Advantage Solutions Inc. provides outsourced solutions to consumer goods companies and retailers in North America and internationally. It operates in two segments, Sales and Marketing. The Sales segment offers brand-centric services, such as headquarter relationship management; analytics, insights, and intelligence; administration; and brand-centric merchandising services. This segment also provides retailer-centric services comprising retailer-centric merchandising, in-store media, and digital commerce. The Marketing segment offers brand-centric services, including shopper and consumer marketing, and brand experiential services; and retailer-centric services, such as retail experiential, private label, digital marketing, and digital media and advertising. The company was formerly known as Karman Holding Corp. and changed its name to Advantage Solutions Inc. in March 2016. Advantage Solutions Inc. was founded in 1987 and is headquartered in Irvine, California.
Strategy: Small-Cap Sprinters
Return at exit: -5.3%
Market underperformance amid financial challenges
• Rotated out due to significant market underperformance and deteriorating financial metrics relative to alternatives in our model universe.
• Stock has declined dramatically (-70% 1-year, -41% 3-month returns) and trades at just 30% of its 52-week high, with Morgan Stanley recently reducing its price target to $1.50.
• Financial stability concerns include a high net leverage ratio of 4.6x and negative return on assets (-7.6%), following S&P’s credit rating downgrade to ‘B’ earlier this year.
• Despite challenging metrics, the company demonstrates some operational capability with 4.2% operating margins and recently beat revenue expectations in Q2 ($873.7M vs $811.7M forecast).
• This change reflects portfolio rotation, not a sell signal.