Q1 2021 Emerald Holding Inc Earnings Call
Good morning, and welcome to the Emerald holding incorporated first quarter 2021 earnings conference call. During today's call all parties will be in a listen only mode. Following the prepared remarks. The conference will be opened for questions, we'll construct and just to follow at that time.
Before we begin let me remind everyone that this call may contain certain statements that constitute forward looking statements 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 to differ materially from those indicated or implied by such statements.
Such risks and other factors are set forth and the company's most recently filed periodic reports on form 10-K, and form 10-Q, and subsequent filings. The company does not undertake any duty to update such forward looking statements. Additionally, during today's call management will discuss non-GAAP measures, which it believes can be useful in evaluating the company's 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. GAAP a reconciliation of these non-GAAP measures, it's and the most comparable GAAP measure can be found and the company's earnings release.
As a reminder, this conference is being recorded and a replay of this call will be available on the investors section of the company's website through 11 59 P. M. Eastern time on May 7th 2020 one.
I would now like to turn the call over to Mr. Irving said, she president and Chief Executive Officer. Please go ahead Sir.
Thank you and good morning, everyone.
On today's call I'll provide an update on our events schedule for the balance of the year as well as our progress executing on our strategic initiatives designed to add value to our customers, while accelerating emerald to growth.
David Dolphin, Emerald and CFO will review, our first quarter results in more detail and we'll then open the call for your questions.
To start our first quarter results continued to be impacted by the COVID-19 pandemic as we cancelled or postponed all our live events, except for Scherf Expo in Orlando and January that while in person was impacted by understandable and travel and safety concerns.
You May recall January was a time when we were in the midst of a frightening surge of COVID-19. It was in fact, the deadliest months yet.
So it's no surprise that even though we still hosted several thousand people, we experienced a more than 50% decline and attendance yet.
Yet our exhibitors were very pleased with the quality and.
And the number of buyers that attended as the buyer to exhibitor ratio exceeded pre COVID-19 levels.
Importantly, the events stage safely with the industries all secure protocols fully observed and there were no reported COVID-19 cases coming out of the events.
Positive customer sentiment coming out of surf Expo and clearly demonstrates the vital role that face to face events continued to play and driving connections commerce and growth.
For customers and communities.
Looking ahead, our business is at an important inflection points as COVID-19 vaccines are not widely available and the U S and tens of millions of Americans have been vaccinated.
Many states have scheduled their reopening dates for large in person events over the next two months.
And we're just providing real optimism across our industry.
Importantly, the governor of Nevada announced that the state is expected to fully opened on June 1st, California announced that events are expected to be a lot of beginning on June 15th and just yesterday. The mayor of New York City said he plans to fully reopened the city on July 1st. So we're hopeful that New York State will allow large live it.
Hence beginning this summer.
Additionally, Florida, and Texas are already fully open for business.
The rapid rollout of COVID-19 vaccines combined with their success and providing protection is beginning to provide confidence to our customers, while giving our team the conviction to move forward with and aggressive second half event schedule and.
As a result, we expect our full resumption of our events calendar beginning this summer.
We are planning for the busiest second half and Emerald history in terms of the number of events were producing given the show postponements that have occurred.
While the outlook for attendance at our shows remains uncertain and could well be challenged in the near term even for events, we do stage with the lingering impacts of COVID-19. We're encouraged with the early success that we're seeing from other operators in Asia, where recoveries seems further along and.
We've seen several recent events, which have matched or exceeded pre COVID-19 levels that said our focus is true insure that we stage successful shows for our customers that not only deliver value, but also safe environments.
We remain confidence and the value that our events provide to our customers and believe that our shows and our industry will return to pre COVID-19 levels overtime.
Safety is of course still very much top of mind. This past March Governor, Steve just a lack of Nevada set the following and an interview with the associated press Mark My words, Nevada will be the safest place to have a convention or did you come and visit it will be safe for the tourists it will be safe.
For the hotel operators and for the employees and their families are called the Governor of Nevada is I feel his words are a helpful reminder, that as we begin to rollout ambitious in person and trade shows we cannot forget that our clients and employees need us to commit to the highest safety standards and possible they have my.
Ward.
Well, we have only stage two large events over the past year, we have not been idle in fact, our team has been hard at work transforming our business as we strive to innovate and expands.
And last quarters call I discussed our growth focused framework that is centered on three strategic imperatives, which are customer centricity delivering 365 day customer engagements.
And portfolio optimization I'm very proud to report that we have made significant progress across all three initiatives through the first quarter, which puts us in a position to thrive as we return to live events.
On customer Centricity, we have completed the first stage of our customer data hub, which has taken more than a year to complete.
This was a significant undertaking as we have integrated roughly 85% of our customer data from more than 50 sources into one database. We expect to have the remainder of our data integrated by the summer, which should allow our teams to deliver greater service and value to our customers due simply to the fact that we will have improve.
And with visibility into all areas that our customers are doing business with us ultimately, we will better understand what our customers really care about across Emerald portfolio of events Webinars digital content, which will in turn and allow us to be more targeted and how we develop market and sell solutions to them and more.
Effectively engage with them year round.
We also created a dedicated pricing function by hiring our first pricing director, whose mandate is to drive the optimization of our value based pricing initiative.
The second strategic imperative.
Our goal of engaging with our customers 365 days a year through utilizing digital mediums.
Our acquisition of from River and it's elastic suite technology platform is central to accomplishing this goal and a key component of our strategy of bringing buyers and sellers together in a digital environment year round, while providing them with a platform where they can transact.
As part of this I'm very pleased with the development of elastic suites digital marketing technology platform.
This powerful b to B E Commerce platform will provide our exhibitors with the technology to take their relationships with their customers beyond the show floor by supporting the wholesale purchasing process year rounds.
Digital market creates a standardized single platform approach to beta B e-commerce by offering 365 day access to product sourcing and ordering across a broad range of brands.
Digital market also provides the opportunity for a more streamlined and collaborative buyer seller experience and our in person events.
The launch of digital market is set to coincide with our outdoor retailer and surf Expo summer additions with expectations for the platform to be rolled out across more of our events over the balance of this year and next.
Our third strategic imperative is portfolio optimization, where we're cultivating a culture of innovation with additional growth driven by accretive M&A and new event launches through our newly created Emerald accelerator business unit.
And we recruited and on boarded a few weeks ago, a former senior executive from American Express you said you want H elite Emerald accelerator. This team will evaluate and execute on new event launch opportunities, which we expect to be and incremental driver of organic growth over time.
Given our strong balance sheets and liquidity. We're also in an enviable position to acquire attractive assets that come up for sale. One day, we believe has real potential as true Bryce education, which we acquired in April two.
Price is a member based a portrait photography platform that provides valuable content to its members with a subscription based business model.
The company offers photographers both online and in person learning and a community that helps them grow creatively, while also providing them with the tools to build their own successful photography and businesses.
Well I'll focus on photography, we believe this E learning concepts can be expanded across our portfolio of shows adding a valuable subscription based revenue model that will enhance our year round digital offerings and.
This was a relatively small acquisition, but one that we believe provides a platform for expansion across our portfolio of industry, leading shows which is critical to how we think about expanding the value that we provide to our customers while growing our business.
Historically Emerald was a collection of industry, leading live events that are number one and their industries and must attend events for both exhibitors and attendees and the shows were managed and run almost as separate companies with their own sales force is marketing and customers.
The show teams did not interact with one another nor where customers engaged holistically. Each show was stage once or twice a year with limited customer engagement beyond the live show except to sell the next edition.
We're changing this paradigm with a new way of doing business, which you can clearly be seen with our key initiatives. This quarter, our customer data hub will allow our sales team to better add value to our customers by offering solutions that draw upon all of Emerald products.
Which will better meet their needs with a launch of digital market brands and retailers across the Emerald portfolio, we'll be able to transact year round.
And the digital market provides a valuable lead generation function for our customers and further enhances the value that we can provide.
We're not positioned to engage with our customers through and 65 days a year, while adding an important new revenue stream to Emerald.
Lastly, our acquisition of Sioux Rice will allow us to develop new ways of engaging with our customers around our live events and unlock the potential of subscription based E learning offerings.
As you can see we think there are numerous and subscription based products that we believe we can extend into.
Which should not only enhance our growth profile, but also provide incremental value to our existing customer base across all categories.
Our portfolio of industry, leading events is crucial to our success and remains our core focus.
That said the disruption to a lot of events caused by the pandemic has provided us with an opportunity to build businesses that complement our shows expand our reach and create new fast growing revenue streams for our malls I'm often asked when will your shows get back to full capacity and what will margins look like at that time.
Well I understand this line of thinking it's not how I think about our business. Our vision has much higher aspirations with re imagining Emerald doing so will result, and accelerating growth and expanding profitability. We took a significant step forward through the first quarter to achieving our goal and I'm very excited.
Cited for what the future holds for Emerald.
Now, let me turn the call over to David.
Thank you Herve and good morning.
For the first quarter, we reported revenues of $12 $9 million, which compares to $99 $7 million and the year ago quarter.
The decrease was primarily due to the cancellation of almost all first quarter events due to COVID-19, including KBS, New York now winter outdoor retailer Snow show ISS long Beach, and the sports licensing and tailgate show, which resulted in a reduction of $78 million, our first quarter 2000.
And 'twenty revenue.
We are also rescheduled several shows the later in the year comprising $12 $2 million, a first quarter 2000 and 'twenty revenue.
During the first quarter, we were able to successfully stage surf Expo and winter and Orlando, Florida, where we experienced a more than 50% decline in revenues and everybody mentioned the number of buyers per exhibitor increased as compared to pre COVID-19 levels, which drove a strong rise and exhibitor satisfaction, our customers satisfaction with surf.
Expo demonstrates the value of in person face to face events, which is so important to our customers' businesses.
Our adjusted EBITDA for the first quarter was negative $2 $7 million as compared to positive $23 $6 million and the same period last year.
The decrease in adjusted EBITDA of $26 $3 million was mainly due to the COVID-19 related cancellation of 13 first quarter events, representing prior year first quarter, adjusted EBITDA of $39 $7 million and the postponement of 10 first quarter, 2020 events representing <unk>.
Our year first quarter, adjusted EBITDA of $5 $5 million.
And this was offset by the recognition of $14 $1 million and other income related to event cancellation insurance claim proceeds received or confirmed.
First quarter 2021 adjusted EBITDA also reflected the benefit of cost savings measures that we've implemented over the last 12 months.
Looking at our event cancellation insurance and more detail, we have submitted $220 million and claims to date.
We also continue to work on finalizing claims submission for several more cancelled 2021 events.
These claims represent the net amount of budgeted growth revenues less avoided costs for impacted or canceled events previously scheduled to take place from 2020 and 2021.
Through April of 2021, we've received insurance claim payments totaling $121 1 million of which $89 $1 million was received in 2000, and 2020 $9 $6 million has been received and the first quarter of 2021 and $2 $4 million was received.
This month.
We are actively pursuing collection of the remaining unpaid amounts of filed insurance claims for our canceled 2020 events. In addition to claims for our canceled 2021 of them.
As part of these collection effort. This past February we commenced litigation against the insurers. We believe the insurers have improperly failed to timely pay amounts due and owing and submitted claims as covered losses and we intend to vigorously pursue full collection on our claims.
Looking to the balance of the year, we have canceled or postponed all our first quarter 2021 events, except surf Expo, which as I discussed successfully staged in January.
Additionally, we have postponed and many of our second quarter events till later in the year and the expectation that states will continue to reopen as the COVID-19 vaccines continue to be administered broadly.
As <unk> discussed we are very optimistic that we can begin staging events through the summer and execute and aggressive calendar and the second half of this year.
That said, we maintain almost $200 million of event cancellation insurance for the full year 2021, which we expect to continue to insulate our business from certain adverse effects of the pandemic.
We will also be vigilant as we work to mitigate expenses related to canceled events in order to preserve our event cancellation insurance coverage given the uncertain environment, which you can see and the sharp decline and our cost of revenues.
Turning to free cash flow and the first quarter, we experienced an inflow of $600000, which compares to an inflow of $7 $7 million and the year ago first quarter. It.
It is important to point out that as our shows begin to stage, we expect to experience positive net cash inflows as we receive customer deposits. In fact, we are already seeing this and the strong increase in our deferred revenue since year end.
Over 50%.
This should have a long tail as we ramp our events back to pre COVID-19 levels over time.
Additionally, our business model is a capital light model as our Capex run at very low levels as can be seen by our capex and the first quarter of 2021, which was $1 million as compared to $1 $1 million and the year ago first quarter.
Turning to our balance sheet. We ended the first quarter of 2021 with $293 $6 million of cash as compared to the fourth quarter of 2000, twenty's cash balance of $295 $3 million. Additionally.
Additionally, we have full availability of our $150 million revolving credit facility, which brings our total liquidity to more than $440 million.
As we have discussed our $400 million capital raised in 2020 combined with our event cancellation insurance policy at all.
Loud our team to Opportunistically invest in the business and position Emerald for growth as the pandemic has brought under control and the exhibition industry begins to normalize.
And they outlined the benefits of our acquisitions of Plum River and Sue price education, which are key steps towards engaging with our customers 365 days a year, we plan to invest and these businesses to expand them across our brands as well as make other strategic growth investments and our business as we work to position Emerald for return.
Organic growth.
We also plan to remain disciplined and keep a tight rein and our expenses as we strive to balance investment and profitability.
We finished the first quarter with net debt of $232 million flat to year end and representing a net leverage ratio of one six times, our TTM consolidated EBITDA of $148 million per the terms of our credit agreement.
As a reminder, our credit agreement has a springing total net leverage covenant of no more than five five times, which kicks in and if borrowings under our credit facility exceed 35% of our revolver capacity of $150 million at March 31, we had no borrowings under our revolver.
And do not expect to draw on our revolver in the near term given our strong liquidity position.
With that I'll now turn the call back to Eric.
Thank you David.
To conclude this is a very exciting time and Emerald as we prepare to return to live events. We have built a strong foundation over the past year, which will allow us to expand the value we offer our customers engage with them year round and ultimately better monetize the value that we're providing.
Additionally, we are building new digital businesses that are expected to provide high margin subscription revenue streams to complement our live events. Ultimately we are greatly expanding our addressable market, which will position emerald to deliver accelerating organic revenue growth with improve.
And the profitability overtime.
Thank you again for your time today and operator, please open the meeting for questions.
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Okay.
Okay.
Ladies and gentlemen, there are no further questions at this time I would like to turn the call back over to management for closing remark.
Great. Thank you very much Alex building on this strong foundation over the past year is provides us with this exciting opportunity here at Emerald to to return to live events.
We feel very very.
Very good about the position that we're in and excited about the near and the long term and I want to thank you for your time today.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation and have a great day.