Good morning ladies and gentlemen, and welcome to Emerald Holding’s Fourth Quarter 2020 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 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.

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 statement. Such risks and other factors are set forth in the company's most recently filed periodic reports on Form 10K and Form 10Q 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 in prepared accordance with U.S. GAAP. A reconciliation of these non-GAAP measures to the most comparable GAAP measures can be found in 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 PM Eastern Time on February 25, 2021. I would now like to turn the call over to Hervé Sedky, President and Chief Executive Officer. Please go ahead..

Thank you and good morning everyone. I'm very pleased to be here today and truly appreciate your participation in our fourth quarter and year-end 2020 earnings call. Four things I'd like to accomplish today. First, give you a bit of background on my journey including what attracted me to Emerald.

Second, share my vision on how we will make this strong company an even better one by returning it to growth and improved profitability.

Third, I'll turn it over to David Doft, our Chief Financial Officer for him to review our fourth quarter and year end 2020 results and close the meeting by sharing our key priorities that build on the accomplishments of the last 18 months; accomplishments that are critical in that they provide Emerald a strong foundation for the future.

David and I will then open the meeting to answer any questions that you have. To start I'm very excited to be here today given the opportunity that I see ahead for Emerald and the exhibitions industry overall.

Having spent my entire career in DW businesses starting with my 22 years at the American Express company including serving as Senior Vice President and General Manager of American Express Global Business Travel and more recently my six years at Relics Group as President of the Americas for REIT exhibitions I'm keenly aware of the importance of putting the customer first and obsessively focusing on adding value to them.

In Emerald, I see a company with a portfolio of industry leading live events and content brands as well as the recent edition of incredibly powerful digital experiences. The company's strong capital position allows us to also expand into new digital mediums while taking advantage of opportunistic acquisitions.

Our industry is going through unprecedented change as a result of COVID-19 pandemic that simply cannot and should not be ignored not only because of the impact on our revenue but because in unprecedented times we need to think out of the box and respond with unprecedented creativity, thoughtfulness and resourcefulness.

I'm very confident in our ability to come back.

Our small business customers rely on trade shows to drive their business by launching new products, generating leads, entering new geographies in addition and according to go live together our industry is a foundational element of how business gets done with 46% of small businesses participating in at least one event annually and 41% of companies in the U.S.

considering event marketing as their top channel for lead generation. We've seen early signs of a comeback at Emerald and we're poised to return as the pandemic begins to recede and shows start to stage once again.

In fact, the relative success that our exhibitors and attendees experience at IGES in November and Surf Expo in January clearly highlights the vital role that face-to-face events play in driving connections, commerce and growth for customers and communities. This provides real optimism for the future.

The Emerald senior leadership team led by Chief Operating Officer, Brian Field and Chief Financial Officer, David Doft drove significant and impressive change across the company despite the challenging pandemic environment. A few notable highlights include the reorganization of the company. Expansion to digital mediums.

Cost reductions and profit improvement initiatives of almost $20 million on an annualized basis. The acquisition of a digital marketplace and raising 400 million in capital to de-risk the balance sheet and create flexibility to invest for growth.

This is a remarkable set of accomplishments and provides a strong foundation that we will build from as we continue to execute our growth plan which I will outline shortly. But now let me turn the meeting over to David to discuss our 2020 Q4 results and 2020 accomplishments..

Thank you Hervé and good morning. Our fourth quarter and full year results mimic much of what we have reported all year since COVID-19 began to impact our business. For the fourth quarter, we reported revenues of $12.2 million which compares to $44.9 million in the year ago quarter.

The decrease was primarily due to the cancellation of almost all fourth quarter events due to COVID-19 including Boutique Design New York, Healthcare Design Expo, Photoplus East and Medtrade among others.

During the fourth quarter we were able to successfully stage IGES in Pigeon Forge, Tennessee where we experienced the 50% decline in revenues while the number of buyers per exhibitor increased by 15%. This increase drove a strong rise in exhibitor satisfaction given the increase in sales generated.

Subsequent to end we staged Surf Expo in Orlando which experienced similar dynamics to IGES and further demonstrated the value of in-person face-to-face events which is so important to our customers businesses. Needless to say our customer communities are eager to get back to live events and business as usual.

Our adjusted EBITDA for the fourth quarter was $18.3 million as compared to a negative $1.5 million in the same period last year. The increase in adjusted EBITDA of $19.8 million was mainly due to the recognition of $42.7 million in other income related to event cancellation insurance claim proceeds received or confirmed.

This amount was offset by the COVID-19 related cancellation of 19 fourth quarter events representing prior year fourth quarter adjusted EBITDA of $18.2 million. All in, for the full year we canceled 94 events representing prior year adjusted EBITDA of $141.8 million.

Fourth quarter 2020 adjusted EBITDA also reflected the benefit of cost savings measures that we have implemented throughout the year. Looking at our event cancellation insurance in more detail, we have submitted $167.4 million in claims.

These claims represent the net amount of budgeted gross revenues less avoided costs for impacted or cancelled events previously scheduled to take place in 2020. Through the end of January we have received insurance claim payments totaling $107 million of which $89.1 million was received in 2020 and $17.9 million has been received thus far in 2021.

Subsequent to this we have also received approval for an additional $5.3 million in insurance claim payments. 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 events.

Looking to the year ahead, we have canceled or postponed all of our first quarter 2021 events except Surf Expo which as I just discussed successfully staged in January. Additionally, many of our second quarter events have also been postponed till later in the year.

We remain hopeful that the rollout of the vaccine will mitigate the spread of the COVID-19 pandemic and allow for more activities in the second half of this year.

In the meantime we maintain $191.4 million of event cancellation insurance for the full year 2021, which we expect to continue to insulate our business from the adverse effects of the pandemic that continues to impact much of the country.

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. Turning to the free cash flow in the fourth quarter, we experienced an inflow of $4.7 million which compared to an inflow of $14.1 million in the year ago fourth quarter.

During the fourth quarter we acquired edge spaces in PlumRiver for a total consideration of $37.7 million which consisted of $33.3 million in cash payments and the issuance of approximately 800,000 common shares.

Given the cash outflow for these acquisitions we ended the year with $295.3 million of cash on our balance sheet as compared to the third quarter of 2020 cash balance of $326.7 million. Additionally we have full availability of our $150 million revolving credit facility. This brings our total liquidity to more than $445 million.

As we have discussed our $400 million capital raise combined with our event cancellation insurance policy has allowed our team to opportunistically invest in the business and position Emerald for growth as the pandemic is brought under control and the exhibition industry begins to normalize.

Our acquisition of PlumRiver and its elastic suite technology is a key step in our strategy to bring buyers and sellers together in a digital environment year round and provide them with a platform where they can transact.

PlumRiver is expected to meaningfully enhance our digital initiatives and it's just one of the exciting investment opportunities that we have in front of us as we work to expand our business in the year ahead.

We plan to invest in elastic suite to expand the platform across our brands as well as make other strategic growth investments in our business as we work to position Emerald for a return to organic growth. We will also remain disciplined and keep a tight rein on our expenses as we strive to balance investment and profitability.

Of note, our cost structure is made up of the direct cost needed to execute events and the SG&A or overhead needed to run the company and manage our portfolio of assets. Direct costs are largely variable typically 70%. However, with enough advance notice a substantial portion of those direct costs can be avoided.

We continue to carefully manage commitments for those events yet to stage in order to maximize our ability to avoid further costs given the current circumstances. As part of this we have driven a significant decline in our annual expense run rate which we've reduced by almost $20 million along with other profit improvement initiatives.

We will continue to review our organization for further opportunities to optimize our operations and deliver efficiencies in the year ahead. We also expect to reinvest some of the savings in organic growth initiatives to benefit future years.

We finished the fourth quarter with net debt of $230 million representing a net leverage ratio of 1.7 times our TPM consolidated EBITDA of $134.2 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 5.5 times which kicks in at borrowings under our credit facility exceeds 35% of our revolver capacity of $150 million.

At December 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.

To conclude we are very pleased with our success executing our strategic initiatives designed to streamline our operations, improve the performance of our events and more importantly our customers’ satisfaction expanding into new digital mediums while also reducing our expense structure and preserving capital.

As we look to the year ahead we are focused on accelerating our investments into new growth initiatives that we expect to deliver at least mid-single-digit organic growth annually over the coming years. We will also manage our capital structure as we work to maintain modest leverage between two to three times normalized EBITDA.

As events return and our growth accelerates, we expect cash generation of our business to markedly improve given the low capital intensity of our business model. With that I will now turn the call back to Hervé..

Thank you, David. Looking ahead we've developed a growth focused framework that builds on the strong accomplishments that David outlines in hyper focused on three key imperatives. The first is customer centricity. Our customers must be at the center of everything that we do.

To this end we will focus on identifying our customers’ needs and delivering against them to increase value which we expect will allow us to better retain customers and acquire new ones.

Additionally, we'll have three-year operating plans for each brand establish customer advisory boards and optimize key relationships by providing pan-Emerald solutions to meet their business needs.

We will also implement a value-based pricing structure that will give our customers the opportunity to choose how they want to do business with Emerald and in turn pricing will be developed specifically around the value that we deliver. The second key strategic imperative is delivering 365-day customer engagement.

Central to this initiative are four strategies. One, scaling our B2B marketplace, which we acquired through PlumRiver to support year-round commerce and product discovery.

This acquisition was a truly innovative move for Emerald because it demonstrates the insights that we have into our current customer needs and the foresight to secure resources that drive change.

Through the elastic suite B2B e-commerce platform we expanded our digital commerce capabilities and accelerated Emerald's strategy to provide a 365 day per year engagement while delivering a new heightened degree of customer experience and value. The benefits of our acquisition of PlumRiver are twofold.

First the new depth and breadth of resources available to our customers from both the brand and the buyer side will provide a full spectrum of bundled solutions from discovery, connection and lead generation to transaction across both in-person face-to-face events as well as year-round digital opportunities.

Second, Emerald Antlem River's combined reach in a diverse and vast number of key industries will provide our customers a deeper reach into their existing market penetration while fueling discovery and growth into new market segments. Two, further developing and refining our existing content media business by building insights into the model.

This should support the shift from an advertising only revenue stream to an advertising and subscription-based revenue stream through the collection, analysis and adaptation of insights.

Three, we plan to also increase the cadence of digital and hybrid products leveraging what we learned in the past year and four, all of this should benefit from the optimized marketing efforts leveraging data and persona based journey mapping. Lastly, the third key strategic imperative is portfolio optimization.

We are working hard to develop a culture of innovation at Emerald with additional growth driven by creative M&A including attractive tuck-in acquisition that strengthen Emerald's position in our core categories and support our 365-day engagement strategy.

Entering new markets with attractive industry dynamics and growth trends focusing on targets that have already achieved scale.

Creating a new group called Emerald Accelerator to launch new events more aggressively than we have in the past both sub-expos and greenfields and evaluating other B2B marketing solutions that support our 365-day engagement strategy and diversification of our product suite.

Over the next 12 months we will continue to evolve and refine our infrastructure to ensure we become the industry leader in building dynamic market driven platforms that integrate face-to-face events with a broad array of industry insights, digital tools and data focus solutions to create uniquely rich experiences.

Our commitment is to progressively and strategically secure Emerald's future viability while ensuring our industry partners and customers continued growth and resilience. In closing, I'm deeply honored to be leading Emerald today and into the future and look forward to further harnessing Emerald's vast potential.

A rock solid foundation has been firmly built through the nimble actions of our management team over the past year and I'm excited to build upon the successful strategy that is in place to return Emerald to organic growth and improve profitability as the exhibition industry recovers.

As we will look back at this historic moment in time I want Emerald to be seen not only as having successfully improved profitability in the faith of tremendous odds caused by global pandemic, but the industry leader that took the additional step of prioritizing creativity ingenuity and innovation when the world came to a halt.

Thank you again for your time today and I'll ask the operator to please open the meeting up for questions..

Thank you. [Operator Instructions] Our first question is from Kevin McVeigh with Credit Suisse. Please proceed..

Great. Thank you. Thank you so much and very helpful context.

What if you could talk a little bit more about the structural impact of the businesses you transition from more kind of physical to the digital experience and then within the context of the physical is, you're in a way to think about how much of the experience goes outside versus internal and just any way to maybe frame what we think the revenue contribution can be going forward as things normalize as opposed to maybe where they've been in the past?.

Sure. So let me answer that question by helping define what business we're in. We're essentially in the B2B marketing solutions business.

So if you really think about what we do and how we serve customers it's really about supplier discovery and lead generation and the tools that we've had in the past the live events, the trade publications those are the core tools, the core assets that allow us to deliver against our customers goals of supplier discovery and lead generation.

What we now have is the ability to amplify and to add the transactional portion and that's really critical to see the entire process from beginning to end.

The transactional piece which was not there allows us to see the entire cycle and to observe what customer behavior is across the process of identifying suppliers, getting leads and then transacting.

That gives us enormous amount of insights that we can then turn around and see how we continuously add products and value to the customers that are engaged in that entire chain..

This is David. Thanks for the question I'll add and I'll reinforce what we've said the last couple of quarters are we very much believe that the live events are going to come back and come back strong. I think the timing is a question given the pandemic and the timing of vaccine rollout is crucial to that.

But all the feedback we're getting from our customer base from independent studies are that trade shows will remain a crucial part of the marketing mix of our customers, but the Hervé's point it doesn't mean we can't do better and by adding in the 365 day year engagement, we can drive more value for our customers and more value for us.

Historically about 10% of our revenue has been non-trade show related. Our media properties. We think that could be double or triple over the next few years in terms of our exposure based on continuing to build out these broader capabilities..

Helpful. And then I think the numbers right we had about 191 million of event cancellation insurance for 2021 is that right David? Then just can you remind us how long do those policies stay in effect for and now in process on them, any thoughts on that..

Sure. So you're correct that is the limit of our policy for 2021 and the policy does expire at the end of 2021.

Given the pandemic, the renewal cycle beyond 21 has been a little slower than usual and we continue to be in conversations with our insurance broker and various parties about extending it beyond 2021 though admittedly I would not expect pandemic coverage beyond 2021.

It will likely be a more normal course event cancellation type policy that we'd be able to get..

Makes sense but it's unless you've got bridge enough to adjust the business where you may not necessarily need that 21 is up there as well..

That's right. .

Thank you. .

We have reached the end of our question and answer session. I would like to turn the call back over to management for closing remarks. .

Great. Well I just wanted to thank you all for your time for your participation on today's call and wish you a very good rest of your day. Thank you. .

Thank you. This does conclude today's conference. You may disconnect your lines at this time and thank you for your participation..