Advantage Solutions Inc. (NASDAQ: ADV) (“Advantage,” “Advantage
Solutions,” the “Company,” “we” or “our”), a leading provider of
outsourced sales and marketing services to consumer goods
manufacturers and retailers, today reported financial results for
its second quarter ended June 30, 2022.
“Advantage continued to see progress in the second quarter. Our
performance was highlighted by a 15.4% year-over-year improvement
in revenues, driven largely by the recovery of our in-store
sampling and demonstration business,” said Advantage Solutions
Chief Executive Officer Jill Griffin. “Throughout the second
quarter, we remained focused on operating the core business,
navigating the challenging macroeconomic environment and
positioning Advantage for the long-term future. We are also
strategically spending on wages, recruiting and retention to stand
up significant numbers of new associates in order to meet client
demand for our ‘must-have’ services.”
“Despite continued wage inflation and volatile consumer demand,
we continue to anticipate that our revenues and Adjusted EBITDA
will be stronger in the back half of the year as compared to the
first half. This growth on our top and bottom lines will be
supported by the ongoing recovery and scale of our in-store
sampling and demonstration business. As a result, we are confident
in reaffirming our full year 2022 Adjusted EBITDA guidance of $490
million to $510 million,” Griffin concluded.
Second Quarter 2022 Highlights
- Revenues were $981.1 million for the second quarter of 2022,
representing an increase of $131.1 million, or 15.4%, from the
second quarter 2021 revenues of $850.0 million.
- Operating income was $28.3 million for the second quarter of
2022, representing a decrease of $14.2 million, or 33.4%, from the
second quarter 2021 operating income of $42.4 million.
- Net income was $3.7 million for the second quarter of 2022,
representing a decrease of $2.1 million, or 36.1%, from the second
quarter 2021 net income of $5.8 million.
- Adjusted EBITDA was $108.3 million for the second quarter of
2022, representing a decrease of $13.6 million, or 11.2%, from the
second quarter 2021 Adjusted EBITDA of $122.0 million.
The year-over-year increase in revenues was driven by $88.6
million of growth in the marketing segment (an increase of 31% year
over year) and $42.5 million of growth in the sales segment (an
increase of 8% year over year). Second quarter growth in the
marketing segment was driven primarily by the continued recovery in
in-store product demonstration and sampling services. Net of
foreign exchange headwinds, the second quarter growth in the sales
segment was driven by acquired revenues, as well as the recovery of
certain international businesses and higher merchandising services
revenues, partially offset by the loss of a foodservice client in
the prior year and a decrease in third-party selling and retailing
services.
The year-over-year decrease in operating income was primarily
due to the ongoing investment activities in talent, wages,
renovation and innovation, coupled with inflationary pressures.
The year-over-year decrease in net income was driven by the
decline in operating income, partially offset by a decrease in
interest expense.
The year-over-year decline in Adjusted EBITDA was primarily due
to the same items impacting the decline in operating income as
noted above.
Balance Sheet Highlights
As of June 30, 2022, the Company’s cash and cash equivalents was
$115.8 million, total debt was $2,131.2 million and Net Debt was
$2,015.4 million. The debt capitalization consists primarily of the
$1,305 million First Lien Term Loan, $775 million of senior secured
notes and a $400 million revolving credit facility, under which
there was a $45 million outstanding balance as of June 30,
2022.
Fiscal Year 2022 Outlook
The Company is reiterating its fiscal year 2022 Adjusted EBITDA
guidance range of $490 million to $510 million. As previously
disclosed, this guidance reflects a decision by the Advantage team
to pursue thoughtful investment — focusing even more of the
Company’s capital on talent amidst a difficult labor market
backdrop, innovating in higher-margin retail data services and
renovating infrastructure.
Conference Call Details
Advantage will host a conference call at 5:00 p.m. ET on August
9, 2022 to discuss its second quarter 2022 financial performance
and business outlook. To participate, please dial (877) 407-4018
within the United States or (201) 689-8471 outside the United
States approximately 10 minutes before the scheduled start of the
call. The conference ID for the call is 13730240. The conference
call will also be accessible live via audio broadcast on the
Investor Relations section of the Advantage website at
ir.advantagesolutions.net.
A replay of the conference call will be available online at
ir.advantagesolutions.net. In addition, an audio replay of the call
will be available for one week following the call and can be
accessed by dialing (844) 512-2921 within the United States or
(412) 317-6671 outside the United States. The replay ID is
13730240.
About Advantage Solutions
Advantage Solutions (NASDAQ: ADV) is a leading provider of
outsourced sales and marketing solutions to consumer goods
companies and retailers. Our data- and technology-driven services —
which include headquarter sales, retail merchandising, in-store and
online sampling, digital commerce, omnichannel marketing, retail
media and others — help brands and retailers of all sizes get
products into the hands of consumers, wherever they shop. As a
trusted partner and problem solver, we help our clients sell more
while spending less. Headquartered in Irvine, California, we
have offices throughout North America and strategic investments in
select markets throughout Africa, Asia, Australia and Europe
through which we serve the global needs of multinational, regional
and local manufacturers. For more information, please visit
advantagesolutions.net.
Forward-Looking Statements
Certain statements in this press release may be considered
forward-looking statements within the meaning of the federal
securities laws, including statements regarding the expected future
performance of Advantage's business and projected financial
results. Forward-looking statements generally relate to future
events or Advantage’s future financial or operating performance.
These forward-looking statements generally are identified by the
words “may”, “should”, “expect”, “intend”, “will”, “would”,
“could”, “estimate”, “anticipate”, “believe”, “predict”,
“potential” or “continue”, or the negatives of these terms or
variations of them or similar terminology. Such forward-looking
statements are predictions, projections and other statements about
future events that are based on current expectations and
assumptions and, as a result, are subject to risks, uncertainties
and other factors which could cause actual results to differ
materially from those expressed or implied by such forward looking
statements.
These forward-looking statements are based upon estimates and
assumptions that, while considered reasonable by Advantage and its
management at the time of such statements, are inherently
uncertain. Factors that may cause actual results to differ
materially from current expectations include, but are not limited
to, the COVID-19 pandemic and the measures taken in response
thereto; the availability, acceptance, administration and
effectiveness of any COVID-19 vaccine; market-driven wage changes
or changes to labor laws or wage or job classification regulations,
including minimum wage; Advantage’s ability to continue to generate
significant operating cash flow; client procurement strategies and
consolidation of Advantage’s clients’ industries creating pressure
on the nature and pricing of its services; consumer goods
manufacturers and retailers reviewing and changing their sales,
retail, marketing and technology programs and relationships;
Advantage’s ability to successfully develop and maintain relevant
omni-channel services for our clients in an evolving industry and
to otherwise adapt to significant technological change; Advantage’s
ability to maintain proper and effective internal control over
financial reporting in the future; potential and actual harms to
Advantage’s business arising from the Take 5 Matter; Advantage’s
substantial indebtedness and our ability to refinance at favorable
rates; and other risks and uncertainties set forth in the section
titled “Risk Factors” in the Annual Report on Form 10-K and
Quarterly Report on Form 10-Q filed by the Company with the
Securities and Exchange Commission (the “SEC”) on March 1, 2022 and
August 9, 2022, respectively, and in its other filings made from
time to time with the SEC. These filings identify and address other
important risks and uncertainties that could cause actual events
and results to differ materially from those contained in the
forward-looking statements. Forward-looking statements speak only
as of the date they are made. Readers are cautioned not to put
undue reliance on forward-looking statements, and Advantage assumes
no obligation and does not intend to update or revise these
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
Non-GAAP Financial Measures and Related
Information
This press release includes certain financial measures not
presented in accordance with generally accepted accounting
principles (“GAAP”), including Adjusted EBITDA and Net Debt. These
are not measures of financial performance calculated in accordance
with GAAP and may exclude items that are significant in
understanding and assessing Advantage’s financial results.
Therefore, the measures are in addition to, and not a substitute
for or superior to, measures of financial performance prepared in
accordance with GAAP, and should not be considered in isolation or
as an alternative to net income, cash flows from operations or
other measures of profitability, liquidity or performance under
GAAP. You should be aware that Advantage’s presentation of these
measures may not be comparable to similarly titled measures used by
other companies. Reconciliations of historical non-GAAP measures to
their most directly comparable GAAP counterparts are included
below.
Advantage believes these non-GAAP measures provide useful
information to management and investors regarding certain financial
and business trends relating to Advantage’s financial condition and
results of operations. Advantage believes that the use of Adjusted
EBITDA and Net Debt provides an additional tool for investors to
use in evaluating ongoing operating results and trends and in
comparing Advantage’s financial measures with other similar
companies, many of which present similar non-GAAP financial
measures to investors. Non-GAAP financial measures are subject to
inherent limitations as they reflect the exercise of judgments by
management about which expense and income are excluded or included
in determining these non-GAAP financial measures. Additionally,
other companies may calculate non-GAAP measures differently, or may
use other measures to calculate their financial performance, and
therefore Advantage’s non-GAAP measures may not be directly
comparable to similarly titled measures of other companies.
Adjusted EBITDA means net income (loss) before (i) interest
expense, net, (ii) provision for (benefit from) income taxes, (iii)
depreciation, (iv) impairment of goodwill and indefinite-lived
assets, (v) amortization of intangible assets, (vi) equity-based
compensation of Karman Topco L.P., (vii) change in fair value of
warrant liability, (viii) stock-based compensation expense, (ix)
fair value adjustments of contingent consideration related to
acquisitions, (x) acquisition-related expenses, (xi) costs
associated with COVID-19, net of benefits received, (xii) EBITDA
for economic interests in investments, (xiii) restructuring
expenses, (xiv) litigation expenses (recovery), (xv) costs
associated with the Take 5 Matter and (xvi) other adjustments that
management believes are helpful in evaluating our operating
performance.
Net Debt represents the sum of current portion of long-term debt
and long-term debt, less cash and cash equivalents and debt
issuance costs. With respect to Net Debt, cash and cash equivalents
are subtracted from the GAAP measure, total debt, because they
could be used to reduce the debt obligations.
Due to rounding, numbers presented throughout this document may
not add up precisely to the totals provided and percentages may not
precisely reflect the absolute figures.
This press release also includes certain estimates and
projections of Adjusted EBITDA, including with respect to expected
fiscal 2022 results. Due to the high variability and difficulty in
making accurate estimates and projections of some of the
information excluded from Adjusted EBITDA, together with some of
the excluded information not being ascertainable or accessible,
Advantage is unable to quantify certain amounts that would be
required to be included in the most directly comparable GAAP
financial measures without unreasonable effort. Consequently, no
disclosure of estimated or projected comparable GAAP measures is
included and no reconciliation of such forward-looking non-GAAP
financial measures is included.
Advantage Solutions
Inc.Reconciliation of Net Income (loss) to
Adjusted EBITDA(Unaudited)
Consolidated |
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
(in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
3,676 |
|
|
$ |
5,754 |
|
|
$ |
21,210 |
|
|
$ |
5,208 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
28,188 |
|
|
|
37,189 |
|
|
|
40,071 |
|
|
|
68,054 |
|
Provision for income taxes |
|
1,316 |
|
|
|
6,563 |
|
|
|
10,365 |
|
|
|
8,306 |
|
Depreciation and amortization |
|
58,444 |
|
|
|
62,674 |
|
|
|
116,212 |
|
|
|
122,287 |
|
Equity
based compensation of Topco(a) |
|
(3,519 |
) |
|
|
(1,642 |
) |
|
|
(6,314 |
) |
|
|
(4,456 |
) |
Change
in fair value of warrant liability |
|
(4,914 |
) |
|
|
(7,059 |
) |
|
|
(20,356 |
) |
|
|
(1,533 |
) |
Stock-based compensation expense(b) |
|
14,961 |
|
|
|
8,988 |
|
|
|
22,732 |
|
|
|
17,643 |
|
Fair
value adjustments related to contingent consideration related to
acquisitions(c) |
|
3,654 |
|
|
|
3,598 |
|
|
|
5,788 |
|
|
|
2,555 |
|
Acquisition-related expenses(d) |
|
5,998 |
|
|
|
2,797 |
|
|
|
15,583 |
|
|
|
7,943 |
|
EBITDA
for economic interests in investments(e) |
|
(1,020 |
) |
|
|
(1,807 |
) |
|
|
(5,072 |
) |
|
|
(2,996 |
) |
Restructuring expenses(f) |
|
253 |
|
|
|
6,934 |
|
|
|
896 |
|
|
|
11,030 |
|
Litigation recovery(g) |
|
(800 |
) |
|
|
— |
|
|
|
(800 |
) |
|
|
(818 |
) |
Costs
associated with COVID-19, net of benefits received(h) |
|
1,362 |
|
|
|
(3,328 |
) |
|
|
2,936 |
|
|
|
(2,035 |
) |
Costs
associated with the Take 5 Matter(i) |
|
723 |
|
|
|
1,310 |
|
|
|
1,810 |
|
|
|
2,211 |
|
Adjusted
EBITDA |
$ |
108,322 |
|
|
$ |
121,971 |
|
|
$ |
205,061 |
|
|
$ |
233,399 |
|
_______________
(a) |
Represents expenses related to (i) equity-based compensation
expense associated with grants of Common Series D Units of Karman
Topco L.P. (“Topco”) made to one of the equity holders of Topco and
(ii) equity-based compensation expense associated with the Common
Series C Units of Topco. |
(b) |
Represents non-cash compensation expense related to the 2020
Incentive Award Plan and the 2020 Employee Stock Purchase
Plan. |
(c) |
Represents adjustments to the estimated fair value of our
contingent consideration liabilities related to our acquisitions.
See Note 6—Fair Value of Financial Instruments to our unaudited
condensed financial statements for the three and six months ended
June 30, 2022 and 2021. |
(d) |
Represents fees and costs associated with activities related to our
acquisitions and restructuring activities including professional
fees, due diligence, and integration activities. |
(e) |
Represents additions to reflect our proportional share of Adjusted
EBITDA related to our equity method investments and reductions to
remove the Adjusted EBITDA related to the minority ownership
percentage of the entities that we fully consolidate in our
financial statements. |
(f) |
Represents fees and costs associated with various internal
reorganization activities among our consolidated entities. |
(g) |
Represents legal settlements that are unusual or infrequent costs
associated with our operating activities. |
(h) |
Represents (i) costs related to implementation of strategies for
workplace safety in response to COVID-19, including employee-relief
fund, additional sick pay for front-line associates, medical
benefit payments for furloughed associates, and personal protective
equipment; and (ii) benefits received from government grants for
COVID-19 relief. |
(i) |
Represents costs associated with the Take 5 Matter, primarily,
professional fees and other related costs, for the three and six
months ended June 30, 2022 and 2021, respectively. |
|
|
|
|
Advantage Solutions
Inc.Reconciliation of Total Debt to Net
Debt(Unaudited)
(in millions) |
June 30, 2022 |
|
Current portion of long-term debt |
$ |
59.8 |
|
Long-term debt, net of current portion |
|
2,026.0 |
|
Less:
Debt issuance costs |
|
(45.4 |
) |
Total
Debt |
|
2,131.2 |
|
Less:
Cash and cash equivalents |
|
115.8 |
|
Total Net Debt (a) |
$ |
2,015.4 |
|
|
|
|
|
_______________
(a) |
Net Debt represents the sum of current portion of long-term debt
and long-term debt, less cash and cash equivalents and debt
issuance costs. With respect to Net Debt, cash and cash equivalents
are subtracted from the GAAP measure, total debt, because they
could be used to reduce the debt obligations. We present Net Debt
because we believe this non-GAAP measure provides useful
information to management and investors regarding certain financial
and business trends relating to the Company’s financial condition
and to evaluate changes to the Company's capital structure and
credit quality assessment. |
|
|
Contacts:Lasse GlassenAddo Investor
Relationsinvestorrelations@advantagesolutions.net (424)
238-6249
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