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Operator: Good morning, and welcome to the Advantage Solutions First Quarter 2023 Earnings Call. Today’s call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I’d like to turn the conference over to Kimberly Esterkin, Investor Relations for Advantage. Please go ahead.

Kimberly Esterkin: Thank you, operator, and thank you, everyone, for joining us on Advantage Solutions’ First Quarter 2023 Earnings Conference Call. On the call with me today are Dave Peacock, Chief Executive Officer; and Chris Growe, Chief Financial Officer. After their prepared remarks, 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. These statements are based on management’s current expectations and involve assumptions, risks and uncertainties that are difficult to predict. Actual outcomes and results could differ materially due to a number of factors, including those described more fully in the company’s annual report on Form 10-K filed with the SEC.

All forward-looking statements are expressly qualified in their entirety by such factors. The company does not undertake any duty to update or revise any forward-looking statements, except as required by law. Please note, management’s remarks today will highlight certain non-GAAP financial measures. Our earnings release, which was issued earlier today, presents reconciliations of these non-GAAP financial measures to the most comparable GAAP measure. This call is being webcast, and a recording of this call will also be available on the website. And now I’d like to turn the call over to Advantage’s CEO, Dave Peacock.

David Peacock: Thanks, Kimberly. Good morning, everyone, and thank you for joining us. I am pleased to be able to report a strong start to the year for Advantage Solutions, including stronger-than-expected revenue and adjusted EBITDA performance for the business. I’ll provide more color on our performance and our outlook in a few minutes. I want to start by thanking everyone on the Advantage team for their hard work this past quarter. In my first 100 days at Advantage, I’ve spent considerable time in the market, connecting with many of our stakeholders. I’ve been consistently impressed by the caliber of our talented teams, their heart for service, and their unwavering commitment to delivering results, which is evident in the feedback I’ve heard from clients and customers, the new business we’re winning, and our solid performance for the quarter.

Specifically, our revenue and adjusted EBITDA were ahead of our plan and that stronger business performance, along with a focus on working capital led to an improved free cash flow performance as well. Together with our newly formed executive leadership team, we’ve been assessing our services, capabilities and potential. We’re setting the stage for a long-range business plan that will position Advantage for long-term profitable growth. We’ll share this plan in the coming months. Advantage is uniquely positioned at the intersection of brands and retailers with extensive reach and breadth of services that span the entire path to purchase. Our operational scale is unmatched with nearly 4,000 clients spanning 17 channels of trade in most of the largest U.S. grocery retailers regarding Advantage as their exclusive in-store experiential partner.

It’s a competitive position that gives us critical insights and a strategic perspective to both inform and help achieve our client’s goals, including how best to play and where to pivot to optimize performance. In doing so, we also make consumers’ lives easier. Our people-powered culture and data-driven insights create collective intelligence that differentiate our execution. In fact, through my many meetings with clients, I have been repeatedly reminded of the clear value of our work. They’re up against the evolving consumer behavior, supply chain challenges and labor constraints, all while CPGs are accelerating innovation at a pace closer to pre-COVID levels. As a result, Advantage’s offerings are needed now more than ever. During the first quarter, we successfully continued to increase pricing in cases where we believe the value of our services were not yet fully realized as well as areas where incremental labor cost inflation necessitated a change.

While we are beginning to see the benefit from price increases, it’s important to remember that those initiatives take time. The contract-based nature of our work often results in a lag to implement price increases on the sales side of our business as compared to the CPG or retail industries where price increases can be implemented and realized more quickly. We’ll see these changes as the year progresses and fully anticipate better revenue management reflected in margin improvements. We’ve also been very active and successful in winning new business, while increasing the scope of existing business, demonstrating the value we provide to our clients and customers. Overall, we delivered a strong first quarter result with Advantage generating $1 billion in revenue, an increase of 10.6% year-over-year and adjusted EBITDA of $92 million.

I am confident in our capabilities and our potential. Together with the deep expertise of our newly formed executive leadership team, we are taking decisive action to leverage our strengths to drive operational excellence and position Advantage for long-term profitable growth. We’re seeing some early progress. It takes a favorable cash flow yield and a strong balance sheet to create the capacity to invest in growth. In Q1, Advantage generated approximately $70 million of adjusted unlevered free cash flow, representing a significant increase versus the prior year, driven by solid performance in working capital year-over-year. With all roads leading back to our people, we experienced notable growth in our recruitment and retention efforts. We had approximately 900 net new hires in the quarter, which has helped fuel growth in our sales segment and supported continued improvements in our sampling and demonstration business.

Event counts have now reached approximately 77% of comparable 2019 levels, up from 72% last quarter. We reduced turnover by approximately 25% year-over-year across our enterprise. We’ll continue to refine our talent practices to strengthen retention in the future. And thanks to our top talent, we were once again recognized by Ad Age as the #1 experiential marketing agency and top promotion agency for the 10th consecutive year. Our executive leadership team is identifying operational enhancements, new ways of collaborating and exploring white space where Advantage has the right to win. We are confident that aligning our core competencies while enhancing capabilities will deliver more value to our stakeholders. Financial strength is critical, and we intend to build capacity to invest in innovation and improve our balance sheet.

We will do this by enhancing our cash generation, enabling us to reduce our debt while investing in core areas of our company. With financial strength, we can make more strategic investments in the right technology, modernize our systems, and improve our reporting. Our sales and marketing platforms generate massive amounts of data, given our unique positioning within the consumer retail ecosystem. Under the leadership of our new Chief Digital Officer, we are working to improve our tech infrastructure, simplify our processes and calibrate our analytics to assess this data more efficiently. In doing so, we’ll be able to work smarter, faster and expand our strategic service offerings. We will make it easier for associates to do their jobs and for clients to do business with us.

None of this is possible without our people. Led by our new Chief of HR, we are implementing a competitive and holistic talent strategy to deliver an exceptional associate experience that drives retention, fuels growth and positions us as an inclusive employer of choice. We’re also continuing to build on our strong track record of providing differentiated services to retailers. We continue to grow this part of our business while working to create new service offerings and enhance our penetration with existing retailers to help them grow their businesses more effectively. With that, I’ll turn it over to our new Chief Financial Officer, Chris Growe, for more on our financial performance and outlook. Chris, it’s great to have you on the team and welcome to your first of many Advantage earnings calls.

Christopher Growe: Thank you, Dave. I’m excited to be here on the other side of these calls as CFO of Advantage. I look forward to working with you, Dave and the rest of the team in establishing a consistent and enduring level of growth for the company. I believe there’s a tremendous amount of value to unlock for all stakeholders. And although it is early days, my conviction in this business is high and has only grown in my short time here. I am joining Advantage after over 25 years in sell-side research, most recently at Stifel, and I believe that experience and familiarity with the consumer and retail sector will serve me well in this position and at Advantage more holistically. I have the great benefit of working with the entire finance team who are aiding me in my assimilation into the organization and getting me positioned quickly to succeed in this role.

Now let’s get into the performance for the quarter. On a consolidated basis, first quarter revenues grew 10.6% year-over-year to total $1 billion. Excluding unfavorable foreign exchange rates, revenue increased by 12.1%. First quarter adjusted EBITDA declined 4.8% year-over-year to $92 million. Sales segment revenues of $613 million increased 3.6% year-over-year. Sales segment adjusted EBITDA of $66 million declined 3.5% year-over-year. Top line growth is driven by growth in retail merchandising services in our European joint venture, along with success in our pricing initiatives. The decline in adjusted EBITDA in the sales segment is largely a result of the continued inflationary pressures and mix shift toward lower margin business services as we discussed on prior earnings calls.

Market segment revenues of $399 million were up 23.5% year-over-year. This growth was driven primarily by the continued return of our in-store sampling and demonstration services to higher event counts as well as pricing realization in this business, partially offset by softness in digital services. Marketing segment adjusted EBITDA of $26 million was down 8% year-over-year, driven largely by the flow-through of headwinds in our higher-margin digital services, partially offset by the aforementioned return of sampling and demonstration events. In the aggregate, the adjusted EBITDA margin came in at 9.1%, down 150 basis points year-over-year, reflecting a decline of 80 basis points in the sales segment and 220 basis points in the marketing segment.

Let’s move on to discuss some balance sheet items. Our net debt to adjusted EBITDA finished the first quarter at approximately 4.5x. It remains our goal to delever our balance sheet and reduce our leverage ratio over time, and we continue to explore various initiatives, which adhere to that goal. For the first quarter, we achieved adjusted unlevered free cash flow conversion of approximately 75% of adjusted EBITDA, reflecting significant improvement from the same period a year ago as a result of working capital improvements. In line with the prior quarter, our debt profile remains healthy, and we have no meaningful maturities in the next 4 years. At the end of the first quarter, our total funded debt outstanding continued to be approximately $2 billion.

We’ve also taken tangible steps to mitigate future risk and promote a healthy balance sheet. We voluntarily paid down a small amount of floating rate debt at an attractive discount, and we’ll continue to monitor opportunities to deploy capital that deleverages the balance sheet while generating a favorable rate of return. In April, we also initiated a favorable collar on $300 million of our term loan, resulting in 84% of our debt being hedged or at a fixed interest rate and allowing us to capture most of the downside interest rates should it occur. Additionally, we completed a small divestiture subsequent to quarter end that generated cash to further strengthen our balance sheet. A summary of our debt and equity capitalization can be found on Slide 5 in the supplementary slides for the first quarter results posted on the Investors section of our website.

Turning to our outlook. For the full year 2023, we are reconfirming adjusted EBITDA in the range of $400 million to $420 million, inclusive of the impact from the completed divestiture. Looking ahead, we will continue to pursue pricing initiatives to offset wage and ancillary spend increases to preserve margin. While wage inflation has begun to moderate, as they noted, the rate remains elevated relative to historical levels. As labor costs increased, we remain diligent with regard to revenue management and our cost structure. Thank you for your time, and I’ll turn it now back over to Dave.

David Peacock: Thanks, Chris. We are just getting started and have a lot of work to do. We do not believe that one quarter define success, but we’re pleased with our start. I am confident in the leaders in our company, both new and legacy, who are uncovering and capitalizing on the opportunity every day both for our own operations and for our clients and customers. We have tens of thousands of associates who are a powerful force for consumer and retail businesses and the passion and commitment that I’ve seen in market visits gives me incredible optimism and confidence in our future. We will now take your questions. Operator?

Operator: [Operator Instructions]. The first question is from Faiza Alwy of Deutsche Bank.

Operator: The next question is from Greg Parrish from Morgan Stanley.

Operator: The next question is from Jason English of Goldman Sachs.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Dave Peacock for closing remarks.

David Peacock: Thank you. No, I can’t reiterate enough that we’re very pleased with the quarter. We don’t obviously declare victory after 1 quarter. We’ve got a lot of work to do. The team is very committed. We’re uncovering opportunities every day to both improve the services we provide to our clients and customers and enhancing the employee experience within our orientation. We have to remember that the associate experience is critical to our success because we’re a people-based business, a people-powered business, and we remain focused on that. We thank you for your time, and we look forward to speaking to you again.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.