Q1 2020 Earnings Call
[music].
Good afternoon, ladies and gentlemen, and welcome to the Emerald first quarter 2020 earnings conference call. During today's call all parties will de analysts and only not following their prepared remarks. The conference will be open for questions with instructions to follow at that time as a reminder, at this conference is.
Being recorded.
I would now like to turn the conference over to Mr., David Doft Chief Financial Officer. Please go ahead Sir.
Thank you operator, and good afternoon, everyone.
We appreciate your participation today in our first quarter 2020 earnings call.
I'm very pleased to have Brightfield emeralds interim President and Chief Executive Officer with me here today.
As a reminder, a replay of this call will be available on the Investor section of the company's website through 11 59 PM Eastern time on May 18, 2020.
Before we begin let me remind everyone that this call may contain certain statements that constitute forward looking statements within the meaning of the applicable securities laws.
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 Companys. 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, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation weren't as a substitute for results prepared in accordance with U.S. GAAP.
A reconciliation of these non-GAAP measures to the most comparable GAAP measure can be found in our earnings release now I'll turn the call over to Brian.
Thank you David and good afternoon, everyone.
On today's call I will review the steps that we've taken to ensure the health and safety of our employees and customers as coven 19 has quickly spread across the country.
As well as the actions that we are taking to ensure that we have the liquidity and resources necessary to manage through an extended downturn.
I will then briefly review our first quarter results before turning the call back to David who will discuss our financials in more detail.
We will then open the call to your questions.
Before we begin I would like to extend my deepest condolences to Sally Shanklin family.
Sally passed away on April Twentyth.
So we had been a mentor to me for many years.
It wasn't great leader colleague and friend.
With relentless energy curiosity intelligence in empathy.
She was a positive influence on many for absence will be keenly felt.
Turning to today's announcement I.
I would like to start by thanking our employees for their tireless work and dedication during such a challenge in time.
The rapid spread of Cobot 19 has had a severe and negative impact on our ability to deliver large in person experiences, including cancellations and substantial changes to our show calendar.
Our team has been working with our customers and partners to determine if and how best to reschedule our shows and the second half of the year should conditions permit.
This has been a tremendous undertaking to accomplish in a very short period of time and I'm deeply appreciative of our employees agility and focus as they have steadfastly supported our customers' needs.
Through April we have postponed 14 events to the second half of 2020, which equates to approximately 12 million of 2019 revenue.
Total we now have 82 events scheduled from July through December, which in 2019 delivered total revenues of $124 million.
We've also made the decision to cancel 29 events, including the March tradition of HST, Jay a New York Spring put your retail X and outdoor retailers summer markets, which in total accounted for approximately $118 million of 2019 Russ.
Well these have been difficult decisions, we're very encouraged by the strong support there'll be a received from our customer communities, which demonstrates the importance of our shows to their respective markets.
Our customers consistently tell us how eager they are to get back to business, which has a strong indication that the demand for our marketplaces remains intact and should recover overtime.
The commentary from our customers is not just anecdotal.
We have done some very recent survey work, which bolsters our positive view on the long term prospects for the trade show business.
The feedback we've received tells us to follow it.
First.
Trade shows are a significant component of marketing spend for exhibitors and most exhibitors have either increased or maintain their spend on trade shows over recent years.
Second as.
While exhibitors are suggesting a decrease in trade show related spend in the interim period, which is not surprising.
They nonetheless continued to view trade shows as a key component to their marketing mix strategy post cobot 19, and expect to return to their pre covance spending levels. Once the health situation has resolved.
Third.
Many exhibitors are eager to return to trade shows as soon as possible and practical.
Well, most exhibitors still see value exhibiting a trade shows with reduce sizes. They are likely to prioritize larger industry shows such as those produced by Emerald as tightening budgets lead exhibitors to cut their participation in regional and smaller shows first.
And finally for.
Exhibitors have stayed connected with customers. During this time, primarily through virtual mediums emails webinars digital products et cetera.
But many recognize that these formats cannot replicate the value of face to face interactions in the long term, especially as the building of new relationships are discovering new products requires the in person interactions that trade shows brain.
Inherently digital tools are limited given the lack of personal contact the challenges in highlighting product quality and the difficulty in gathering potential buyers.
Next I want to up highlights our insurance coverage.
As we've discussed on prior calls Emerald maintains event cancellation insurance.
This policy provides coverage for the gross revenues less avoided cost plus certain costs relating to the taking a remedial action for each of the company's individual offense and conferences occur in within a calendar year.
This event cancellation insurance covers up to an aggregate limit of $191 million per year for each of 2020 and 2021, if losses arise for reasons within the scope of emeralds policy.
The coverage has no deductible and covers the cancellation postponement and movement of an event as well as enforced reduced attendance.
Importantly, our coverage expressly includes losses, resulting from the outbreak of communicable diseases.
Well there is no assurance that the insurance carriers will agree that all the emeralds claims are covered under the policy. We believe that all shows that have been canceled or postponed due to covert 19 to date should qualify as covered losses with respect to this event cancellation insurance.
Since the middle of March our team has been assembling our insurance claims for each of our canceled shows.
This is an in depth process that includes a variety of information, including our budget for the event costs incurred and cost avoided.
Thus far we have submitted $66 million of claims and expect to submit further claims representing an estimated $20 million to $30 million of losses over the coming weeks.
These claims if successful would cover the lost profit contribution that was expected for the impacted events.
We will remain transparent and plan to update the investment community as our claims are processed.
It is important to point out that while our policy covers 50% of our total portfolio revenues. We also have the ability to mitigate expenses, sometimes avoiding them altogether for canceled events. When there is adequate lead time to and events scheduled stages.
Examples of such avoidable expenses include freelance event personnel general contractor expenses associated with the physical event space, along with food and beverage costs named just a few.
As a result, when we submitted a claim we reflect all costs that have been mitigated.
This reduces the amounts will be request as part of our claim thus preserving our insurance dollars, while maintaining our margin and cash flow from each event.
Well the economic environments in trade show industry Mitt remains very uncertain.
We feel fortunate both to have made the decision to purchase communicable disease coverage as part of our event cancellation insurance policy last year and also that this coverage is bound and in effect through the end of 2021.
We expect this coverage will provide emerald with critical cash flow until the environments begins to return to normal.
Ahead of the Cobot 19 outbreak this quarter, we successfully staged all of our events through early March and they performed inline or better than our expectations.
This was largely driven by the new upfront rigor and data led decision making around our events.
As we've noted in earlier calls we have implemented event plans that have standard lies our strategic planning around our markets along with the support in marketing and sales strategy and tactics for each of our offense across emeralds entire portfolio.
Coupled with our enhanced customer research capabilities, we saw strong performance and customer sentiment in our Q1 shows that took place.
One particular call out here was the exhibitor feedback from our syrup Xplore event in January which given the prior summers cancellation due to hurricane Dorian, what's particularly satisfying and validated our enhanced customer centric approach.
Given the spread of the cobot 19 pandemic and its impact on our business.
We have maintained critical focus on our internal transformation initiatives to deliver our events in a more efficient way.
We have earlier outlines how we are integrating our customer data enriching customer profiles with behavioral touch points and through intelligent automation, creating more relevant personalized experiences.
This will allow us for the first time to effectively cross sell across our brands as well as at the enterprise level.
We believe this can be a meaningful driver of incremental revenue in coming years.
We have maintained our investments in this important strategic growth initiatives and are on schedule for rollout in the second half of this year.
Well, we work to streamline our operations, we are also accelerating or digital product offerings. During this pandemic.
These digital offerings provide value to our customers through education networking and connecting our buying and selling customers.
This in turn will strengthen our customer relationships by delivering valuable content and services.
These digital products are also driving new customers to us, which we will be able to nurture and well look to extend into our live events as they return.
Of note, we have already grown net new customers by 15% over the same period last year through these initiatives and at a fraction of the cost per lead.
Some of these products include Webinars podcast easing and paid research.
We're also spending time refining our strategic priorities and innovate in additional new revenue streams, which we look forward to updating you on in the future.
It is important to point out that these digital initiatives in no way suggested change in our view or confidence in the viability of long term outlook for the events industry. These are merely acceleration of our previously articulated strategy to provide year around customer value and create new revenue streams.
We have been reviewing our operations and cost structure, even before the outbreak of coven 19, as part of our strategy to improve emeralds execution and have accelerated a variety of measures to reduce our cash burn improve our financial flexibility and successfully navigate the current environments, while meeting all financial obligation.
Yes.
David will go into more detail that our cost structure and the expense savings initiatives that we're implementing in a moment.
Before I hand off I want to reaffirm our focus and commitment to the health and safety of our staff and our customers. During this time.
And also our resolve to listen to and understand the needs of our customer communities to play a key role for them today and demonstrate valuable long term partnerships as we support the returned to growth tomorrow.
There's nothing we have heard or seen from our customers to change our view of the viability of and need for our events in the marketplace.
In our view the only question is when we will be able to safely stage them again.
As the safety and well be enough our employees customers and communities is our top priority.
Now, let me turn the call over to David.
Thank you, Brian and good afternoon.
Turning to first quarter revenues decreased $37.7 million or 27.4% as compared to the first quarter of 2019.
The decrease primarily reflected a 34.3 million dollar reduction from the cancellation of sapping first quarter events under the covert 19 crisis.
Most notable among these cancellations and HSD March International key to Expo and Jay Spring.
In addition, $3.6 million on the first quarter decline.
Due to the postponement of tell second quarter 2020 events and the second half of the year.
Our first quarter results were also negatively impacted by $2.3 million as a result of discontinued lossmaking publications and events.
Lastly, the T. Three communications acquisition, which closed in the fourth quarter of 2019 contributed $3.9 million of revenue the first quarter of 2020.
Organic revenue, it's kind of first quarter declined $2.6 million worth 2.6% as compared to the prior year first quarter.
Our adjusted EBITDA. After the first quarter was $23.6 million as compared to $57.5 million. Your same period last year adjusted for show scheduling differences, including the show postponement due to cold get 19.
The decrease in adjusted EBITDA of $33.9 million with mainly related to the cancellation is in first quarter events, representing prior year profit contribution of $27.5 million.
As well as the acceleration of approximately $2 million.
Previously expenses related to second quarter events, which was forced to cancer.
To cope with 19 crisis.
Our first quarter 2020, adjusted EBITDA also reflects a combined effect of the postponement and.
Lower organic revenues incremental investments made event took place in the quarter and increased marketing costs.
Next impairment charges.
In the first quarter, we booked a 554 million dollar noncash goodwill impairment charge X 59.4 million dollar noncash charge related to certain intangible assets in first quarter in connection with your triggering event caught I'd impacted the cobot 90 basis on the traveling against.
Industry, the company's forecasted results and its market Sally.
Free cash flow for the first quarter with 7.7 million hours as compared to $11.3 million in the year to call first quarter and was aided by strong working capital management.
We finished the quarter with net debt of $549.5 million, representing a net leverage ratio fluctuate one times, our TTM consolidated EBITDA of $127.7 billion third it terms of our patent agreement.
As a reminder, our credit agreement had just bringing total net leverage company no more than high Plains, five times, which takes can only if borrowings under our credit facility exceed 35% our revolver capacity of $150 million.
At March 31, our borrowing levels were below that international meaning no covenant was in place.
Additionally.
And it should have consolidated EBITDA in the agreement allows for various adjustments, including those for anticipated proceeds of insurance claims under our bank cancellation policy.
The impact of shifts in our event calendar.
The add back in certain one time costs as well at run rate savings restructuring initiative initiatives.
This serves to bolster our TTM consolidated EBITDA calculation.
In the face a coffee related cancellations and postponements.
As Brian has discussed we're reviewing our ongoing expense structure to identify opportunities optimize and further reduce our expenses.
Okay, we've made significant progress our.
Our cost structure is made up of your direct costs needed to execute events and the machinery or overhead needed to run the company and manage our portfolio of assets.
Let cost or where are you could argue.
Typically 70%.
However, with enough advance notice almost all direct cost can be avoided.
Today, we reported over $30 million wrap up.
And we have a capsule and we're carefully managing.
At this stage in order to avoid turnover costs given this current circumstances.
Our overhead is more fixed specifically, we estimate a little over 50%, it's even the leadership team IP infrastructure rent and public requirements. Among other things that said, we reorganized how we operate in order to reduce the run rate of Sta over $15 million.
Beginning of year.
This includes approximately 18% headcount grew combination of staff for Chuck Shaffer obligating opening conditions and strokes.
We continue to look at areas, where we can manage the business more efficiently while also increasing our investment in growth and diversification initiatives.
We look forward to updating you on our progress in the coming months.
One last item our balance sheet looks a little different this quarter given the event cancellations, we have had a significant decline in deferred revenue.
Our business typically has favorable cash flow dynamics with exhibitors paying for booth spades ahead of the production events production of our events.
When events or canceled we must refund those payments given the high volume of event cancellation the amount of pending refunds is substantial.
As a result, we've broken out the refund or canceled event liability of $72 million on our balance sheet.
We believe that the anticipated proceeds of our event cancellation insurance claims will offset the pending refunds and when combined with the cost saving moves I just discussed should provide the company with ample liquidity to manage through the current environment.
With that I'll now turn the call back to Brian.
Thank you David.
Well the first quarter was off to a strong start with our events delivering results in line to better than expectations, the global economy, and the events industry along with it has encountered severe headwinds as a result of the covert 19 pandemic.
Our team has done an incredible job rescheduling many of our shows to the second half of the year.
Accelerating into our digital product offering while nurturing our existing customers and growing new customer relationships.
I'm very proud of our employees for their efforts in such a challenging environment.
I'm also very confident in our expected insurance coverage, our solid liquidity position and the future viability of our industry.
There is clearly much uncertainty in the world today I'm confident that we at Emerald have the financial flexibility to whether this unprecedented time, while maintaining our industry leadership.
Thank you once again for your time today.
Operator, please open the call for questions.
[noise] certain certainly at this time, we will be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad a confirmation channel indicate your line is another question can you May press star to if he would like to remove your question from the Q3 participants using speaker.
And then she may be necessary to pick up your handset for pressing the star keys.
One moment, please while they call for questions.
Just first question is from Seth Weber of RBC capital markets. Please go ahead.
Hi, This is only Mclaughlin on Percept Tonight.
My first question is just in a scenario where the World me out then stuff people remain wary about traveling well then we'll still put on the show is it looked like participation levels are going to be significantly lower than prior addition.
I guess, we assume there'd be some impact into their ROI is in the event a material materially lower attendance. So just wondering how you're thinking about managing that particularly as you move toward more sophisticated value based pricing models.
Sure.
So you know, it's it's very much going to be a case of is the the facts and circumstances.
As we get closer to a particular show staging and the come out of.
Customer interest and the viability of the event.
I think at this point most customers as our survey has a has indicated aren't expecting that we're going to return overnights to pre co good levels of participation.
And in fact, as I mentioned on the Oh on the call just a moment ago most of them expect that there'll be less attendance.
That said you know the question is really around the value that a particular brand has the kind of.
Customers, both buying and attending attached that quality of event the quality of the brands that come together that result in a meaningful connection and transactions essentially people are really hungry to business.
And so while the attendance may come up or down.
A lot of that expectation is to be the type of business that can be done secondly, I want to point out that as David mentioned, a lot of our costs are scalable and as we began to get closer to the anticipated.
Volume of overall participation will be able to scale a lot of those variable costs. Accordingly. So that's a you know we're not planning for an event of 100000 people. When we know that so far fewer may show up.
So we're going to try to manage.
The margin to each one of these shows as a they they come closer.
So that in the end, what we're trying to really managed as customer expectation and customer experience because that over the long term is going to be the thing that is a long term and enduring aspect to the business.
Okay. That's helpful and just switching over to the insurance side of things, we understand that the cancellation insurance boundary 2021, I'm not sure when the discussion take place you electoral policies to 20 to 22 I just want to get your thoughts on the ability to obtain the same breadth of coverage in the future ensuring such circumstances.
Random acts any impact on policy pricing any inflation, there is something that could materially affect profitability and the like several years ahead.
Alright. Thank you this is David.
And then follow on known at this point is the reality I think that we need to wages said, how the next few months play out.
How much impact it has had on our industry and others.
To understand yet what the ability onboard or cost downs.
That type of reinsurance is for 2022 beyond.
We're very pleased that were already locked in for 2021, but.
It's unclear what that's going to look like if that insurance is still available to us it will surely cost more.
At but theres no certainty it will be available beyond our current contract.
Okay. Thanks, very much so it was helpful I'll pass it on.
The next question is from Ryan Maynard Barclays. Please go ahead.
Hey, guys. Thanks, I was just wondering if you price maybe a little bit more near term liquidity update you mentioned the revolver at the end of March but you know through April and I guess, what are the assumption you make in terms of when you know show you start hosting shows again that under.
Why youre competence and liquidity in the near term.
Sure so.
At the end of the corner.
Our net revolve around fuel is essentially zero right, we drew down proactively in order to have a cash on the balance sheet.
And while we've used a little bit of cash since quarter end, it's not meaningfully.
Different at this point in time as we have begun testing some refunds and we'll continue to as we move where the corner and then ultimately our belief is insurance proceeds will come in offset those refunds.
And replace that cash with the company.
We've run scenarios that have no shows the rest of the year and chosen 2021 down significantly.
And our building scenarios around all of that of what we would look like what moves we would make et cetera, and so while we've taken taken significant amount of cost on the system already and materially reduced our cat cash burn, especially when you combine the team suspension of our dividends in the elimination of our share buyback program.
There are other moves that we could and we'll make if necessary. If this looks like it's going to extend well into 2021.
And I guess, maybe on after they've been can you give us more information on your cash burn today, you know what that looks like if events don't come back into the third quarter and then just on the insurance piece specifically.
You have filed claims before they typically been path I mean, I know these are different times, but you know what is the timeline. This takes a year. If we have lived through legal proceedings, how does that kind of alter yeah. Some of them. After you just giving us.
Sure I'm.
Well I think it will start with we don't expect can take a year.
And our scenarios do not contemplate insurance, taking a year, we have already submitted a substantial amount of claims.
And.
I do not believe that it will drag out like that.
I think when you look at the circumstances going on in the near term.
The events in which are.
They venues in which our events.
We're supposed to stage in March and April they're all closed.
And every single government authority in those locales has made it a legal.
To have gathering.
Sometimes more than five people on that wasn't kind of people went a little bit more in our mind, that's pretty clear and I think that in our view why would someone hey, this insurance if that did not qualify in that part.
Now ultimately there.
No guarantee.
And there might be.
It is different loved ones are like might ultimately be covered but.
I think should we be near term events, we would have all the time, but weaker you'll understand outbreak that if kids Dan.
We'd have to potential take incremental moves to produce cash.
[laughter] a in order to ensure that we didnt reach that point, where that money come said.
In the short term we.
We have taken on the cash burn and they have.
The.
If you look at the.
Direct cost line of art I know.
You should assume on those shows are staying at that really essentially zero.
And I was there certainly is planned to be in July.
We're being very carefully about commitments you have those expenses given the uncertainty that those are well stage hopefully they do but they may not end and so we're going to manage that as appropriate ultimately off.
Shows that had not yet stage, but I still in the calendar.
Staged.
Hi, So you know tens of million dollars just direct costs that were looking to avoid in order to minimize the cash burn books want it otherwise might have been a in a normal year.
Same time on our SGN age down meaningfully.
Given the moves in the short term.
We've been able to reduce Chile to SGN, hey by 25, 30%.
Levels and can depending on how the rest of your playing out.
Be willing to make moves gets similar to reduce the rest of year.
Okay. Thanks.
[noise]. The next question is from Jess Mueller of Baird. Please go ahead.
Yeah, I think is this.
Might be already covered by saying that do insurance covers communicable disease, but is there any pandemic exclusion and your policy.
No no.
Want to be I'd be very clear.
We take extra.
For a rider that specifically covers endemic.
Yeah, well diseases.
Got it.
That's helpful.
When.
You kind of breaking up at least for me can you just run through the expenses are done there was something about over I think 50% of SDMA is fixed or variable. When you gave us something on like direct expenses could you just David just break that down again course plays it wasn't coming through clearly to me.
Discretionary sorry, sorry about that we're all remote how long do they have a cell phone.
The <unk>.
I think you're generally look at our direct costs apparent on an event, it's about 30% fit and 70% variable, but that's how you get closer to closer and closer to management ultimately actor your visibility well ahead of time around an event not happening or being smaller.
Even though it's 30% I'm, calling six can be variable rate debt. There that's kind of initial marketing spend but rent on the facility things like that where there's a certain amount you're just going to spend if you're pretty I mean event I and my mind I that's fixed.
But if you know you're not adding that also in that kind of become very well if you're ahead of you harness.
And I'm kind of become more very about your had been on on a show that would be smaller you can commit to smaller amount of space. You can have a smaller marketing plan from day, one where you're never getting ahead of yourselves from that and so that's what I was talking about in terms of direct caught I asked today.
Well, we look at it more than half his script.
Cost of the senior team I T O right.
<unk> costs are generally the things fall within that and we look at it more variable and and again.
Turning around the number of shows we produced a the amount of of marketing that we did spend.
But we put time sales et cetera are all things that are a bit more on variable in nature and with proper you're planning I can be.
Reduced if you foresee a revenue is going to be lower than than you plan or if it's a C producing less events overtime.
Okay, and then I'll be insurance policy, you gave us the amount will you put it in the context of revenue, but it it I'm not interpreting it.
Revenue or shows that account for half of your revenue you are covered it sounds like correct me if I'm wrong like all of your revenue it's possible, but then there was a maximum depending upon I guess stripping out the director avoidable costs and that's structure that way.
In some choose to get rid of those costs can you just maybe.
Let me know if I'm interpreting that correctly or dot Where's my error.
Sure So [noise].
Let me try to simplify it.
We have $191 million of coverage in 2020.
I'm events cancelled.
Or for damaged or for enforce reduce attendant do two things out of the company's control that are laid out in the insurance policy. One of those items is the impact of a pandemic and and so ultimately.
What is covered than with that 191 million limit.
It's the last okay to enrol.
Some of those circumstances right, so perhaps you're thinking about that at the profit contribution or gross profit of that show Campbell is what covers heading into year, we supplied budgets for our guidance to the insurance carriers on.
Got to our.
That is why.
How the premier only to determine that we pay.
400 coverage right. So that's how we come up with the amount.
191 million, that's probably come up with the premium that we pay for that insurance based 191 billion and now we have $191 million coverage over the course of the your applause any and all events and are potentially.
Impact I didn't fall under the circumstances.
Policy.
Okay, and then different variation of an earlier question, but.
Yes, the show attendance.
Remains depressed intermediate term so like I don't know if this isn't attendees per show or revenue per show kind of in 2022 is okay pick your number 25 or.
40 or whatever percent below.
The 2019 revenue level for that same show whatever kind of numbers you run through some of your sensitivity analysis, what would that imply for.
Gross profit or EBIT or kind of add on a show level like is it revenues down 25 is EBITDA down 50, or just any sort of sensitivity.
Around what the financial implications would be if you wouldn't have a show revenue returned 200% a part of a baseline anytime soon thanks.
Oh, Yeah, I don't think I'm going to start playing scenario game about what percent of what for 2022, which is a long time from now and hopefully barriers to the popular.
So let me circle.
Correction to this problem at that time, but ultimately we just talked about a fixed versus variable component of our of our events and I think if you use that as a starting point you can run.
Some scenarios what things could look like I. If revenues are hit looking out a couple of years.
And when.
And shows or say staging again and might not be back to a full force, but but one thing I do I do want to reinforce related is with enough lead time, that's 30% that I'm, saying its fixed on a shallow.
And even more variable.
And so if it becomes clearer that events are coming back at levels lower than we anticipate we can look forward venues, we could attached to our.
Our costs around pay on the event in order to protect the margin a bit more than a surprise shortfall of revenue at the last minute what underlies.
I'll now like okay.
Okay. Thank you for taking my questions.
Sure.
The next question is from Robert Lever of International FCC Shannon. Please go ahead.
Hi, guys. Thank you for its for taking my question.
Hi, there has been a lot of questions asked on the insurance, but just.
Well I'll take one more stab at it basically you're covered at 191 million of lost revenue.
It is the purpose of the insurance is to cover the gross profit effectively associated with that lost revenue.
After the you know what you're saying you have to pay back the deferred revenue the into the the prepayments. After all that has done the gross profit from that 191 million in revenue should be protected is that correct way to look at that.
That is essentially how the.
Policy is constructed.
Okay.
And then on your Ah your revolver utilization.
I I don't know if it's too much of the too much of a projection to us but given that these.
Given that the expected proceeds that you can get from the insurance coverage do you think you would have availability.
Beyond the current draw off.
He says is $50 million below the current $50 million draw.
You know going forward like let's say pass to Q.
Oh, I'm, sorry, I'm not to reward that I'm not quite sure what you're asking.
You are you noticed that you have the springing financial covenant on your revolver, but not to us, but the the financial Covenant takes into account expected insurance proceeds as well as deferrals of events or cost associated one time cost associated with deferral of of the.
Given all those those expectations.
Do you think you would have availability on the revolver greater than the current remote that you've drawn down like you noted that you're below the amount of the springing financial Covenant right. Now do you feel that you could tick it up beyond that at any point and this year even.
Even if it came quarter so.
Sure.
It's really possible everything depends on the amount and timing of insurance recoveries.
So there are surely scenarios, depending on the flow of insurance proceeds assuming that they're coming.
Like we expect that could lead us to be borrowing above the threshold for the cobbling to kick in.
Okay. Thank you very much appreciate.
Sure.
This concludes todays question and answer session I would like to turn the floor back over to Mr., Brian Shields for closing comments.
Yes, I'd just like do up [noise], thank everyone for joining us today.
And no reaffirming our our confidence in Emerald over the long term and the kind of attention that were.
Delivering to our customers and through all of our staff activity in support of that attention to our customers is something on I'm deeply grateful for and that I'm I'm confident we'll.
Pay dividends over the long term as we keep those customer relationships very close to us and nurtured.
Thank you very much.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
[music].