Q2 2021 Emerald Holding Inc Earnings Call
Good morning, and welcome to the Emerald holding Inc. Second quarter, 2000, and free 1 earnings conference call.
During today's call all parties will be and a listen only mode.
Following the prepared remarks, the conference will be open for questions with instructions 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 shuts such statements are subject to a variety of risks uncertainties and other factors that could cause actual results to differ materially from those indicated are implied by such statements.
Such risks and other factors are set forth and the company's most recently filed periodic reports.
And form 10-K, and 10-Q and subsequent filings the.
The company does not undertake any duty to update so such forward looking statements. Additionally, during today's call management will discuss non-GAAP measures, which it believes can be useful and evaluating the company's performance.
And the presentation of this additional information should not be considered and isolation orange and substitute for results prepared in accordance with U S Guy and.
A reconciliation of these non-GAAP measures to the most comparable got measures can be found and the company's earnings release.
As a reminder, this conference is being recorded and replay of this call will be available on the investors section of the company's web site. There are 11.59 P M Eastern time and August 6th 2021 and.
And I'd like to turn the call over to Mister Hervey said, Keith President and Chief Executive Officer. Please go ahead Sir.
Thank you Melissa and good morning, everyone I have to say, it's great to be back to the business on today's call I'll provide an update on our events schedule as our team has been preparing for what is expected to be the largest number of shows staged and the second half of the year and Emerald history due to the numerous events being.
[noise] moved from earlier and the year to the second half and which we began staging over the last few weeks, David Daft Emerald CFO, where review our second quarter results and we will then open the call for questions.
To start our second quarter results continued to be impacted by the COVID-19, pandemic as we canceled or postponed and all of our life events, except for our hosting a regional ASB market week, South East and Orlando in April and digital dealer in Tampa and June.
While these are 2 of our smaller shows our customers clear enthusiasm for returning July of events was evidence.
The more recent digital dealer show, which brings together automated automotive dealers Oems and thought leaders over 3 days demonstrated a vital role that face to face events continue to play and driving connections commerce and growth for our customers and communities and.
Attendance reached 65% of the free Covid edition impacted by supply train issues and the auto industry combined with international travel restrictions. However, we experienced a significant increase in the shows net promoter score based upon the quality and value of the <unk>.
Events to attendees, leading too much stronger pacing for the next iteration later this year.
Providing valuable events to our customers is critical to our long term success and the focus of our team as we as we are set to stage 86 live events through the second half of this year.
The roll out of the Covid vaccine has created the confidence that we can move forward with in person events as all of the states, where we host events have reopened and approved the allowance for large in person indoor events and fact Emerald events are the first or among the first.
Large scale events to stage post reopening in New York, Chicago, and Las Vegas, among other locations.
The vaccine and data points around its efficacy are creating confidence.
For our second half show schedule that said there is still some near term caution among our customers given the rise of the Delta variance.
And we're closely monitoring any near term impacts on our event calendar to be clear safety remains a core priority and as a focus for all of our shows as we work to provide a safe environment for our exhibitors attendees our team and other per cent participants.
It is important to note that planning and staging this quantity of events. While also working through significant logistical issues given the short and lead time that now exists is presenting our team and our customers with challenges, which will also impact attendants given some of the uncertainty that continues to exist.
Given this backdrop are clear goal is to deliver a high quality events that meet and exceed our customer's expectations as we focus on our shows brands and the value that our customers achieved by attending.
As we've said we need to keep our customers at the center of everything that we do as a company and that is our priority. We're cognizant that we will see lower attendance and revenue in the near term relative to prepandemic levels, given the dislocation that has taken place show postponements that and some case.
Does have shifted events outside of typical buying seasons travel restrictions that still exists as well as shorter selling cycles for some events impacted by the timing of cities permitting large gatherings as a result, our focus for 2021 is not on the level of attendance or even revenues. It some day.
Gibbering the highest quality events for our customers as we focus on getting back to live events with a view that we're building toward a more normal attendance environment as we look out to next year.
We expect a full recovery will come and our revenues are poised to recover to prepandemic levels as long as we maintain the quality of our shows and value to our customers, we remain confidence and our events physician as a strong driver of return on our customers marketing investment.
As we start the third quarter, we continued to see positive signs highlighted by our prosperous show, which stage and Las Vegas, 2 weeks ago Prospers and annual conference aimed at online sellers seeking to improve their business on Amazon and it was essentially in line with free Covid edition in 2019 with expectations.
Of a very strong addition, next year, which is certainly not surprising given the move to e-commerce that we've experienced through the pandemic.
Look into the weeks ahead. Notable shows that will stage include ASD market week, New York now all our summer market HD Expo retail X, Syria, and surf Expo among others.
As I mentioned all of our near term shows are seeing constraints and impacts resulting from the incredibly short lead time to plan.
And stage with pacing ranging between 30 and 70% of Prepandemic levels from most events and 2021.
What does it become more apparent is.
His events staging and their normal time slot are pacing better than those postponed out of their normal dates and events and cities that reopened early are facing better than those that reopened late and that events with more of a domestic audience are pacing better than those with.
<unk> International attendance given travel restrictions that remained in place.
What is very encouraging is that the pacings are better the further out we look, especially with our 2022 first quarter events spacing much closer although still below free COVID-19 levels on average and and where we expect to see a more substantial recovery and our business assuming the situation with COVID-19.
Facilitates a normal operating environment.
And important important to highlight and which David will expand upon is are very attractive business model that features negative working capital requires little and the way of Capex investments and generate strong free cash flows as.
As we begin to book customers for our upcoming shows were receiving deposits in advance which can be seen in our strong positive free cash flow generation. This quarter, we're beginning to build cash on our balance sheet, which will have a long tail as we gradually return to pre COVID-19 levels.
We are and the sweet spot of this now which is welcome relief as compared to a year ago.
Now I would like to provide you with an update on our strategic imperatives that we're implementing to drive growth and profitability and which are centered on customer centricity deliver.
Delivering 365 customer engagements and portfolio optimization.
And our customer Centricity, we have now essentially completed the data integration of our customer data hub.
This was a significant undertaking as we will have integrated all of our customer data from more than 50 sources into 1 database with completion, we are moving to operationalize of customer data hub and the latter part of the year as we get back to selling our full suite of events and content. This.
Will allow our teams to deliver greater service and value to our customers due simply to the fact that we will have improved visibility into all areas of our customers are doing business with us. We're also making technology investments and upgrades to more seamlessly interact with our customers enhance the value, we provide them and make it easier.
To do business with us and ways that our customers once.
The second strategic imperative is our goal of engaging with our customers 365 days a year through utilizing digital mediums are acquisition of Plum River and its elastic sweet technology platform is central to accomplishing this goal and a key component of our strategy of bringing buyers and sellers.
Gather and a digital environments year round, while providing them with a platform where they can transact. Although we are still in the early days, we're making good progress on this front and continuing to work towards rolling this digital marketplace across brands such that it becomes an integral and.
And cohesive 365 day tool with recurring subscription based revenues to complement our live events. We expect this to become a powerful feature of our model with time.
Through the second quarter Plum rivers core enterprise offering elastic suites continued to deliver on our expectations with more than double the number of new clients wins as compared to this point last year.
This area of <unk> E. Commerce software is beginning to make real traction and the marketplace and we are and a great position to accelerate growth here further as we continue to build out our sales and development capabilities and rolled out elastic 2 more categories in the coming quarters.
Our third strategic imperative is portfolio optimization, where we are 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 give.
Given our strong balance sheets and liquidity, we're also and the enviable position to acquire attractive assets.
As we discussed and our first quarter earnings call, we acquired shoe price education and April.
This is a member based portrait photography platform that provides a valuable content to its members with a subscription based business model while focused on photography. We believe this E learning concept can be expanded across our portfolio of shows adding valuable subscription based revenue model that will and.
Hands are year round digital offerings. This was a relatively small acquisition, but 1 that belief 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 also growing our business.
During the second quarter, we also announced a strategic partnership with come exposure to launch CL America and March of next year and Las Vegas, We expect <unk> America will be the first large scale generalist food show focused on supporting the 1.5 trillion food and beverage Mark.
But.
This show will Colocate with our international Pizza Expo and international Artisan Bakery Expo and is expected to focus on organic and wellness beverages grocery sweets and bakery seafood meats and snacks to name a few we expect CL America to be very meaningful over time and are excited.
And to launch it next year.
Overall, we continue to be and the inevitable position with our strong balance sheets cash generation contents, and commerce offerings and portfolio of industry, leading shows we will continue to that potential acquisitions and.
As there remains dislocation across the events sector, we will remain disciplined and opportunistic as we focus on enhancing the value of our portfolio and accelerated the growth of our business as we look to the recovery of the events industry, which we believe it's clearly at hands now let me turn the call over to day.
And.
Thank you have a and good morning for.
For the second quarter, we'd reported revenues of $15 million, which compares to $7 million and the year ago quarter.
Organic revenues for the second quarter were $11.6 million and increase of $5.3 million as compared to the second quarter of 2020 organic revenues of $6.3 million. The increase was due to several small live events that staged which herve touched on as well as higher print and digital advertising <unk>.
Revenues combined with several new virtual offerings.
Our adjusted EBITDA for the second quarter was negative $13 and $6 million as compared to a positive $33.2 million and the same period last year.
The decrease and adjusted EBITDA of $46.8 million was mainly due to the lower confirmed a received even cancellation insurance claim proceeds and the second quarter of 2021, we.
We recorded $2.3 million of other income during the second quarter of 2021 as a result of event cancellation insurance claims proceeds related to events cancelled and the second half of 2020, which compares to $48 and $2 million of other income recorded during the year ago second quarter as a result of event cancer.
Elation insurance claims proceeds related to events cancelled and the first half of 2020.
Looking at our event cancellation insurance in more detail, we have submitted $242 million and claims to date. We also continued to work on finalizing claim submissions for several more cancelled postponed and otherwise impacted 2021 events.
These claims represent the net amount of budgeted gross revenues less avoided costs for impacted our cancelled events previously scheduled to take place and 2020 and 2021.
Through June of 2021, we have received insurance claim payments totaling $123.4 million of which $89 and $1 million was received and $2020.29.6 million has been received and the first quarter of 2021 and $4.7 million was received and the second.
Quarter of 2021, and we have also received or expect to receive an additional $1.3 million and insurance payments and July.
We are actively pursuing collection of the remaining unpaid amounts of filed insurance claims for our cancelled 2020 events. In addition to claims for our cancelled 2021 events that currently totals and incremental $120 million as part of these collection efforts. This past February we commenced.
Litigation against the insurers, we supported by the views of our outside counsel have strong conviction and our position and believe the insurers have improperly failed to timely pay amount due and owing on submitted claims as covered losses, and we intend to vigorously pursue fall collection on these insured claims.
Turning to our events schedule and as survey discussed we are in the middle of planning selling and executing a very aggressive calendar and the second half of this year and the earlier results have been positive with enthusiastic feedback from our customers, albeit with lower levels of attendance and revenue in general.
As our Vey mentioned, we have a range of expected outcomes for near term events with some events off meaningfully from pre COVID-19 levels, while others are pacing much closer to what we've seen in the past.
That said, we maintain almost $200 million of events cancellation insurance for the full year 2021, which we expect to continue to insulate our business from certain adverse effects of the pandemic, especially if the delta variant where to intensify we.
We will also be vigilant as we work to mitigate expenses related to cancelled 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 second quarter, which is really the breakthrough metric to focus on this quarter, we experienced a net inflow of $23.8 million, which compares to and outflow of $32 and $6 million and the year ago second quarter. As everybody noted we are experiencing strong positive net cash inflows and.
Shows begin to stage and we receive customer deposits. The impact of this is best seen and the increase and deferred revenue from $48.6 million, a year and $2.119 and $2 million at June 30. This should have a long tail as we ramp or events back to pre COVID-19 levels over time.
Actually our business model is a capital light model as our Capex runs had very low levels as can be seen by our capex and the second quarter of 2021, which was $1.3 million as compared to $1.2 million and the year ago second quarter.
We ended the second quarter of 2021 with $300 million to $8 million of cash as compared to the first quarter of 2020 one's cash balance of $293.6 million. Additionally, we have full availability of our $110 million revolving credit facility, which brings our total of.
Quiddity to almost $413 million note that and June we extended the maturity of a revolving credit facility by 18 months to November of 2023 as part of the extension, we reduced capacity the facility to $110 million, which given our strong liquidity.
<unk> is more than appropriate.
As we have discussed our $400 million capital raised and 2020 combined with our with our event cancellation insurance policy has allowed our team to remain on its front foot and opportunistically invest and the business and position Emerald for growth as the exhibition industry begins to normal.
Through the second half of 2021 and into next year her.
Survey outlined the benefits of our acquisitions of Plum River and too bright 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 to organic growth.
And we also plan to remain disciplined and keep a tight rein and our expenses and we strive to balance investment and profitability. We finished the second quarter with net debt of $219 and $6 million down from the first quarter of 2021, and representing and net leverage ratio of 1.5 times are TTM consolidated E.
<unk> of $148.5 million per the terms of our credit agreement.
As a reminder, or credit agreement has a springing total net beverage covenant of no more than 5.5 times, which kicks and if borrowings under our credit facility exceed 35% of our revolver capacity of $110 million at June 30, we had no borrowings under a revolver and do not expected Ron R. A.
Solver and the near term given our strong liquidity position.
With that I will now turn the call back to her day.
Thank you David to conclude the return to live events. This summer is an important infection 0.4, Emerald as we re engage with our customers and remind them of the value that our shows provides and while near term show attendance continues to be impacted by COVID-19 concerns timing issues travel bans and other <unk>.
And demick related items those that do attend have so far enthusiastically done so with increased satisfaction and.
As I said last quarter, we have built a strong foundation.
Which will allow us to expand the value we offer to our customers engage with them year round and ultimately better monetize the value that we're providing we are building new digital businesses that are expected to provide high margin subscription revenue streams to complement our live events and.
And we believe this will allow us to greatly expand our addressable market and physician emerald to deliver accelerating organic revenue growth with improved profitability overtime.
Thank you again for your time today and Melissa now please open the meeting for questions.
Thank you gentlemen at this time will be conducting a question and answer session. If you'd like to ask a question. Please press star 1 and your telephone keypad, a confirmation total will indicate your line and and the question Kim.
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For participants using speaker equipment and may be necessary to pick up your handset before pressing the stocky 1 moment, please lollipop for questions.
Gentlemen, and it seems there are no questions at this time I'll turn to slip back to management from any final comments.
Very good thank you Melissa and thank you all for your participation today have a very good Friday and a good weekend goodbye.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.