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 fiscal first quarter ended March 31, 2022.
“I am pleased to report we delivered approximately 16%
year-on-year increase in revenues during the first quarter,
primarily driven by the ongoing recovery of our businesses most
impacted by the pandemic,” said Advantage Solutions Chief Executive
Officer Jill Griffin. “Our product demonstration and sampling,
retail merchandising and select European businesses were key
drivers of our revenue growth in the quarter. We continue to make
significant investments in innovative new services, infrastructure,
systems and tools to drive new revenues in higher-growth,
higher-margin areas as well as improve business productivity and
operational efficiencies. Concurrently, we are stepping up spending
in wages, recruiting and retention of our workforce but remain
disciplined in realizing price from our clients to offset inflation
in these labor-intensive services that are critical for brands and
retailers.”
“Looking ahead, as we continue to navigate the evolving
operating environment, challenging macroeconomic headwinds and
emergence from the pandemic, we remain confident in our ability to
deliver against our full year 2022 Adjusted EBITDA guidance of $490
million to $510 million,” Griffin concluded.
First Quarter 2022 Highlights
- Revenues were $914.8 million for the first quarter of 2022,
representing an increase of $123.8 million, or 15.6%, from the
first quarter 2021 revenues of $791.0 million.
- Operating income was $23.0 million for the first quarter of
2022, representing a decrease of $14.6 million, or 38.7%, from the
first quarter 2021 operating income of $37.6 million.
- Net income was $17.5 million for the first quarter of 2022,
representing an increase of $18.1 million from the first quarter
2021 net loss of $0.5 million.
- Adjusted EBITDA was $96.7 million for the first quarter of
2022, representing a decrease of $14.7 million, or 13.2%, from the
first quarter 2021 Adjusted EBITDA of $111.4 million.
The year-over-year increase in revenues was driven by $66.1
million of growth in the marketing segment (an increase of 26% year
over year) and $57.6 million of growth in the sales segment (an
increase of 11% year over year). First quarter growth in the
marketing segment was driven primarily by the continued recovery in
product demonstration and sampling. First quarter growth in the
sales segment was driven by higher merchandising services revenues
and a rebound of the Company’s international businesses.
The year-over-year decrease in operating income was primarily
due to a shift in revenue mix and the ongoing reinvestment
activities in labor and wage spend, along with our innovation and
renovation activities and an increase in the amount of self-insured
medical claims.
The year-over-year increase in net income was driven primarily
by the decrease in change in fair value of warrant liability and
interest expense, partially offset by the decrease in operating
income and increase in the provision for income taxes.
The year-over-year decline in Adjusted EBITDA was primarily due
to the same items impacting the decline in operating income noted
above.
Balance Sheet Highlights
As of March 31, 2022, the Company’s cash and cash equivalents
was $123.6 million, total debt was $2,090.1 million and Net Debt
was $1,966.6 million. The debt capitalization consists primarily of
the $1,308 million First Lien Term Loan, $775 million of senior
secured notes and a $400 million revolving credit facility, under
which there was no outstanding balance as of March 31, 2022.
Fiscal Year 2022 Outlook
In an environment marked by continued inflation, supply chain
constraints and labor challenges, the Company is reiterating its
2022 Adjusted EBITDA guidance range of $490 million to $510
million. As previously disclosed, this reflects an initial budget
for 2022 that showed modest year-over-year Adjusted EBITDA growth
and a decision by the Advantage team to pursue thoughtful
reinvestment — focusing even more funding on talent amidst a
difficult labor market backdrop, innovating in adjacent
faster-growth and higher-margin services and renovating
infrastructure.
Conference Call Details
Advantage will host a conference call at 5:00 p.m. ET on May 10,
2022 to discuss its first 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 13728570. The conference call
will also be accessible live via audio broadcast on the Investor
Relations section of the Advantage website at
https://ir.advantagesolutions.net.
A replay of the conference call will be available online at
https://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
13728570.
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. 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”, “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
May 10, 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
InformationThis 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 EndedMarch 31, |
|
|
2022 |
|
|
2021 |
|
(in
thousands) |
|
|
|
|
|
Net income (loss) |
$ |
17,534 |
|
|
$ |
(546 |
) |
Add: |
|
|
|
|
|
Interest expense, net |
|
11,883 |
|
|
|
30,865 |
|
Provision for income taxes |
|
9,049 |
|
|
|
1,743 |
|
Depreciation and
amortization |
|
57,768 |
|
|
|
59,613 |
|
Equity-based compensation of
Topco(a) |
|
(2,795 |
) |
|
|
(2,814 |
) |
Change in fair value of warrant
liability |
|
(15,442 |
) |
|
|
5,526 |
|
Stock-based compensation
expense(b) |
|
7,771 |
|
|
|
8,655 |
|
Fair value adjustments related to
contingent consideration related to acquisitions(c) |
|
2,134 |
|
|
|
(1,043 |
) |
Acquisition-related
expenses(d) |
|
9,585 |
|
|
|
5,146 |
|
EBITDA for economic interests in
investments(i) |
|
(4,052 |
) |
|
|
(1,189 |
) |
Restructuring expenses(e) |
|
643 |
|
|
|
4,096 |
|
Litigation expenses
(recovery)(f) |
|
— |
|
|
|
(818 |
) |
Costs associated with COVID-19,
net of benefits received(g) |
|
1,574 |
|
|
|
1,293 |
|
Costs associated with the Take 5
Matter(h) |
|
1,087 |
|
|
|
901 |
|
Adjusted EBITDA |
$ |
96,739 |
|
|
$ |
111,428 |
|
______________
(a) |
Represents expenses related to (i) equity-based compensation
expense associated with grants of Common Series D Units of Topco
made to one of the Advantage Sponsors 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 5—Fair Value of Financial Instrumentsto our unaudited
condensed financial statements for the three months ended March 31,
2022 and 2021. |
(d) |
Represents fees and costs associated with activities related to our
acquisitions and restructuring activities related to our equity
ownership, including transaction bonuses paid in connection with
the Transactions, professional fees, due diligence and integration
activities. |
(e) |
Represents fees and costs associated with various internal
reorganization activities among our consolidated entities. |
(f) |
Represents legal settlements that are unusual or infrequent costs
associated with our operating activities. |
(g) |
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. |
(h) |
Represents costs associated with the Take 5 Matter, primarily,
professional fees and other related costs, for the three months
ended March 31, 2022 and 2021, respectively. |
(i) |
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. |
|
|
|
Advantage Solutions Inc.Reconciliation of
Total Debt to Net Debt(Unaudited) |
|
|
|
(in
millions) |
March 31, 2022 |
|
Current portion of long-term debt |
$ |
15.0 |
|
Long-term debt, net of current
portion |
|
2,027.7 |
|
Less: Debt issuance costs |
|
(47.5 |
) |
Total Debt |
|
2,090.2 |
|
Less: Cash and cash
equivalents |
|
123.6 |
|
Total Net Debt(a) |
$ |
1,966.6 |
|
______________
(a) |
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 (310)
829-5400
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