Release Date: May 12, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Advantage Solutions Inc (ADV, Financial) has a robust new business pipeline despite macroeconomic challenges.
- The company is making significant progress in modernizing its tech infrastructure, which is expected to yield operational savings.
- Investments in talent acquisition processes are beginning to show benefits, with improved staffing and execution rates anticipated in Q2.
- Demand for experiential services remains strong, with growth in events per day and execution rates improving.
- The company is implementing cost reduction programs and expects lower restructuring costs throughout the year.
Negative Points
- First quarter revenues and adjusted EBITDA were down 5% and 18% year-over-year, respectively.
- The company faced challenges from a more difficult labor market, impacting staffing for events and projects.
- Consumer confidence waned, leading to lower-than-expected consumer purchases and reduced order volumes in many CPG categories.
- Retailer inventory destocking and reductions in discretionary marketing budgets negatively impacted branded services.
- The company lowered its revenue and adjusted EBITDA outlook to flat to down low single digits due to a softer growth environment.
Q & A Highlights
Q: Can you provide an update on the macroeconomic environment and any notable changes in the second quarter compared to Q1?
A: David Peacock, CEO: We anticipated some labor challenges in Q1, which we addressed with a task force. Improvements are already visible in Q2, with better hiring rates and smoother operations across regions. The businesses most affected by labor issues have more seasonality in Q2 and Q3, allowing us to recover ground.
Q: Have there been any significant increases in labor costs that have helped improve staffing levels?
A: David Peacock, CEO: We are not seeing significant changes in labor costs from Q1 to Q2. Inflation is in line with the macro market, driven by regulatory minimum wage laws in certain states. The issue was more about our talent acquisition strategy, which we have since improved.
Q: How are you addressing the impact of macroeconomic factors, such as tariffs and consumer sentiment, on your business?
A: David Peacock, CEO: Consumer sentiment is low, affecting shopping behavior and leading to reduced orders. Retailers are destocking, impacting our commission-based business. We see opportunities in private label and supply chain services, and we are helping clients navigate uncertainties with our services.
Q: Can you elaborate on the quarterly phasing of EBITDA growth and the impact of new business?
A: Christopher Growe, CFO: We expect stronger EBITDA growth in the second half due to lower shared service costs and cost reduction programs. The first half is more impacted by shared service cost increases, particularly in IT, but these will decrease in the second half, allowing for stronger growth.
Q: How are you managing potential execution issues during your tech transformation?
A: David Peacock, CEO: We have a well-organized team and external resources for our ERP implementation. While there are short-term cash flow impacts due to billing cycles, the new systems will improve efficiency and data visibility. We are decommissioning older systems, which will offset costs and streamline operations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
