管理層發言
Welcome to Advantage Solutions Second Quarter Earnings Conference Call. Dave Peacock, Chief Executive Officer; and Chris Growe, Chief Financial Officer, 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-K 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 reimbursable expenses. And now I would like to turn the call over to Dave Peacock.
Thanks, operator. Good morning, and thank you for joining us. First, I want to acknowledge our teammates. We have over 60,000 people who spend the majority of their days in service of our clients and customers, from our retail merchandising reps moving between stores to ensure our clients' products are on shelf, to samplers delighting our retail partners' customers with a pleasant experience and great products, to our key account managers calling on retailers in an effort to add a little more push behind the great brands that we represent. These and thousands of others work in pursuit of exceeding client expectations, and I appreciate the energy and effort they bring each day. Second quarter net revenues of $757 million were up 3% year-over-year and 4% excluding the effect of divestitures, while adjusted EBITDA of $76 million declined 12% and declined 9%, excluding divestitures, reflecting several one-time factors and mixed performance across our segments. Experiential Services delivered another very strong quarter and both demand signals and execution continue to improve across this business, giving us confidence in second half growth. Retailer Services revenues increased 3% year-over-year, but adjusted EBITDA was down approximately 25% year-over-year, reflecting project timing and costs associated with early-stage project work that we do not anticipate repeating. We expect growth in the second half of the year. In Branded Services, revenue declined 13% year-over-year and was down 11%, excluding divestitures, as the recovery is taking longer than expected, and we are impacted by the same persistent challenges as our CPG clients. Cash generation remains solid with $19 million in adjusted unlevered free cash flow despite an incremental working capital impact from our SAP final phase implementation. We ended the quarter with $102 million in cash. Turning to our growth initiatives. Clients continue to prioritize programs that can demonstrate clear ROI, support trial and discovery and convert demand into purchases. That trend aligns directly with the capabilities we have built across Advantage. Experiential Services is the clearest proof point. Demand for product demonstrations continues to exceed our expectations, with meaningful opportunities to expand event volume across existing customers and support growth with new customers. We are adding capacity where demand signals are strongest, and remain confident in our ability to recruit and staff as needed. We have seen strong growth across the spectrum of customers we serve, both in the U.S. and internationally, with even higher daily event volumes in our international regions. We believe this provides a useful blueprint for what can be achieved in the U.S. as programs mature and as we continue to improve labor readiness and execution. In our CPG-facing work, Branded Services merchandising projects were a relative bright spot. We are focused on scalable, high-return opportunities that can become durable long-term relationships as we deploy a highly trained and experienced team against what we see as recurring issues in out-of-stocks at retail. In addition, our Pulse selling system is improving visibility into on-shelf availability, item velocity and distribution gaps, allowing our teams to target resources more precisely and helping clients connect spending to measurable returns. Finally, we continue to develop our alert-based execution model, allowing Advantage to see out-of-stocks, distribution voids and missing displays in almost real time. Turning to our productivity initiatives. Our productivity agenda spans labor planning, process standardization, technology and operating visibility. Together, these initiatives are designed to manage costs prudently, improve execution quality and create capacity to support growth. Our centralized labor model continues to enhance labor planning and execution, which is critical as Experiential Services demand and Retailer Services project activity increase. Experiential execution rates of approximately 95% in the quarter demonstrate the efficacy of this model. We are also in the final stages of our enterprise technology transformation, and these new systems will help us support improved data integrity, process discipline and operating visibility. We plan to complete the heavy lifting of this transformation this year. And in 2027, we expect to fully leverage these platforms and realize the benefits of the investments we've made to drive better decision-making and efficiency. While many companies are grappling with the existential risks from AI, we are focused on the opportunities to enhance our physical network that was built over decades. We continue to prioritize integrating AI across Advantage in pursuit of better service levels, a better teammate experience and greater efficiency. We have established a governance structure, including a newly created Chief AI Officer role that is tightly aligned with our tech and data teams. We are prioritizing training and fluency across our organization and the deployment of the right tools to our teammates. We remain focused on empowering our people to opportunistically employ a wide variety of AI tools that best fit their respective use cases, and to find efficiencies in everything they do. We are making sure our teams are educated on the potential of these AI models, how to use them effectively and encouraging them to find opportunities for efficiency, speed or enhanced service quality. Our priorities range from personal productivity to enterprise-wide initiatives that deliver faster insight and more precise resource deployment. We have several pilots we have developed across our workforce operations that we expect to increase efficiency, including a new event manager compliance tool, photo verification tool, cartless automation and a supervisor intelligence dashboard. We continue to develop new AI-led opportunities to bring both efficiency and operational excellence to our business. Turning to the macro environment. The core consumer themes and K-shaped economy we discussed last quarter have persisted. Lower and middle-income households remain highly focused on value, with purchases increasingly planned around promotions and price points. Higher-income consumers continue to shift portions of their baskets toward healthier and better-for-you options, but they are also becoming more deliberate about the value they receive. Emerging brands continue to also gain share of the industry in many categories as consumers seek variety and gravitate to product discovery. Value-seeking behavior is broadening across income groups. We are also seeing greater price competition among large retailers seeking market share gains and traffic. These trends reinforce the need for highly measurable, cost-effective programs that can drive trial, discovery and conversion. Advantage is well positioned to help clients navigate this volatile operating environment by supporting their growth plans and helping them gain market share in as efficient a manner as possible. We have adapted our business accordingly by emphasizing execution quality, disciplined staffing and measurable ROI. As a scaled outsourced labor provider, we are well positioned to support clients seeking flexible capacity and greater efficiency. We continue to monitor energy prices, tariffs and geopolitical developments, which are affecting consumer behavior. Our outlook does not incorporate a major change in underlying consumer health. Now turning to our segment results. Experiential Services delivered another very strong quarter. Event volumes increased 18%, with strong incremental margins supported by healthy demand across existing customer relationships and new vendor activity. With revenue growing at a healthy rate, improving profitability remains a priority even as we invest in infrastructure to support higher long-term demand. We are focused on labor efficiencies, stronger training and safety protocols, consistent execution and a shift toward higher return demos. We expect continued momentum in the second half of the year. In Branded Services, the recovery is taking longer given constrained CPG spending, procurement-driven dynamics, client in-sourcing and select client losses. Our focus is on stabilizing the revenue base while protecting profitability. That means strengthening client retention and executive engagement, improving pipeline conversion, hiring and retaining the right talent and demonstrating measurable ROI through our data, analytics and execution capabilities. CPG merchandising projects performed well this quarter, and we are hopeful this is a leading indicator for the rest of the business. While we are not assuming a near-term inflection, we do expect modest improvement in the second half of 2026. Retailer Services had a softer quarter, primarily due to project timing, a difficult comparison with an unusually strong prior year period and higher execution costs on merchandising projects. We view these as factors as temporary and largely specific to the second quarter. We expect performance to improve sequentially through the second half as larger projects ramp up. The pipeline remains encouraging, and we expect project-related earnings volatility to moderate in the second half. Our priorities in Retailer Services are clear: align staffing with demand, improve execution discipline and operating consistency and better match costs with associated revenue streams. Cash generation remains a structural strength of our business and a core priority. We saw unlevered free cash flow of $19 million or 25% of adjusted EBITDA in the quarter. For the first half, unlevered free cash flow was 79% of adjusted EBITDA. We have seen some expected pressure on cash flow from working capital, which we believe will improve in the second half as we have moved past our final SAP implementation phase. Our capital allocation priorities remain unchanged. We intend to direct free cash flow primarily toward debt reduction, while maintaining the liquidity and strategic flexibility required to operate the business. Turning to our outlook. We are taking a balanced view of the remainder of the year. That view reflects three dynamics: continued strength in Experiential Services, improving Retailer Services performance with a more normalized earnings cadence in the second half and a more gradual recovery timeline in Branded Services. We are reiterating our full year 2026 revenue and adjusted EBITDA guidance ranges, reflecting the successful execution of our growth initiatives and in consideration of the investments we are making into our business and our teammates. We are also reiterating full year guidance of adjusted unlevered free cash flow of $250 million to $275 million and net free cash flow conversion of 25%, excluding debt refinancing costs. We are encouraged by the strength of our Experiential Services demand and the progress across our growth agenda. At the same time, we are clear-eyed about the work required to stabilize Branded Services and reduce margin pressure driven by business mix. We remain focused on delivering for clients, generating cash and building a more durable and profitable Advantage. I'll now turn it over to Chris for more detail on our financial performance.
Thank you, Dave, and welcome to everyone joining us today. I will review our second quarter performance by segment, discuss our cash flow and capital structure and provide additional detail on our outlook. I will outline our business results on a reported basis and also on an adjusted basis for divestitures, which weighed on our year-over-year performance. In the second quarter, businesses we have divested represented a year-over-year headwind of approximately $5 million to revenues and approximately $3 million to adjusted EBITDA. And for 2026, we still expect divestitures to represent a year-over-year headwind of approximately $20 million to revenues and over $10 million to adjusted EBITDA. So turning to our divisional performance and starting with Branded Services. In the second quarter, we generated $224 million of revenues and $22 million of adjusted EBITDA, down 13% and 36% year-over-year, respectively. Excluding divestitures, revenues were down 11% and adjusted EBITDA was down 30%. The segment continues to face pressure from ongoing client in-sourcing, softer CPG spending and client losses. However, we saw encouraging activity in CPG merchandising projects, which contributed positively to results in the quarter. Our focus remains on stabilizing the revenue base, improving pipeline conversion, client retention and maintaining disciplined cost management. We continue to expect gradual improvement through the balance of the year. Turning to Experiential Services. We generated $296 million of revenues and $34 million of adjusted EBITDA, up 19% and 32% year-over-year, respectively. Results were driven by accelerating demand for product demonstrations, higher event volumes and strong operational execution. Demand remained healthy across both existing and new customers, and we continue to see opportunities to further increase event volumes in the second half of the year. We are confident in our ability to recruit and staff to meet this increased demand. Finally, in Retailer Services, we generated $237 million of revenues and $20 million of adjusted EBITDA, up 3% and down approximately 25% year-over-year, respectively. Performance was impacted by project timing, a difficult comparison with unusually high project activity in the prior year and higher costs related to execution issues on a new project in the quarter. We view these as unique and temporary factors and expect sequential improvement in the second half versus the first half performance. We also have a stronger project pipeline in the second half and expect project-related earnings volatility to moderate as these programs ramp. Offsetting some of these headwinds, our private label business delivered a solid quarter as the industry backdrop became more favorable and the channel mix drag eased again modestly. Our focus remains on execution, staffing alignment and operational discipline to better align costs with project activity and drive more consistent earnings growth. From a cost perspective, during the quarter, we saw more favorable health insurance cost trends, which have been a meaningful pressure point over the last year. Moving to the balance sheet and liquidity. We ended the quarter with $102 million in cash, reflecting our continued focus on disciplined capital management and strong cash generation. Our net debt level stood at approximately 4.5x trailing EBITDA. Turning to cash flow and working capital. Cash generation remains a core strength of the business, and we view it, along with working capital discipline, as important long-term shareholder value creation drivers. Our days sales outstanding, or DSO, remained elevated during the second quarter, primarily due to the impact of our final SAP implementation and customer payment timing, both of which we continue to view as temporary. We expect DSOs to improve steadily through the remainder of the year, including in the third quarter, supporting strong full year cash flow generation. Adjusted unlevered free cash flow was $19 million in the second quarter, with a conversion rate of 25%. The performance this quarter was negatively affected by an increase in DSO, as expected. We expect strong working capital improvement in the second half, which will contribute to free cash flow generation and support our cash flow outlook. Moving on to capital allocation. This year, we have focused on debt reduction, particularly during the first quarter around our refinancing. In the second quarter, we repurchased approximately $15 million of our shares. These repurchases were primarily intended to help offset dilution from stock grants and exercises. As we look ahead, free cash flow will primarily be directed toward debt reduction. Finally, turning to our outlook. We are encouraged by our second quarter performance and continue to maintain a balanced outlook for the remainder of the year. We are reiterating our full year 2026 revenues and adjusted EBITDA guidance ranges given a solid first half of the year. However, we've updated our guidance for interest expense and capital expenditures, which are now slightly lower than previously forecasted. Our free cash flow outlook remains unchanged. From a business perspective, we continue to see strength in Experiential Services, sequential improvement in growth in Retailer Services and a more gradual recovery in Branded Services on its path towards stabilization. Key factors influencing our outlook include Experiential Services demand and execution, Retailer Services project timing and second half project ramps and the pace of recovery in Branded Services. Overall, we've taken a prudent view of the second half of the year. Regarding quarterly cadence, given a stronger first half performance, our guidance implies that second half adjusted EBITDA will represent approximately 53% of the full year total. We expect fourth quarter adjusted EBITDA to be higher than third quarter adjusted EBITDA. Our focus remains on improving execution, raising profitability and delivering consistent cash generation. Thank you for your time. I'll now turn it back over to Dave.
Thanks, Chris. We remain encouraged by the momentum in the Experiential Services and the expected improvement in Retailer Services as larger projects are ramping up. At the same time, we continue to focus on stabilizing Branded Services while protecting profitability. We are also advancing our productivity initiatives across labor planning, process standardization, technology and operating visibility while integrating AI to support stronger service levels, a better teammate experience and greater efficiency. Together with our focus on disciplined capital allocation and strong cash generation, we believe these efforts position Advantage to build a more durable and profitable business over the long term. I want to thank everybody for joining us today, and we look forward to speaking with you again next quarter. Operator, we're now ready for questions.
分析師問答
The operator provided instructions. Your first question comes from the line of Gregory Parrish with Morgan Stanley.
Maybe just on Branded, I know you called out maybe a more gradual recovery in second half. But thinking ahead to 2027 and beyond, in your view, what's the catalyst that really gets this business stabilized?
I think if you think about it, Greg, we're coming off a few larger client losses, and there's various reasons for those. But as we move into '27 — and let's talk about Branded Services first — we're seeing parts of that business demonstrate growth, which is giving us some optimism. And then you're lapping, like I said, if you go back three years, we had some resignations we talked about and then a couple of key client losses, which has actually put us in a position to have a more balanced, more fragmented client base. If I look at our top 25, 30 clients, year-over-year, they're growing. All these things are signs to us that things are moving towards stabilization. It's just in a long lead, contracted business. You have to get through these quarterly cycles until you can realize that shift or that pivot. And then you just heard our results in Retailer, which really are driven primarily by a tough comp. We had a pretty large, one-time project in the second quarter of last year that did not repeat this year, but the underlying business remains strong. We're never going to turn away significant project work when it comes, and we get it from time to time. But that business has been a consistent, slower grower than Experiential, but a consistent growing business for us. We see opportunity with new lines of service that we can bring to our retail partners that give us optimism. And then Experiential, the demand signals continue to be very strong, both from large clients and from new business acquisition that we've been working on and realized as recently as the second quarter. So all of those things give us optimism as we look at '27.
Great. That's helpful. And then maybe just on the other side of the coin, just Experiential. Obviously, a lot of strength, three quarters in a row here, 20% growth. I feel like we sort of talked about this a lot, but there's new demand, you had some new clients come on board, better labor availability. I'm not sure if I missed anything there. But maybe zooming out, thinking about next year and beyond, how durable is this outsized strength that you've been seeing in Experiential?
I think it's very durable. The demand signals are very strong from our clients, and from a macro standpoint, the growth of emerging brands in the industry and the growth of innovation and new products is not slowing down. That stimulates the need for sampling and trial. I think retailers, justifiably so, are realizing that sampling, experiential, in-store demos and retail payment are important for the customer as they come into the store. They compete on that level and that supports the business. I want to give our team a shout out because they've done a really good job on the execution front. When we deploy AI, we only do so when there are tangible benefits and where we see AI as an enabler to the business. Experiential is a good example, where we're really speeding up our time between application and when people are actually working at a cart. We're compressing that. So we're getting people through the funnel much quicker. Photo verification, which is important in this business, we've found ways to really streamline that process. I listed a few items in the prepared remarks. Those are just a few of the things we're doing where AI is bringing real advantage. When you put it all together, it's driving better execution rates and efficiency.
Greg, I would just add to that that we talked about this really at the start of the year and after last quarter as well, just the investments we're making in that business to sustain the growth. So you're seeing that here in Q2, and you'll see it in the second half of the year. I'm really proud of the team for putting up nearly 20% revenue growth with that degree of incremental margin improvement. We're preparing and getting the business in a place where we can continue to sustain this rate of growth in a high-quality way. As you saw this quarter, we hit that 95% execution. So it puts us in a great place to grow in the second half of the year and into 2027.
Yes. Okay. Great. Congrats on the quarter. I'll pass it on.
Your next question comes from the line of Lucas Morison with Canaccord.
So I think you called out CPG merchandising projects as a relative bright spot, possibly a leading indicator for the rest of Branded. Can you just help me understand sort of the underlying mix there? Is client spend rotating within that segment? Are you seeing mix shift? Help me understand what's happening with that comment.
If you think about that business, two of the big drivers within Branded Services are headquarter selling, where we represent a client at headquarters, and retail merchandising, where we are sending folks in to execute in-store. You're seeing persistent challenges with in-stock in many categories across the store, and there are a lot of reasons for that. You're not going to sell products if they are not on the shelf, and our clients understand that. So you're seeing an increase in project work to either get more display space on the floor or remediate out-of-stocks. If you look back maybe a year ago, projects were roughly 15% of our total work in this space in the first half. Now they're close to a little under 25%. We saw a lift in project work of a little over 20% year-over-year, which reflects an unplanned need and opportunity to address displays and out-of-stocks. As we look forward and talk with clients, we see an opportunity to lean into this business. It's a syndicated business: we have some direct teams, but we can realize decent margins when utilizing an existing force out there against multiple clients to solve problems. We've also invested in becoming more alert-based and bringing more efficacy to the work. These teams were typically allocated by time, going into stores on a set cadence. We're starting to pilot and realize great results in making it more alert-based, where we get a scan or a read from a store and we go directly to address the issue—drawn-down displays, out-of-stocks, or missing items. That allows us to deploy resources more efficiently. It's a strong labor force of roughly 5,000 people, with average tenure with the organization over nine years, many dedicated teammates who both sell and remediate problems for our clients in stores.
Yes. Yes. Okay. Super helpful. And maybe just a follow-up. You've said reducing mix-driven margin pressure is obviously a priority here. As I look at Experiential, it's both your fastest grower and your lowest margin segment. Help me think through what closes that gap? Is it labor efficiency? Is it event mix? Is it pricing? Is there something else?
Yes. Luke, it's Chris. To address that in a couple of ways: when you have mix shifts this year with Branded Services down and Experiential up, you'll see pressure on the overall margin profile of the company. We also deliberately reinvested in the business this year, so you're seeing a bit less incremental margin in Experiential this quarter, but the investments are intentional to sustain growth. Looking ahead, we see a path toward stabilization for Branded Services, which should slow the margin pressure from mix. You're seeing strong growth in Experiential and expect Retailer Services to improve in the second half of the year. That will help equalize margins across the businesses as one grows and another declines, combined with the benefit of Branded Services stabilizing. We expect margin stability and hopefully margin growth next year as these dynamics play out and our investments drive durable improvement.
There are no further questions at this time. I will now turn the call back to Dave for closing remarks.
We want to thank everybody for joining, and we look forward to connecting with this group next quarter.
This concludes today's call. Thank you for attending. You may now disconnect.