. 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.

Dave Peacock, Chief Executive Officer, Advantage Solutions: Thanks, Ruben. 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. Their unwavering focus on our clients and customers is commendable. Our first quarter revenues of $696,000,000 and adjusted EBITDA of $58,000,000 were down five percent and eighteen percent, respectively, from the prior year.

While the headline figures highlight a year over year decline, intentional client exits and anticipated transformation related investment represented the majority of the adjusted EBITDA decline in the quarter. We were also negatively impacted by the calendar with a late Easter and one less working day weighing on Q1 results as we expected. As the quarter progressed, consumer confidence waned, followed by increased uncertainty caused by tariff concerns. 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. 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 consumer staples categories, where product demand is traditionally more stable, we are not immune to shifts in consumer sentiment and pricing. All 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. 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. We will continue to monitor the situation very closely.

And while we may experience the challenges in the near term, we remain optimistic about the future. Advantage has a track record of performing well through recessionary environments. And as a largely domestic services business with no manufacturing, we do not have meaningful direct tariff exposure from a supply chain or cost perspective. 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. These shortfalls were exacerbated by intentional turnover and attrition designed to upscale our talent acquisition teams in some of our field management.

We have implemented new processes and have added resources to our talent acquisition teams to help close the gap. 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. Turning to our segments. In Branded Services, we are seeing expected headwinds related to a contraction in consumer spending, retail inventory destocking and reductions in discretionary marketing budgets. In response, we’re continuing to adapt and invest behind our go to market next generation selling model and feel very good about the state of our business development efforts.

Retail merchandising and supply chain support, in particular, are examples of services that we provide our CPG clients to help manage their P and Ls with a tangible cost advantage during this uncertain environment. We are confident in those businesses continuing to perform well throughout this year. In 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 improving in Q2. In Retailer Services, ongoing effective price and cost discipline were offset by regional staffing shortages, which limited activity in some places in the quarter. We remain optimistic in our outlook as client demand remains solid and our teams continue to make progress executing our strategy to expand in adjacent services and channels. 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. 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. 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 II of our ERP implementation across our international operations without notable disruption. We are on pace to complete the implementation of our foundational data platform in the second half of twenty twenty five and the broader cloud migration by the first quarter of twenty twenty six. We 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.

This is manifest in how we review categories with buyers to how we determine the next best action at retail for our clients to how we deploy labor in our retailer and experiential segments. 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 from more modern systems. In addition, we also expect to achieve broader business efficiencies as a result of our new simplified IT ecosystem. Our IT and data investments are foundational to helping support our teammates in better serving our clients from the deployment of proprietary analytics in our selling process to greater utilization of field personnel through enhanced scheduling and routing.

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. We have several related strategic initiatives underway. We are seeing positive results from our pilot of a new field operating organizational structure in Experiential Services, with the efforts scaling to larger markets this quarter. The benefits include higher event execution rates and better teammate retention.

We continue to have confidence in our target of over 30% uplift in availability of hours for our part time teammates that are looking for additional hours. Our broad scale initial rollout for a centralized labor model remains on track for the second half of twenty twenty five. This program will cover the majority of our total part time labor hours in the near to medium term. We feel confident in our ability to be a cost leading solutions partner to CPGs and retailers in this challenging environment. 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 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. While we may experience benefits from growth in private label and supply chain services, these could be offset by demand softness in certain brokerage, retail, and sampling services. 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. While 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.

I’ll now pass it over to Chris for more details on our performance and guidance.

Chris Growe, Chief Financial Officer, Advantage Solutions: Thank you, Dave, and welcome to all of you joining the call today. I will tick through our first quarter twenty twenty five performance by segment, discuss our cash flow and capital structure and reinforce Dave’s guidance commentary. In Branded Services, we generated $257,000,000 of revenues and $28,000,000 of adjusted EBITDA, down 919% on a year over year basis, respectively. Results were driven by the aforementioned intentional client exits and client loss, partially offset by continued cost discipline. Additionally, we continue to see challenges from CPG spending pullbacks, most notably in our omni commerce marketing business.

In Experiential Services, we generated $221,000,000 of revenues and $12,000,000 of adjusted EBITDA, down 128% 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. 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%. In Retailer Services, we generated $218,000,000 of revenues and $18,000,000 of adjusted EBITDA, down three percent and seven percent 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 recovery 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 $20,000,000 of debt and $1,000,000 of shares at attractive levels. Our net leverage ratio was approximately 4.4x 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 seventy days of sales outstanding, up from sixty one days at the end of twenty twenty four due to the system implementation. 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 twenty twenty five. Most notably in the first quarter, we reduced restructuring and reorganization costs by $16,000,000 on a year over year basis and $10,000,000 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. We ended the quarter with $121,000,000

Ruben Mayer, Vice President of Investor Relations, Advantage Solutions: of cash on hand. We view the current debt and equity trading levels as attractive opportunities for value creation with our excess cash.

Chris Growe, Chief Financial Officer, Advantage Solutions: As Dave highlighted, we are lowering our guidance to reflect the current market environment. I will focus my comments on the quarterly weighting and performance and touch on balance sheet and cash flow guidance. 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 the back half of the year. We are also proactively implementing cost reduction programs across the company.

Consequently, we continue to believe that this year will be more back half weighted relative to 2024. Turning to cash flow in 2025. We continue to expect adjusted unlevered free cash flow to be over 50% of adjusted EBITDA, with the 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 $140,000,000 to $150,000,000 and CapEx to be $65,000,000 to $75,000,000 in the year. 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 3.5x. We would also note that from a liquidity perspective, we ended the quarter with an untapped revolving credit facility of nearly $400,000,000 We feel confident in our liquidity position and ability to manage the macroeconomic climate. Thank you for your time. I will now turn it back over to Dave.

Dave Peacock, Chief Executive Officer, Advantage Solutions: Thanks, Chris. Despite the challenging quarter and volatile operating backdrop, I remain pleased with our team’s efforts in 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 transformation. Operator, we are now ready for questions.

Conference Operator: Thank you. We will now be conducting a question and answer session.

Chris Growe, Chief Financial Officer, Advantage Solutions: Session.

Conference Operator: Thank you. And our first question is from Joseph Vafi with Canaccord. Please proceed with your question.

Joseph Vafi, Analyst, Canaccord: Hey guys, good morning. Thanks for the opportunity to ask a couple of questions. I thought we’d first maybe check-in on the macro here. We’re kind of halfway through the second quarter. Any kind of notable changes that you’re seeing kind of real time versus kind of the Q1 print?

And then secondly, if we could maybe drill down a little bit on some of the labor challenges in Q1, kind of more specifically, certain geos or areas of the country and kind of a little more detail on the progress to get those fixed. Thanks, guys.

Dave Peacock, Chief Executive Officer, Advantage Solutions: Hi, Joe. Thanks. This is Dave. Let me probably answer both questions with the same information. We put a task force together pretty quickly, and actually had anticipated a little kind of bumpiness relative to labor

Ruben Mayer, Vice President of Investor Relations, Advantage Solutions: in

Dave Peacock, Chief Executive Officer, Advantage Solutions: the first quarter as we were making some changes both in in some of our event managers and our experiential business, but also on our talent acquisitions team and both in in some in process and some in leadership. And it’s the good news is the there’s yielding from that work. Already in this quarter, we’re seeing much better hiring rates, if you will. And some of these anomalies that we saw in certain regions and certain geographies are starting to smooth out a bit. And wherever we see dispersion relative to our ability to acquire talent in a certain geography.

We’ve got I think a nimble enough and agile enough team now to go address it pretty quickly. And we’ve always had in our business. Mean, 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 to say that we feel very good about how things are playing out in the second quarter. And it’s important to note as well is that those businesses that are most exposed to labor that we have actually have more seasonality in second and third quarter.

So we have an ability to make up more ground to the degree we can continue this hiring phase.

Chris Growe, Chief Financial Officer, Advantage Solutions: Hey, Joe, I might add a comment there. For example, on experiential, our execution rate in the first quarter was around 93%. And that’s so that’s an improved rate. We’re seeing that you know 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, but then the kind of knock on effect for execution. We should see a much stronger performance, especially in experiential.

Joseph Vafi, Analyst, Canaccord: Great. Thanks a lot, guys.

Conference Operator: And we’ll take our next question from William Reuter with Bank of America. Please proceed with your question.

William Reuter, Analyst, Bank of America: Good morning. I have two. So the first, the issues with staffing. In the previous question, you mentioned event managers, talent acquisition, some in process and some in leadership. Have there been meaningful increases in your labor costs that have 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?

Dave Peacock, Chief Executive Officer, Advantage Solutions: Thanks for the question. We are not seeing what I would call differentiated labor costs from first quarter to second quarter necessarily. We’re seeing labor cost inflation in line with the macro market for high volume talent. A lot of that is a byproduct of, you know, regulatory minimum wage laws in select states. And then obviously, get some markets that are more competitive and have been for a long time.

One example might be like the Southeast Of The US. But yeah, from quarter one to quarter two, we’re not seeing real difference. It wasn’t our wages that was the issue. I think it was a little bit on our side relative to our talent acquisition strategy. And and and some of the changes we were making, and like I said, we signaled a soft first quarter in the fourth quarter call three or four months ago.

And part of that was knowing kinda we’re gonna go into this quarter a little bit at risk on the labor side. But the good news is the initiatives that we’ve put underway are are really starting to take hold.

William Reuter, Analyst, Bank of America: 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? 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?

Chris Growe, Chief Financial Officer, Advantage Solutions: 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, we’re in a year in which we’re not going to generate a lot of incremental cash. We are focused on balancing the cash we have available to use that to repurchase debt.

So I think what I 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.

William Reuter, Analyst, Bank of America: Okay. And was it the term loan or the bonds that you repaid or repurchased in the quarter?

Chris Growe, Chief Financial Officer, Advantage Solutions: We repurchased the bonds.

William Reuter, Analyst, Bank of America: Great. Okay, that’s all for me. Thank you.

Conference Operator: We’ll take our next question from Faiza Alwy with Deutsche Bank. Please proceed with your question.

Faiza Alwy, Analyst, Deutsche Bank: Yes, hi, thank you. Good morning. I wanted to ask about, you mentioned the macro impact and you alluded to channel shifts. So curious if you could talk about what you’re seeing there and whether you’re starting to see, you know, increased business as it relates to private label. And then maybe on the brand side, or I don’t know, maybe it impacts, you know, all segments, but what are you seeing?

Are there specific categories where you’ve seen a change in consumer or retailer or manufacturer, the demand?

Dave Peacock, Chief Executive Officer, Advantage Solutions: Yeah, it’s a good question, an important one. So one, we all see that consumer sentiment is I think the lowest it’s been in twelve years. And consumer sentiment is affecting their shopping behavior. You 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 with with with kind of limited discretionary to spend, we’re seeing in certain categories where consumers may fear tariffs or fear inflation, or there’s even some some cases somewhat exaggerated inflation in the media. They’ll start buying up or stocking up in those categories. And that just affects overall movement of goods across all categories. You’ve had retailers destocking a bit, in other words, inventory. And again, that goes back to depending on the category.

In the categories where we operate being fast moving consumer goods, you you could see a little bit of destocking there, even though you may find other categories like electronics or or or large durables that there was actually more inventory just trying to get ahead of tariffs. So part of that is how they’re leveraging their overall working capital and their inventory dollars. As it relates to our business, the macro that we’ve seen is that reduction in orders because we’re a commission based business in in a much of our branded services area. And then on the private label side, you do see an increase in shift in the private label in the macro when you look at the IRI, I’m sorry, Surcana Moogle data. But we are exposed more to regional grocery and a lot of that private label growth is occurring with larger retailers, mass merge, club stores.

We do have some exposure to, but not as much exposure as you have to the grocery channel and some other channels like that. So 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 revised outlook is, you know, we do provide services that are really necessary for retailers and consumer products companies. And, you know, we can help them navigate this difficult time. And so the discussions we’re having with a lot of our clients and customers are just around that with uncertainty in the market. Can we provide some level of certainty, whether that’s in an expense line item or in a specific service to help them navigate and manage the unexpected.

And so we can do that with our supply chain services. As you reference 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 SKU rationalization that can create work for our team. So we gave a little bit of a broader outlook just range out as far as outcomes for the year because it really is unknown how the consumer and then thereby the the CPC and the retailers are going to behave. But we do see some opportunity to leverage our services and where they intersect with the specific needs of the consumer segment right now.

Chris Growe, Chief Financial Officer, Advantage Solutions: I can add a little bit of color here just in relation to, just a couple of things quickly. We did see, in our in in retailer inventories, about a one and a 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 it’s just an item just to give you some perspective for what we’re seeing across the business. And then just to follow on Dave’s comment, in this environment private label supply chain as a service, there’s these are services that are nice little offset or balanced to some of the weakness you might be seeing 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 experiential side, for example, where we’re seeing good demand, just 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 achieve that.

Faiza Alwy, Analyst, Deutsche Bank: All right. Great. That’s very helpful. And then just on the guide itself, right, just given where we came in in the first quarter, just help us with a little bit of the quarterly phasing, because my impression is that we should be expecting, you know, much stronger EBITDA growth in the back half. 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 the year to play out from here.

Chris Growe, Chief Financial Officer, Advantage Solutions: Yes. So obviously, little softer first quarter here overall, but I see 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. There’s 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 IT in our new systems, and that is that persists, if I can say it that way.

Obviously, with a little softer revenue in the first quarter, those costs are not changed. So as a result, 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. I just want to also add at the same time Faiza, we are going through a pretty aggressive look at our cost structure here. 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.

Faiza Alwy, Analyst, Deutsche Bank: And maybe just last one, just with all of the tech transformation that you’re going through, how are you ensuring that there’s you know, no execution issues that that that come from it? You know, we’ve we’ve often come across situations where as you go through this IP implementation issue. So just curious how you’re managing through that.

Dave Peacock, Chief Executive Officer, Advantage Solutions: Yeah. By this is Dave. Team one has been really well organized and has done a great job, especially with our ERP implementation. Obviously, bring in a top tier systems integrator. So we’re leveraging all the external resources, as well as having what I’d say expertise within our business and experience having done this before, and frankly, more complex businesses.

You know, when you do something like this, and you undergo this effort in a manufacturing environment, which I’ve lived through in my past, or a retail environment where you’ve got, you know, stop ledgers and and vast few long data and all kinds of things, inventory across thousands and thousands of SKUs. 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 actually use a system that’s actually going to help us compress our time to invoice and improve our DSOs over time. But you see that hiccup in the first in the first quarter or two when you’re implementing.

And then as it relates to visibility, I can tell you that the visibility will have in within a granular level of our business is going to be much greater than where we’ve been with the spare systems. And we’re already seeing the benefits of faster and richer data. So what used to take several hours for our team and FBNA to to run a full run of our financials now can take minutes. And all these things will come with efficiencies 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 that there’s foundational systems like our EPM, 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 that will enable us to perform all kinds of AI use cases and leverage the speed of data. 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’ll actually be shutting down systems that will save us the expense that we’ve added to our P and L relative to newer systems. 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 efficiencies within the business to come with streamline operations and better data visibility.

Faiza Alwy, Analyst, Deutsche Bank: Great. Thank you.

Conference Operator: And we’ll go next to William Reuter with Bank of America. Please proceed with your question.

William Reuter, Analyst, Bank of America: Hi, just a couple of 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?

Chris Growe, Chief Financial Officer, Advantage Solutions: Yes. I mean, 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.

William Reuter, Analyst, Bank of America: Got it. And then secondarily, is the destocking that you had previously or you saw I think you mentioned a 1.5% increase or headwind in the first quarter. Are you continuing to see destocking into the second quarter or is that largely complete?

Chris Growe, Chief Financial Officer, Advantage Solutions: 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 ago a year ago in the first quarter, and it went even lower this quarter this first quarter of twenty five. 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.

Dave Peacock, Chief Executive Officer, Advantage Solutions: Yeah. The other thing to think about, William, is you’ve got an Easter shift, was pretty substantial. And and that can play a part in in a retailer and how they stop especially fast moving consumer goods that have a much more efficient supply chain, and they tend to carry less inventory overall. So theoretically, you should see more of a flushing out of that volume by the consumer demand in April, and and then shipments starting to kinda catch up again.

William Reuter, Analyst, Bank of America: Got it. And then the last one for me. And this 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?

Chris Growe, Chief Financial Officer, Advantage Solutions: And you said food versus like beverage household products, that what you’re getting at?

William Reuter, Analyst, Bank of America: 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 when I say consumer products, I’m thinking about, I don’t know, batteries or non consumable of that nature.

Dave Peacock, Chief Executive Officer, Advantage Solutions: Yeah, I mean, the vast majority of our portfolio is gonna be in the food and look all personal care. It’s 70% food. And then we’ve got a very strong presence within the personal care and household good segments as well. So we’re not as exposed to things like, you know, electronics or or kind of these other consumer kind of obviously not apparel and things like that. It’s much more fast moving consumer goods.

William Reuter, Analyst, Bank of America: Perfect. Very helpful. Okay. That’s all for me. Thanks again.

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

Dave Peacock, Chief Executive Officer, Advantage Solutions: Yeah. We thank everybody for joining the call. And we appreciate your attention, your questions and we look forward to connecting with you for second quarter.

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

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