Advantage Solutions Inc. (ADV)·Q1 2024 Earnings Summary

Executive Summary

• Q1 2024 was broadly “in line with plan”: consolidated revenues including discontinued operations were $906M (-10% YoY), revenues excluding divestitures/FX/pass‑through were up ~1%, and Adjusted EBITDA was $79M (10.2% margin on revenues net of pass‑through), with management reaffirming full‑year 2024 guidance for low single‑digit growth in revenues and Adjusted EBITDA .
• Segment mix was decisive: Experiential Services outperformed on higher event volumes (+13% daily demo activity; ~88% of 2019 levels), Retailer Services held up despite an Easter timing headwind, while Branded Services faced soft client orders, cost absorption from client exits, and higher transformation investments .
• Balance sheet and capital allocation were active: $51M of senior secured notes repurchased, net leverage ~4.2x, ~5M shares repurchased YTD including ~2M in April; capex of $16.2M supported IT modernization; adjusted unlevered FCF was $39.1M (~50% of Adjusted EBITDA) .
• Near‑term narrative/catalysts: continued Experiential volume recovery, pricing actions to offset persistent wage inflation, and portfolio simplification (e.g., Adlucent sale). Full‑year EBITDA expected to be weighted to 2H as investments ramp in 1H and pricing/volume tailwinds build .

What Went Well and What Went Wrong

What Went Well

• Experiential Services volume and margin: event activity reached ~88% of 2019, daily demo activity +13% YoY, driving +150% YoY Adjusted EBITDA and ~20% YoY revenue growth ex pass‑through .
• Retailer Services resilience: managed costs and achieved price realization despite an Easter timing headwind; cash flow improved on working capital discipline .
• Balance sheet progress: repriced $1.1B term loan (SOFR+425 bps vs +450 bps), expected to save ~$3M annual interest; $51M notes repurchased; net leverage ~4.2x; share repurchases to offset dilution .

Management quotes:

• “We remain on track to achieve our financial objectives in 2024.” — CEO Dave Peacock .
• “Adjusted EBITDA was $79 million…a 10.2% margin on revenues less pass-through costs…our performance improved in March and early results in April were favorable.” — CFO Chris Growe .

What Went Wrong

• Branded Services pressure: ~3% revenue decline ex pass‑through/FX/divestitures; higher‑than‑planned costs to implement strategic initiatives; cost absorption from timing of client exits; soft market conditions and shipment timing impacted orders .
• Persistent wage inflation: low‑to‑mid single‑digit labor inflation ran higher than expected in Q1, with price realization not fully covering in January–February .
• SG&A up on investments: technology and support services spend increased SG&A; inflationary costs and incentive comp pressured operating income (partially masked by divestiture gains) .

Financial Results

Consolidated performance vs. prior quarters

Notes: Q1 2024 GAAP revenues from continuing ops were $879.0M; discontinued ops added $27.0M . Q1 diluted EPS combined continuing and discontinued operations .

Segment breakdown (new segments; YoY)

Pass‑through costs in Q1 2024: Branded ~$50M; Experiential ~$85M; total pass‑through ~$135M (vs ~$41M and ~$69M; total ~$110M in Q1 2023) .

KPIs

Actuals vs Wall Street consensus (S&P Global)

Note: S&P Global consensus estimates were unavailable at the time of analysis (API request limit). No comparison can be made to Street expectations.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We unveiled our new reporting segment…Branded Services, Experiential Services and Retailer Services…providing a clearer picture of our business and drivers of performance.” — CEO Dave Peacock .
• “Adjusted EBITDA was $79 million…10.2% margin on revenues less pass‑through…performance improved in March; early April favorable.” — CFO Chris Growe .
• “There were regulatory changes that supported increased wages…inflation persistent…we’re managing pricing, mix, and costs to offset across the year.” — CFO Chris Growe .
• “We are investing in establishing our own AI Core Competency Center…contract management, routing merchandisers, HR workflow, and analysis of large datasets…image recognition for real‑time inventory tracking.” — CEO Dave Peacock .
• “Sale of Adlucent represents another step towards our vision as well as reducing debt to optimize our capital structure.” — CEO Dave Peacock .

Q&A Highlights

• Macro and private label: management sees unit growth focus and retailer convergence on promotions/private brands; softness early in Q1 improved through March/April .
• Experiential outlook: no segment guidance provided, but sequential growth expected as volumes recover; Q1 at ~88% of 2019 .
• Cost absorption/client exits: cost timing from two client exits increased absorption in Q1; workforce adjusted early Q2 to reflect exits .
• Wage inflation and pricing: inflation persistent in low‑to‑mid single digits; pricing initiatives in place but did not fully cover early‑quarter inflation; expected to level out .
• Portfolio simplification: further refinement expected beyond clearly non‑core assets; proceeds earmarked for debt reduction .

Estimates Context

• Street consensus (S&P Global) for Q1 2024 revenue and EPS was unavailable due to access limits at the time of analysis; management characterized results as “in line with expectations” and reaffirmed FY guidance .
• Given the 2H weighting and Experiential strength, mix may skew to volume‑driven margin recovery; however, with persistent wage inflation and ongoing transformation spend, estimate revisions will likely balance improved activity with cost timing. S&P Global consensus data was unavailable for quantitative comparison.

Key Takeaways for Investors

• Experiential strength is the near‑term engine: event normalization and efficiency drove outsized EBITDA growth; watch event counts and daily activity as KPIs heading into Q2/Q3 .
• Pricing vs inflation: management continues to claw back inflation through pricing and mix; early‑quarter under‑recovery suggests near‑term margin pressure until wraparound benefits materialize .
• Transformation spend front‑loads 1H; execution needs to deliver in 2H: capex $90–$110M in 2024 and shared‑services/ERP rollouts imply timing asymmetry for EBITDA delivery .
• Capital allocation discipline supports equity story: repricing and buybacks create incremental value while deleveraging toward <3.5x; ~89% debt hedged/fixed limits rate volatility .
• Segment mix shift matters: as Experiential recovers and Retailer Services stabilizes, Branded Services must absorb portfolio exits and cost actions; watch commentary on shipment timing and client orders .
• Portfolio simplification is a continuing catalyst (focus on core, debt reduction): Adlucent sale and prior transactions indicate momentum; proceeds prioritize deleveraging .
• Trading lens: near‑term stock reaction hinges on validation of April/May activity improvement and confirmation of 2H EBITDA weighting; any acceleration in event volumes or pricing realization could be positive, while wage inflation or cost absorption surprises could pressure sentiment .

Sources: Q1 2024 8‑K press release and exhibits ; Q1 2024 earnings call transcript ; Q4 2023 8‑K and call ; Q3 2023 8‑K and call .