Q4 2019 Earnings Call
Good morning, ladies and gentlemen, and welcome to the Emerald fourth quarter and full year 2019 earnings conference call. During today's call all parties will be any listen only mode. Following their prepared remarks. The conference will be open for questions with instructions to follow at that time. As a reminder, this conference is being recorded I would now like turn the call over too.
Mr., David Doft incoming Chief Financial Officer. Please go ahead Sir.
Thank you operator, and good morning, everyone. We appreciate your participation today in our fourth quarter and full year 2019 earnings call I'm very pleased to have brine field and rolled into one president and Chief Executive Officer with me here today as a reminder, a replay of this call will be available on the investors.
Section of the company's website through 11 59 PM Eastern time on February 20-F, 2020.
Before we begin let me remind everyone that this call may contain certain statements that constitute forward looking statement within the meaning of the private Securities Litigation Reform Act of 1995.
These include remarks about future expectations beliefs estimates plans and prospects.
Such statements are subject to a variety of risks uncertainties and other factors that could cause actual results could differ materially from those indicated or implied by such statements.
Such risks and other factors are set forth in the company's most recently filed periodic reports on form 10-K, and form 10-Q and subsequent filings.
We do not undertake any duty to update such forward looking statements.
Additionally, during today's call will discuss non-GAAP measures, including organic revenue adjusted EBITDA adjusted net income and free cash flow, which we believe can be useful when evaluating our performance.
The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with U.S. got.
A reconciliation of these non-GAAP measures to the most comparable GAAP measures can be found in our earnings release now I'll turn the call over to Brian.
Thank you David.
On today's call will begin by reviewing our strategic initiatives and progress, we're making followed by a review of our 2019 results, which we outlined in this morning's earnings press release.
Well then open the call to your questions.
Before we begin I'd like to address sally's resignation and our search for her replacement.
Sally's continuing her treatment in or fight against cancer and continues to be an incredible adventure visionary leader to our chief.
Given the taxing nature of or treatment. However, that we believed it was prudent to step down as CEO well remaining on the board and assuming the more limited day to day employment role as senior advisor.
She will continue to provide guidance and leadership to our team as we execute the strategic initiatives designed to returned the company to sustainable organic growth.
Well, we continued to execute on our initiatives. The board has initiated a search for a permanent CEO.
Candidates from both inside and outside defense industry are being considered and I have personally expressed my interest and the role.
Turning to emeralds performance at this point it is mainly about execution.
Sadly it I have utilized the major aspects of our current strategy successfully in the past and remain confident that we can achieve similar results here at Emerald, which we expect to drive our future success.
Well certainly has chief operating officer of you'd be Americas, I was able to transform the business by enhancing marketing and sales skills, reducing overhead costs and driving new high margin product offerings, ultimately leading to improved customer sentiment and profitability.
These are all similar points and focusing on current strategy at Emerald.
We remain confident that we have the right plan and after making a series of senior management hires in 2019 2020, the right team in place.
Importantly, we've not seen anything over the last eight months that has changed our view regarding our ability to solve emeralds existing operational challenges and notably the board remains committed to our plan.
In terms of our business, we took an important and very visible steps and rebranding Emerald on February threerd.
This represents the culmination of a mumps long process involving a wide range of customer management and employee input, which underscores the customer centric nature of how we are evolving the business.
Oh rebranding tightly aligned with the strategic framework, which we continue to focus and execute.
The four pillars of our strategy that we outlined on our last call remain unchanged.
These four pillars are focusing on customer satisfaction diversification of our revenue streams operating efficiently and cost effectively.
And pursuing attractive tuck in acquisitions.
Customer satisfaction is the cornerstone of our business.
Our focus on driving customer satisfaction has three main components.
Deepening our understanding of customer sentiment through ongoing research developing a 360 degree picture of customer behavior and through that understanding offering increasingly relevant personalized experiences and business connections.
And finally, providing a value based pricing framework that offers transparency and expectation alignment.
In the end, we want our customers to see us as partners, who offer them breakthrough solutions.
Improving customer sentiments and retention are winning by products at this kind of behavior and only comes from a deep understanding of the needs and desires for customers.
An example of the deepening of our customer understanding is our use of the research platform exploring which we began to implement late last year.
This platform integrated with our post show surveys allows us to analyze customer sentiment across a variety of measurements, which in turn provides us key insights into areas of future fine tuning up our shows positioning and broader industry insights.
Currently approximately one third of our shows are utilizing this platform.
As our shows trade over the course of this year, we will continue to onboard them onto this powerful system.
Our 20 largest shows expected to be on the platform by yearend.
To support the 360 degree understanding of our clients we are actively joining our customer data together.
We are time information explicitly provided during registration with the behavioral data associated with that customer through their interactions with our content online products and behaviors that are events.
To support the collection of this information we have also started to gate on content offerings.
Dave approximately 30% of our content offerings are now activated to collect this kind of data, which we subsequently use of building blocks to create a holistic customer profile.
We believe these data strategies will support more meaningful and tailored content that experiences for our customers.
Ultimately driving brand affinity and improved ROI.
Finally, we began the process of value based pricing studies for an initial group of six shows last year.
These studies are intended to help better align perceived customer values of available locations and packages that are events with the actual pricing associated with these locations.
Based upon my prior experience, we believe the implementation of these kinds of pricing models can result in low to mid single digit show level improvements in yield while also supporting improvements in customer sentiment as customers develop a more balanced set the price devalue expectations.
We are continuing this work over the course of 2020 with an additional eight shows scheduled to undertake the process.
Given the timing and seasonality of our events, we expect the financial impact of the implementations of our value based pricing models to begin to materialize in our 2021 show cycles.
The second pillar of our strategy focuses on the diversification of our revenue streams.
We are pursuing this through an increased focus on integrated sponsorship sales in addition to new show launches.
Our integrated selling program is aimed at introducing boot and non boost sales packages that together offer our customers unified solution designed to address their needs and goals, while driving new profitable revenue growth for Emerald.
These types of programs bundle, our year round platforms, where customers can sponsors specific content areas extend their own content to targeted audiences and takeover relevant content channels across our web sites and print publications for example, together with at show offerings, such as event guides sponsored lot content.
Tracks and physical activation opportunities.
We also have several anticipated show launches planned for this year.
By leveraging our expertise and hosted by or events. We are expanding our offering to include events targeting the architecture construction engineering of both convenience stores and senior living facilities.
We've also partnered with the international well building Institute, which develops and administers the well building standard and the well ATP program.
And yes, I'd the American Society of interior designers to launch a new conference focused on the health and wellness implications of the polices and spaces, where we spend our lives.
Well every launch won't be profitable from inception, we believe that investing in these new growth areas offers us opportunities to further expand our portfolio, while leveraging existing customer relationships and addressing customer needs.
Our third strategic pillar is to operate efficiently and cost effectively.
We continue to analyze and critically assess the impact and ROI of all of our spending on investments by applying a rigorous financial lens to our activities.
Through the centralization of marketing operations in commercial operations for example.
We are creating greater automation of our core functions and consolidation of supporting Toolsets, which will provide a scale and allow for more systematic and effective training of our sales and marketing staff.
The fourth of our strategic pillars is to pursue attractive tuck in acquisitions that align and support our existing business.
Along with the acquisition of GE, Threed Communications, which we announced the day before our last earnings call. We also completed the acquisition of shop. He served on December 9th of last year.
Choppy surface, a leading b to B news and content website focused on the surface industry, which is supportive of the customer communities that participate in both our surface Expo and outdoor retailer events.
Along with being financially accretive these acquisitions support our strategy of building year round platforms that continuously engaged and nurture our customers while offering opportunities for cross platform integrate selling.
The execution of our four strategic pillars is designed to return emerald overtime to sustainable organic growth at or above industry levels as well as deliver solid and consistent adjusted EBITDA growth.
Our focus for 2020 is all about execution.
As we continue to implement the foundational aspects of our strategic plan, which are well underway.
We expect to begin to see the tangible operational and financial benefits in 2021.
We look forward to updating you on this as we move through the year.
Before I turn the call over to David to review, our fourth quarter and yearend results I'd like to thank still Evans for his contributions to Emerald over the last six plus years.
A CFO Phil was instrumental in building the business and then taking the company public in April of 2017.
Phil also provided important leadership to the company and to our employees. During his tenure as interim CEO prior to Sallie I mean, joining the company in June of last year.
We're all very thankful for his many contributions to Emerald.
As we look forward I'm very pleased to officially welcome David Doft to Emerald and introduce them to.
Dave its proven leadership formidable execution skills, and broad strategic and financial management background, including in turnaround situations will add depth to our executive team as we execute upon our turnaround and growth strategy.
Now I will turn the call over to David welcomed.
Thank you, Brian and good morning.
First I'd like to join Brian and thanking Phil as he has been extremely helpful. In sharing his insights with me as I have transitioned into the Emerald business over the last month.
I'm very excited to be here.
Based on what I've already seen over the last several weeks combined with my 12 years experience as CFO of MDC partners, a global marketing communications business I believe we have a strong team and a clear runway for growth yard.
The turnaround strategy that had been previously laid out is solid and I look forward to working with the leadership team to execute it.
Given my experience at MDC I'm, a firm believer in the power and staying power of experiential marketing in the face to face interactions between sellers and buyers that enable.
I believe Emerald is well positioned to capitalize on a desirable portfolio of meeting event in the U.S.
Before I talk more about the future. Let me briefly review the company's fourth quarter and full year 2019 financial results.
Beginning with the fourth quarter revenues decreased by $12.1 million or 21% over the fourth quarter 2018, with 6 million dollar to the variance due to show staging in the third quarter of this year versus the fourth quarter last year.
In addition, we stage the outdoor retailer winter market during the fourth quarter 2018, which we did not repeat in 2019. Instead, we made the decision to folded into the 2020 or winter It's no show.
Organic revenue growth for the quarter adjusted for the previously noted showed timing differences and excluding the discontinued outdoor retailer winter market show was down 2.5%.
Our adjusted EBITDA for the quarter decreased by $6.2 million to a loss of $1.5 million, reflecting the impact of the discontinued outdoor retailer winter market show together with the increased show and corporate investments directed toward improving future growth.
The GE three communications acquisition, which closed in November added modestly to revenue and adjusted EBITDA in the fourth quarter.
We also booked a 59.8 million dollar noncash impairment charge in the fourth quarter related to the impairment of goodwill as a result of the reevaluation of our operating segments and reporting unit triggered by the reporting changes brought about by our new senior management team structure.
As a result, we increased both the number of operating segments in reporting unit and our underperformance in certain reporting units necessitated the impairment charge.
Turning to the full year 2019 revenues declined by 5.2% to $360.9 million organic revenues declined by approximately 3% after giving credit to insurance proceeds we received in 2019 to replace lost revenue as a result of the disruption caused by Hurricane Dorian.
And also excluding incremental acquisition contribution and discontinued event.
Adjusted EBITDA for the full year 2019 of $127.8 million decreased by 21.5% versus the full year 2018.
The organic revenue decline the discontinuance of several shows, notably Interbike and outdoor retailer winter market and the increased investments aimed at improving the company's future performance.
Free cash flow for 2019 was $63.9 million, a decrease of $36.5 million or 36.4% over 2018.
This reduction reflected the year its financial performance and a modest outflow of working capital.
We deploy $12.8 million of our 2019 free cash flow on the acquisition of GE, Threeq communications and reduced our debt by $35.7 million through the pay down of revolver balances and the annual amortization of our term debt. In addition, we paid for quarterly dividends totaling $21.3 million.
And used $8.3 million to repurchase approximately 854000 shares of our common stock at an average cost of $9.73 per share.
We finished 2019 with net debt of $531.2 million, representing a net leverage ratio of 4.2 time, our 2019 adjusted EBITDA.
We're not satisfied with these results, which we believe were impacted by legacy operational and execution issues and importantly, do not reflect the underlying quality of and both portfolio and its long term growth potential.
As we move into 2020, our near term priorities for capital allocation have not changed.
We are committed to our quarterly dividend.
We expect to continue to reduce net leverage and we continued to evaluate tuck in M&A opportunities that are strong performers in their own right and that can also strengthen our existing brands.
Now I would like to discuss the coming here.
To start the spread of the Corona virus has dominated the news headlines over the last few weeks and we have been paying close attention as well.
Fortunately our events unlike others in the industry are entirely produced in the United States, which minimizes the risk Nevertheless, last year, 2% to 3% of our revenues came from Chinese exhibitors, which must be viewed as at risk until the virus is under control.
We expect to pursue a recovery of losses from any cancellations from our insurance providers and hope that the financial impact will be minimal.
Now historically this is the time that and we'll have indicated financial guidance for the coming year.
As has previously been discussed by management, the strategic and operational initiatives that are currently being rolled out are not expected to positively impact growth in 2020, given the seasonal nature of most of the company's event.
In addition, the annualized cost structure of the new hires and investment spending to implement a turnaround plan is a headwind to growth and profitability in the near term and will weigh on the company in 2020.
We do not expect to see the financial benefits until 2021 that said I am personally focused on unpacking the company's cost structure from the bottom up in order not only uncover efficiency opportunities, but to ensure that we get a return for each of our investment and free up money to invest behind incremental growth opera.
Two needs in the future.
Given my very recent arrival I feel that it is premature to give 2020 guidance today instead, we plan to do so in conjunction with our Q1 2020 earnings report.
At that time, I will be fully up to speed and can appropriately layout, our expectation again I'm excited to be here and Emerald and although these are early days I'm bullish on our go forward strategy.
Ill now turn the call back to Brian for his concluding remarks.
Thank you David.
We have much to do in 2020 to realize our goal to returned the company to growth in 2021 and beyond.
Confidence that we have the right strategy and the right team to deliver sustainable organic growth in line with were better than the industry over the medium to long term.
David and I, along with the entire Emerald management team are excited United and focused on executing the strategy, we have articulated to drive our future success.
Thank you once again for your time today.
Operator, please open the call for questions.
At this time, we will be conducted question answer session. If you'd like to ask your question. Please press Star 100 help on keypad a confirmation total NK. Your line is and the question Q you May Press Star too if you would like to remove your question from the Q4 participants using speaker equipment, and maybe that's sort of pick up your handset before passing the starches one on that please.
Pull for questions.
Our first question is from David Chu Bank of America. Please proceed with your question.
So I know, you're not providing guidance but.
Can you give us any sense of like revenue expense expectations for the year or maybe even just discussing if you expect trends to get worse before it gets better.
Hi, David Good morning.
We're not going to comment on the outlook for the year I apologize for that but that's the decision that we've made I think that if you read.
The quote in the earnings release and my comments.
Lot of our focus on my end is on cost.
And on Brian's comments have been about continue to execute against our strategic plan in order to drive revenue. That's what we're focused on on both ends here and hopefully we'll be able to can can you report progress against that plan.
Okay and then.
Given that you don't provide a historic recast of just it looks like you guys are presenting revenue like in a new segment fashion can you can you provide for Q for like trade show other marketing and other events. So we have like a base to work off of.
The the new segment reporting.
What is dictated by a change in how the company's being managed by Brian and infrastructure that was put in place there until the segments that we now report are the segments that were going to report going forward.
Given that we're we're really unable to breakout revenue in other ways.
That may have been done in the past.
So.
I mean, the other marketing services other events do they just like fall into three buckets is that how we should think about it I know I mean, the majority of your business is trade show, but just trying to get a sense of how to think about those two segments.
Sure I I think I could help you on that ultimately the two primary segments.
Our split up of the trade show portfolio.
And the all other bucket is essentially.
The other marketing services and other other revenue streams or the company if not perfect in that way.
Because this is.
The segments are dictated by how individual parts of the portfolio, our managed and who the leaders are those portfolios are and so there is a little bit across or but generally.
That's going to work as a rule of thumb in how you look at the business. So I think if you aggregated. The two named segment January will have a trade show bucket. If you looked at all other you'll you will generally have everything else.
And just just lastly, so.
Are you guys going to provide more detailed information buys shows. So we can you know kind of think about the to the two main segments or is it just going to be kind of a high level look.
Similar to what we've had in the past.
Sure.
We're not really going to go into show level financial information going forward and ultimately.
If you think about the strategy that's been put forth by Brian in Sally it's about extending our shows out and leveraging our customer base exhibitors in attendees at those shows with with more products and services and so thinking about it at a trade show level type financials is actually limiting.
Okay.
The opportunity that we see in those properties.
So that's why the segment actually is over time going to I think give a lot more clarity in color because you'll be able to see in.
In the.
Growth numbers and hopefully the growth numbers will be there in the future that.
That the strategy is working through that extension and and as part of kind of portfolio management and optimizing performance of the reality is is that we may.
Choose to.
Change how one show works to benefit another show because the total is better for us and so that's also why on the show level metrics. We believe are not as relevant going forward and so we're going to shift away from commenting at that level. Okay. So should we expect like a historical.
2019 by quarter, and maybe 2018, so we have a sense of what happened.
Overtime.
Yeah, we're working on finalizing some of the historical trending I and I think it's reasonable to believe that will provide some aspect of that.
Okay. Thank you.
Our next question is from Seth Weber RBC capital markets. Please proceed with your question.
Hey, guys good morning.
Learning and Brian you talked about you know outpacing industry growth a couple of times I mean can you just big picture talk about.
What do you think the industry growth really is here going forward I mean do you feel like.
You know the kind of the dynamics of the industry have changed or softening at all or do you feel like this is still kind of.
Low single digit industry grower in Big picture you guys ultimately could be back in that I think you used to target like a 3% to 5% type number.
I. So you know long question, but where do you think industry growth is I guess.
Yeah.
Overall, the industry seems to be continuing to pace now.
You know at those same levels.
The ours is a.
A little bit different than some of the other big global players because were specifically focused on United States versus international markets.
The likes of and then for more or read for example are highly globally distributed.
Certainly our aspiration is.
You know to return to overall.
Gross.
Along the lines that you mentioned the.
You know some of the.
The areas that.
Are likely to impact some of those international players, particularly those with.
Heavy Asian footprint.
We'll be areas, we'll be able to ideally hopefully the current a virus stays contained.
You know continued to.
We want we won't have those kinds of impacts that those international and heavily Asian weighted companies will have but we believe this is a growth industry.
And we're committed to seeing that.
Okay, and then I guess just a question maybe for David you know, how you're thinking about leverage in the balance sheet I mean, you're a little bit over four turns here.
Are you comfortable at that level does that impact your appetite for M&A do you need do you feel like you want to get that lower it sounds like you're pretty focused on cost control, but.
Can you just talking about you know operating the business that that four turns leverage or or do you feel like it needs to be lower thanks.
Sure. Thank you.
Open we the leverage for the company increased over the course of the year by pointed to turn.
Of EBITDA, I think that we're better off a little bit lower than here.
There is no.
I don't think theres much risk, where we sit right now but the.
But ultimately.
If were lower we have more flexibility, we were able to be more nimble to pursue opportunities.
Whether it's increased investment organically or increase investment from an acquisition standpoint, I'm part of the mindset of of returning this business. The growth is making sure that we have the wherewithal to make the right investments at the right time in and that's a combination of factors one of them as balance sheet.
The other that none of those if cost structure and I actually believe they go hand in hand.
And my my view is not really that it's about an absolute cutting of cost.
It's about a cutting of unproductive costs. So that we can redeploy to growth investment in a way that I really from what I can see hasn't really been taking place here at the sort of level that then I think we need to do.
Right. So so following up on that.
Should we expect some more aggressive.
Pruning of the portfolio it sounds like you're adding some new shows but should we expect a more aggressive.
Aggressive tacked on just exiting.
Shows that are not returning inadequate not providing an adequate return.
So we have.
And this is public knowledge Weve closed off some media properties for example that have been unprofitable and that have been misaligned with customer sentiment.
So those things that are a miss aligned to our customer sentiment.
And our unprofitable.
Our things that we've taken charge of very early on this year.
And to David's points, so that we can.
We deploy those assets into areas of growth.
Okay. Thank you very much guys.
Our next question is from Manav Patnaik.
Barclays. Please proceed with your question.
Hi, This is Ryan Leonard on for model.
Yeah, I'm, just curious and I appreciate that obviously, the some moving pieces and.
You can provide guidance on Q1, I think historically part of the benefit here is that theres been 80% of boot sales are completed by March.
The visibility in the business changed at all in the last couple of years.
In looking at the data here and I'm really trying to bring some fresh eyes, because some of these things.
Under the core revenue stream.
I think the visibility it's been fairly consistent.
For example, the retention rates have been stable.
2019 versus 2018, I think thats, an important data point in the wake of what was not the greatest here for the company that Theres, an underlying underlying stability that's going on there that we can build off of at the same time, though some of the other revenue stream.
Our.
A little less predictable a little more near term to two when they get booked and reported around the other marketing services around the publication and I think thats, where there's been a lot of the variance.
Over the last couple of years versus what the company was hoping for so I'm going forward, we're going to try to put in place in processes to enhance our visibility around that.
Part of that bad part of that is some of the initiatives that are already underway around centralizing certain functions that allow us to have consistent views.
Of pipeline and things of that nature going forward that will allow us to be hopefully even better at forecasting them. We have been in the past one thing I'd like to chime in on this topic as well.
Is.
That historically, if you look at our top customer.
Inside of the company represent 0.28% of our overall revenue.
Last year and our top 10 customers represented only 1.81% offer revenue now that's a huge opportunity for us as we're expanding out cross platform sales, taking individual customers, who maybe you only had one piece of the business an expanding them to multiple parts.
Of our business and that ties back to the overall element of.
I've diversifying our revenue and focusing on cross platform sponsorships on.
Multi brand sales.
So there is that's one example, where.
Where theres a tremendous amount of upside for us.
Got it. Thanks, I now would you add that those sort of initiated add visibility right when when you could.
Signed clients up too.
Multiple shows with broader marketing services around it that you have to plan ahead for that you're looking at things over course of the year. It those are things will add visibility to our business going forward.
Got it thanks, if I just clarify a little bit on the current a virus. So there had been some impact from Chinese trade tensions this year. So your comment on the revenue at risk is that as of the ending of 29 teaming there's some incremental risk and then I thought you said some of that could be insured against.
Sure I confirm that your insurance applies to exhibitors either not showing up.
Because of that so just to clarify that.
Of course, so the metric I gave what that.
Our revenue in 2019 for the full year from exhibitors from China, what between two and 3% of our total revenue.
[music].
Not a lot, but not inconsequential right, that's real money and.
Last year as the company talked about throughout the year on their earnings calls there was pressure on Chinese exhibitors because of the trade war and the Paris, and so 2019 went down from 2018 because of that issue.
So there was a higher number in 2018 modestly then then what I said it was well north of 3% as opposed to between two and three.
And.
But in terms of year over year risk, we're looking at the 2019 metric and looking at it in total I would say that.
Hi.
Not 100% about revenues that risk because some shows have already traded.
As we sit right now theres, a travel ban people can't come from China here, and so they're not going to come to our shows as long as that travel ban is in place.
When it comes to the insurance.
If somebody has already contracted to be in exhibitor and have to cancel because of the travel ban, which they can't control and we can't control. We believe that there is recoverability up from our insurance, we're working through that there's no guarantee of that.
And and that'll play out over the coming weeks I would expect what insurance would not cover is the theoretical person who never signs up.
[music].
And come to our show.
So.
There is likely to be some impact.
During the year.
With or without insurance because of that dynamic that's really hard to quantify but the totality of face at.
Our revenue over the course of the full year last year from Chinese exhibitors was between two and 3%.
Got it thanks.
So you can just kind of a broader question you know obviously to do you you said the business underperformed your expectations. We're now at a little bit of a GAAP period, where we don't really have a 2020, you know guidance or anything to kind of put a base on what do you think what do you tell investors what are the metrics that people will see in 22.
What do you see that the plans you have laid out are on track to grow the business in 2020.
So the principal plants since this is really an execution all year.
The things that we're focused on right now and we'll be continuing to talk about how we're progressing are the.
The very things I outlined earlier in today's call. So how how we're advancing in.
Deploying our research tools are exploring tools, how we're progressing against value based pricing studies across the portfolio, how we're tracking against him joining Oliver data. So that we have a full 360 degree view of the customer all of these things inherently will be elements that drive the gross.
In 2021, which is what we're focused on.
Thank you.
Our next question is from Ashish somebody Deutsche Bank. Please proceed with your question.
Hi, Thanks for taking my question. So just a quick follow up question earlier question on the industry trend. So even if the exhibition industry is growing low single digit.
Based on the industry afford it seems like the discretionary consumer goods and services have been declining and given a yard.
Some of the top shows computing is de and and yet no being focused on discretionary consumer goods and services. How do you think a lot that industry that trend and and turning around the dealer strategic initiative. Despite the secular headwinds in this business.
Thanks.
Yes, so all of the you know all of these elements.
The research the value based pricing.
Tracking and be being closer and understanding the needs of our customers will allow us to pivot and continue to refine and define as the as the industry's evolved and changed around them.
New types of offerings, the new types of things, we do around our customers into service their ongoing needs.
To David's point around.
Portfolio management. This is all around.
You know, how we begin to evolve and define and grow the portfolio overall as opposed to just focusing on one particular show or.
A couple of sectors inside of part of our overall company.
So you know as as were.
We're pushing as we're evolving as we continue to do.
Our bolt on tuck in acquisitions.
Will you know.
The overall makeup of the portfolio will shift.
The dynamics of individual shows and products will shift depending on overall secular trends.
But we're going to be very focused on the needs of our customer markets based upon the intelligence we're gathering.
And those are things that we believe we'll continue to drive organic revenue.
And that's helpful.
That's helpful. Ryan and maybe just a quick question I was wondering if you could just provide any color on on the new off now going to show our the is Stephen just coming up in much any.
And any color on those shows how those are trending compared to get expectations.
So generous generally speaking for the shows that have occurred already.
You know the the overall customer sentiment across that portfolio.
Of shows has been very.
Very strong it's been very supportive.
And actually is reflective of the kind of.
Deeper understanding we now have now that we now have through the exploring research.
Around what our customers need.
Which has been very gratifying that said.
As David alluded to earlier, we're not.
Going to speak specifically about individual shows.
Okay. That's helpful and maybe a final question on leverage there was the question earlier on leverage as well being slightly on the eyesight, but as we think about leverage, particularly given they invest mentioned, we think about leverage going up before it goes it comes down any thoughts on that David. Thanks.
Sure I'm you know this is still a strong free cash flow generating business.
And even with a hiccup in.
EBITDA last year.
Still pretty strong free cash generating business and so.
I don't believe that.
Our leverage will go up meaningfully from here I can I'm not going to speak.
The next quarter to quarter after but I think as we've looked at the end of the year.
Our hope would be that that leveraging down.
That's helpful. Thanks.
Our next question is from Jeff Mueller Baird. Please proceed with your question.
Hi, it's Jeff on for Stephen Thanks for taking my question.
As we think about sort of growth investments and you know sort of the incremental spending is that can occur mostly.
The first party or and then sort of roll off or reaching more normalized level the back half of 2020 or is.
We're sort of are getting to a rebase level of consistent quarter to quarter.
Sure well I think a lot of the incremental investment flowed through the year post the arrival of Sally and Brian and some of the changes they put in place and so we're certainly going to annualize that as we move through the first half of 2020 and there are some things that.
And really through the third quarter right. So, but first half is going to get the brunt of that year over year increase.
Of the investment that came in last year and so you can think about the model that way.
The other thing I want to point out just around kind of seasonality.
We didn't make a tweak to the supplemental deck that we posted to our website where are we.
Gave color for the entire all four quarters of the year Recasted 2019 for shows that moved between quarters. In 2020. So you have the base of revenue adjusted EBITDA and operating income off of which to model the quarters of 2020. So.
I Hope Thats helpful. We'll continue to look for ways that we could.
Aid in modeling of our business, which I know has been tough given how often shows move around.
Great and then as far as the value based pricing goes I understand that that's the most the benefit talking to come till 2021, but I assume that a lot of this will be taking place in 2020.
Some benefit from value based pricing in 2020 versus 2019 or is it pretty flat and then like I said all that comes through in 2021, and then I want to clarify that low to mid single digit that you referenced as that's going to be the benefit for revenue or is that just to the yield and retention.
That's that's for the yield.
As far as the.
Overall.
Benefit financial benefit.
It will happen almost entirely in 2021.
Based upon the seasonality the shows there is the mechanics of understanding what the pricing as but then there's the communication process to the customers.
And so that's the part that actually is the ramp up.
And keep in mind our.
The revenue recognition around our shows or when the show actually happens.
And so we might be selling for 12 months ahead of the show.
We don't book the revenue until.
The show actually put on.
And as we want to.
Amend the comment I made it posted just being yield because frankly also there there is a retention benefit to.
Now it's it's a.
Slightly harder to quantify but.
Based upon the overall customers appreciation and acknowledgement of.
The amount they paid for the value they received and Thats what value based pricing is all about.
They are generally is the trend of greater customer satisfaction, so that ought to also translate into retention.
Great. Thanks.
We have reached the end of the question answer session now, we'll now turn the call back over to Brian field for closing remarks.
So I want to thank everyone for dialing in and.
Attending todays.
Call.
Just wanted to reiterate that David and I and the entire senior management team are confident around the strategy that this is really an execution all year.
And that we're extremely focused on delivering that so we look forward to.
Updating you all in progress over the course of this year. Thank you very much everyone.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.