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AS

Advantage Solutions Inc. (ADV)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 revenue was $0.87B (-9.4% YoY; modestly below Q1), with Adjusted EBITDA of $90M (flat YoY) and margin of 10.3% (12.0% ex pass-through), as Experiential and Retailer strength offset Branded softness and a non-cash ~$100M goodwill impairment tied to the Jun Group divestiture .
  • Management reaffirmed 2024 guidance for low single-digit growth in revenue and Adjusted EBITDA (continuing ops), cut 2024 capex to $65–$80M (from $90–$110M), lowered net interest expense to $155–$165M (from $170–$180M), and reduced total 2024–2026 IT capex to $140–$150M (from $160–$170M) .
  • Strategic simplification is “substantially complete”; Jun Group sale closed (gross proceeds ~$185M; ~$130M cash upfront) and ~2024 divestiture proceeds of ~$280M are earmarked primarily to pay down debt (net leverage ~4.1x; LT target <3.5x) .
  • Near-term stock catalysts: reaffirmed outlook with lowered capex/interest, 2H weighting on seasonality and new business/pricing, and continued debt reduction/share buybacks (~$27M debt and ~$9M shares repurchased in Q2) .

What Went Well and What Went Wrong

  • What Went Well

    • Experiential Services momentum: events per day up ~11% YoY, execution rate >92%, driving revenue and margin improvement via price realization and volume leverage .
    • Cost/discipline: Retailer Services EBITDA up on improved execution and labor deployment despite softer grocery; management lowered 2024 capex and interest expense guidance .
    • Strategic focus: “Substantially completed the divestitures of non-core assets…to simplify our business and pay down debt” and launched an AI competency center; reaffirmed 2024 growth guidance .

  • What Went Wrong

    • Wage inflation: price realization did not fully offset labor cost increases across segments .
    • Branded softness: revenue down due to European JV deconsolidation, planned client exits, and soft brokerage/omni-commerce marketing demand; underlying revenue (ex deconsolidation and pass-through) down ~6% .
    • Non-cash impairment and losses: ~$100M goodwill impairment tied to Jun Group divestiture drove operating loss; net loss from continuing ops was $113M (vs $13M LY) .

Financial Results

MetricQ2 2023Q1 2024Q2 2024
Revenues ($USD Millions)$963.8 $861.4 $873.4
Adjusted EBITDA – Continuing Ops ($USD Millions)$89.9 $70.6 $89.9
Adjusted EBITDA Margin % (headline)——10.3% (12.0% ex pass-through)
Net Loss from Continuing Ops ($USD Millions)$(13.0) $(49.1) $(113.0)
Diluted EPS – Continuing Ops ($)$(0.04) $(0.15) $(0.35)
Adjusted Unlevered Free Cash Flow ($USD Millions)—$39.1 $128.8

Segment revenue and Adjusted EBITDA

SegmentQ2 2023 Revenue ($M)Q1 2024 Revenue ($M)Q2 2024 Revenue ($M)Q2 2023 Adj. EBITDA ($M)Q1 2024 Adj. EBITDA ($M)Q2 2024 Adj. EBITDA ($M)
Branded Services$447.3 $329.1 $322.3 $51.8 $34.3 $42.9
Experiential Services$285.2 $307.4 $319.5 $16.2 $16.7 $22.6
Retailer Services$231.3 $225.0 $231.5 $21.9 $19.6 $24.4

Selected KPIs

KPIQ2 2024Reference
Pass-through costs (quarter)~$123M
Experiential events per day YoY~+11%
Experiential execution rate>92%
Capex (quarter)~$15M
Adjusted U/L FCF ($M) and conversion$128.8M; 131.6%
Net Debt ($M)$1,654.1
Net Debt / LTM Adj. EBITDA4.1x
Debt repurchased (quarter)~$27M
Share repurchased (quarter)~$9M

Notes: Revenues and Adjusted EBITDA shown are continuing operations; margin detail shown as disclosed for Q2 2024 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenues (growth, continuing ops)FY 2024Low single digits Low single digits Maintained
Adjusted EBITDA (growth, continuing ops)FY 2024Low single digits Low single digits Maintained
Net Interest Expense ($M)FY 2024$170–$180 $155–$165 Lowered
Capex ($M)FY 2024$90–$110 $65–$80 Lowered
IT Transformation Capex ($M)2024–2026$160–$170 $140–$150 Lowered
Adj. U/L FCF conversionFY 202455–65% of Adj. EBITDA High end of 55–65% Increased target within range
LT Net Leverage targetLT<3.5x <3.5x Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’23, Q1’24)Current Period (Q2’24)Trend
AI/Technology initiativesERP/data modernization; TCS/Genpact collaborations announced; building IT stack AI competency center launched; AI in contract mgmt/labor routing; continued ERP build; expanded Genpact scope to O2C/supply chain Accelerating execution
Supply chain / O2CEarly 2024 partnership plans with Genpact to streamline admin/BPO Expanded Genpact collaboration targeting deductions leakage and O2C SaaS; productivity focus Positive, execution phase
Macro/wage inflationInflation moderating slowly; price increases offset majority of wage/benefit inflation in 2023 Wage inflation remains a headwind; additional H2 pricing secured Mixed (pressure persists)
Experiential activitySampling recovering; event count ~83% of 2019 in Q4’23; ~88% in Q1’24 Events/day +~11% YoY; execution >92%; expect further H2 increase Improving
Branded ServicesImpacted by divestitures/client exits; market softness Still soft; improved trajectory; cost actions; deconsolidation impact lapped Stabilizing with actions
Capital allocation2023–Q1: significant debt buybacks; initial share repurchases Continued: ~$27M debt and ~$9M shares in Q2; divestiture proceeds to debt reduction Continuing discipline
Regulatory/legal (Take 5)Ongoing small costs/recoveries Minor costs included in non-GAAP add-backs Neutral

Management Commentary

  • “We have largely completed the simplification portion of our transformation… Most of the proceeds will be used to pay down debt as we target a net leverage ratio of 3.5x or less over the long term.” — CEO Dave Peacock .
  • “Average daily demo activity grew ~11% year-over-year… execution rate exceeded 92%… revenue and margin improvement also aided by price realization.” — Management commentary (Experiential) .
  • “We are reducing the total 3-year IT transformation CapEx funding range by $20 million to $140–$150 million… For 2024, we expect CapEx to be $65–$80 million.” — CFO Chris Growe .
  • “We are excited about our progress and pleased to reaffirm our full-year guidance to deliver growth during a year of significant investment.” — CEO Dave Peacock .

Q&A Highlights

  • Sequential EBITDA bridge: Retailer timing (holidays) and cost focus; Experiential pricing/mix and strong volume execution; Branded sequential improvement with ongoing cost actions .
  • 2H setup: Seasonality, new business wins starting to contribute (esp. Experiential), additional pricing in H2; lapping heavier H2’23 investments; rightsizing talent resources (notably in Branded) .
  • Labor productivity/utilization: Track hours and productivity; meeting demand with fewer hours aided by tech and cross-tasking across stores/geographies .
  • Pricing vs inflation: Pricing coming through but still short of wage inflation; offsetting via mix, cost structure, execution (e.g., Retailer Services profit despite flat revenue) .
  • Capital allocation: Share repurchases focused on offsetting incentive dilution; majority of divestiture proceeds prioritized for debt paydown; leverage target unchanged .

Estimates Context

  • S&P Global consensus (EPS/revenue/EBITDA) for Q2 2024 and forward quarters was unavailable at the time of analysis due to data-access limits; therefore, no estimate comparisons are included. Values would typically be sourced from S&P Global/Capital IQ and compared to reported results.

Key Takeaways for Investors

  • Reaffirmed 2024 top-line and EBITDA growth with reduced capex and interest expense guidance, improving FCF quality despite investment year .
  • Experiential momentum (volumes + pricing + execution) and Retailer cost discipline are offsetting Branded softness; 2H should benefit from seasonality, new wins, and additional pricing .
  • Balance sheet trajectory improving: ~$280M 2024 divestiture proceeds (Jun Group closed) support deleveraging toward <3.5x; ~90% of debt fixed/hedged moderates rate risk .
  • Watch wage inflation vs pricing realizations; management is using mix, productivity, and tech to bridge residual gaps .
  • Strategic transformation is mid-journey but simplification largely done; AI/ERP/data investments aim to structurally raise productivity and commercial precision through 2026 .
  • Trading setup: 2H weighting, reaffirmed outlook, and lowered capex/interest are supportive; execution on Branded stabilization and continued Experiential strength are the narrative drivers .