Emerald Holding, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Emerald First 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. As a reminder, 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 Brian Field, Emerald's interim president and chief executive officer with me here today. As a reminder, a replay of this call will be available on the investor's section of the company's website through 1159 p.m. 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 to differ materially from those indicated or implied by such statements. Such risks and other factors are set forth in the company's most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings. We do not undertake any duty to update such forward-looking statements. Additionally, during today's call, we 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 or 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 COVID-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's family as Sally passed away on April 20th. Sally had been a mentor to me for many years and was a great leader, colleague, and friend. With relentless energy, curiosity, intelligence, and empathy, she was a positive influence on many. Her absence will be keenly felt. Turning to today's announcement, I would like to start by thanking our employees for their tireless work and dedication during such a challenging time. The rapid spread of COVID-19 has had a severe 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 in 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 am 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. In total, we now have 82 events scheduled from July through December, which in 2019 delivered total revenues of $124 million. We have also made the decision to cancel 29 events, including the March edition of ASD, JA New York Spring, Couture, RetailX, and Outdoor Retailer Summer Market, which in total accounted for approximately $118 million of 2019 revenues. While these have been difficult decisions, we are very encouraged by the strong support that we have 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 is a strong indication that the demand for our marketplaces remains intact and should recover over time. 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 have received tells us the following. First, trade shows are a significant component of marketing spend for exhibitors, and most exhibitors have either increased or maintained their spend on trade shows over recent years. Second, While exhibitors are suggesting a decrease in trade show-related spend in the interim period, which is not surprising, they nonetheless continue to view trade shows as a key component of their marketing mix strategy post-COVID-19 and expect to return to their pre-COVID spending levels once the health situation has resolved. Third, many exhibitors are eager to return to trade shows as soon as possible and practical. While most exhibitors still see value exhibiting at trade shows with reduced 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, four, exhibitors have stayed connected with customers during this time, primarily through virtual mediums, emails, webinars, digital products, etc., 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 or discovering new products requires the in-person interactions that trade shows bring. Inherently, digital tools are limited, given the lack of personal contact, the challenges in highlighting product quality, and the difficulty in gathering potential buyers. I want to highlight our insurance coverage. As we have discussed on prior calls, Emerald maintains event cancellation insurance. This policy provides coverage for the gross revenues, less avoided costs plus certain costs relating to the taking of remedial action for each of the company's individual events and conferences occurring 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 Emerald's 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. While there is no assurance that the insurance carriers will agree that all of Emerald's claims are covered under the policy, we believe that all shows that have been canceled or postponed due to COVID-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 events, costs incurred and costs avoided. Thus far, we have submitted $66 million of claims and expect to submit further claims representing an estimated $20 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 an event's scheduled staging. Examples of such avoidable expenses include freelance event personnel, general contractor expenses associated with the physical event space, along with food and beverage costs, name just a few. As a result, when we submit a claim, we reflect all costs that have been mitigated. This reduces the amounts we request as part of our claim, thus preserving our insurance dollars while maintaining our margin and cash flow from each event. Though the economic environment and trade show industry 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 environment begins to return to normal. Ahead of the COVID-19 outbreak this quarter, we successfully staged all of our events through early March. and they performed in line 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 standardized our strategic planning around our markets, along with the supporting marketing and sales strategy and tactics for each of our events across Emerald's 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 SURF Expo event in January, which, given the prior summer's cancellation due to Hurricane Dorian, was particularly satisfying and validated our enhanced customer-centric approach. Given the spread of the COVID-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 outlined how we are integrating our customer data, enriching customer profiles with behavioral touchpoints, and through intelligent automation, creating more relevant and 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 investment in this important strategic growth initiative and are on schedule for rollout in the second half of this year. While we work to streamline our operations, we are also accelerating our 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 we'll 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, podcasts, e-zines, and paid research. We are also spending time refining our strategic priorities and innovating 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 suggest a change in our view or confidence in the viability and long-term outlook for the event industry. These are merely accelerations of our previously articulated strategy to provide year-round customer value and create new revenue streams. We have been reviewing our operations and cost structure even before the outbreak of COVID-19 as part of our strategy to improve Emerald's execution. and have accelerated a variety of measures to reduce our cash burn, improve our financial flexibility, and successfully navigate the current environment while meeting all financial obligations. David will go into more detail on our cost structure and the expense saving initiatives that we are 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 are resolved to listen to and understand the needs of our customer communities, to play a key role for them today, and demonstrate valuable long-term partnership as we support their return to growth tomorrow. There is 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-being of our employees, customers, and communities is our top priority. Now, let me turn the call over to David.

Thank you, Brian, and good afternoon. For the first quarter, revenues decreased by $37.7 million, or 27.4%, as compared to the first quarter of 2019. The decrease primarily reflected a $34.3 million reduction from the cancellation of seven first quarter events under the COVID-19 crisis. Most notable among these cancellations are ASD March, the International Pizza Expo, and J.A. Spring. In addition, $3.6 million of the first quarter declining was due to the postponement of two first quarter 2020 events for the second half of the year. Our first quarter results were also negatively impacted by $2.3 million as a result of discontinued loss-making print publications and events. Lastly, the G3 communications acquisition, which closed in the fourth quarter of 2019, contributed $3.9 million of revenue in the first quarter of 2020. Organic revenues for the first quarter declined $2.6 million or 2.6% as compared to the prior year first quarter. Our adjusted EBITDA for the first quarter was $23.6 million as compared to $57.5 million in the same period last year, adjusted for show scheduling differences, including the show postponements due to COVID-19. The decrease in adjusted EBITDA of $33.9 million was mainly related to the cancellation of seven first quarter events, representing prior year profit contribution of $27.5 million, as well as the acceleration of approximately $2 million of previously deferred expenses related to second quarter events, which were forced to cancel as a result of the COVID-19 crisis. Our first quarter 2020 adjusted EBITDA also reflected the combined effect of the postponed events lower organic revenues, incremental investments in events that took place in the quarter, and increased marketing costs. Next, impairment charges. In the first quarter, we booked a $554 million non-cash goodwill impairment charge and a $59.4 million non-cash charge related to certain intangible assets. In the first quarter, in connection with the triggering event caused by the impact of the COVID-19 crisis on the travel and events industry, the company's forecasted results, and its market value. Free cash flow for the first quarter was $7.7 million as compared to $11.3 million in the year-ago first quarter and was aided by strong working capital management. We finished the quarter with net debt of $529.5 million, representing a net leverage ratio of 4.1 times our TTM consolidated EBITDA of $127.7 million for the terms of our credit agreement. As a reminder, our credit agreement has a springing total net leverage company of no more than 5.5 times, which kicks in only if borrowings under our credit facility exceed 35% of our revolving capacity of $150 million. At March 31, our borrowing levels were below that threshold, meaning that no covenant was in place. Additionally, a definition of consolidated EBITDA in the agreement allows for various adjustments, including those for anticipated proceeds of insurance claims under our event cancellation policy, the impact of shifts in our event calendar, the add-back of certain one-time costs, as well as the run rate savings of restructuring initiatives. This serves to bolster our TPM-consolidated EBITDA calculation in the face of COVID-related cancellations and postponements. As Brian has discussed, we are reviewing our ongoing expense structure to identify opportunities to optimize and further reduce our expenses to date we have made significant progress. 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 advanced NLIS, almost all direct costs can be avoided. Today, we avoided over $30 million of direct costs for events that we had to cancel. and we are carefully managing commitments for those at this stage in order to avoid further costs given the current circumstances. Our overhead is more fixed. Specifically, we estimate a little over 50% of it is fixed given the leadership team, IT infrastructure, rent, and public company requirements, among other things. That said, we have reorganized how we operate in order to reduce the run rate of SGA by over $15 million since the beginning of the year. This includes approximately 18% of our headcount through a combination of staff reductions, eliminating open positions, and furloughs. 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 space ahead of the production of our events. When events are canceled, we must refund those payments. Given the high volume of event cancellation, the amount of pending refunds is substantial. As a result, we have 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. While 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 COVID-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 am 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. While there is clearly much uncertainty in the world today, I'm confident that we at Emerald have the financial flexibility to weather this unprecedented time while maintaining our industry leadership. Thank you once again for your time today. Operator, please open the call for questions.

Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question is from Seth Weber of RBC Capital Markets. Please go ahead.

Hi, this is Emily McLaughlin on for Seth tonight. My first question is just in a scenario where the world reopens but people remain wary about traveling, would Emerald still put on a show if it looked like participation levels were going to be significantly lower than prior editions? I guess we assume there would be some impact to exhibitor ROIs in the event of 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 very much going to be a case of the facts and circumstances as we get closer to a particular show staging. and the amount of customer interest and the viability of the event. You know, I think at this point, most customers, as our survey has indicated, aren't expecting that we're going to return overnight to pre-COVID levels of participation. And in fact, as I mentioned on the call just a moment ago, most of them expect that there'll be less attendance. That said, the question is really around the value that a particular brand has, the kind of customers both buying and attending attach that quality of event, the quality of the brand that come together that result in a meaningful connection and transactions, essentially. People are really hungry to do business. And so while the attendance may come up or down, a lot of that expectation is to 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 begin to get closer to the anticipated volume of overall participation, we'll be able to scale a lot of those variable costs accordingly. so that we're not planning for an event of 100,000 people when we know that far fewer may show up. So we're going to try to manage the margin to each one of these shows as they come closer, so that in the end, what we're trying to really manage is 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 is bound through 2021. I'm not sure when the discussions take place as you look to roll policies to 2022. I just want to get your thoughts on the ability to obtain the same breadth of coverage in the future, ensuring such circumstances as pandemics Any impact on policy pricing and any inflation there is something that could materially affect profitability as we look several years ahead?

Thank you. This is David. The total unknown at this point is the reality. I think that we need to wait and see how the next few months play out and how much impact it has had on our industry and others to understand yet what the ability of or cost of that type of insurance is for 2022 and beyond. We're very pleased that we're 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, but there's no certainty it will be available beyond our current contract.

Okay. Thanks very much. That was helpful. I'll pass it on.

The next question is from Ryan Leonard of Barclays. Please go ahead.

Yeah, hey, guys. Thanks. I was just wondering if you'd provide 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 assumptions you make in terms of when, you know, you start hosting shows again that underlie your confidence and liquidity in the near term?

Sure. So at the end of the quarter, you know, our net revolver balance was essentially zero, right? We drew down proactively in order to have the 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 to fund some refunds and will continue to as we move through the quarter. And then ultimately our belief is insurance proceeds will come and offset those refunds and replace that cash with the company. You know, we've run scenarios that have, you know, no shows the rest of the year and shows in 2021 down significantly and are 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 significant steps amount of costs out of the system already and materially reduce our cash burn, especially when you combine with the suspension of our dividend and the elimination of our share buyback program. There are other moves that we could and will make if necessary, if this looks like it's going to extend well into 2021.

And I guess maybe on that specific, can you give us more information on your cash burn today? you know, what that looks like if events don't come back, you know, into the third quarter. And then just on the insurance piece specifically, you know, you have filed claims before. They've typically been fast. I mean, I know these are different times, but, you know, what is the timeline? If this takes a year, if we have to go through legal proceedings, you know, how does that kind of alter, you know, some of the math you just gave us? All right. Sure.

I'm, Well, I think we'll start with we don't expect to take a year, and our scenarios do not contemplate insurance taking a year. We have already submitted a substantial amount of claims and 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 our – the venues in which our events were supposed to stage in March and April, they're all closed. And every single government authority in those locales has made it illegal to have gatherings, sometimes more than five people, sometimes more than 10 people, sometimes a little bit more. In our mind, that's pretty clear. And I think in our view, why would someone pay for this insurance if that did not qualify? I mean, that's our view. Now, ultimately, there's no guarantee, and there might be different levels that might ultimately be covered. But I think surely for these near-term events, we would have a hard time believing it would extend like that. If it did, then we'd have to potentially take incremental moves to reduce cash flow further. in order to ensure that we can manage to that point where that money comes in. In the short term, you know, we have taken down the cash burn, as I said. If you look at the direct cost line of our P&L, you should assume while those shows are staging that that goes to potentially zero. And while there are shows planned to begin in July, We're being very careful in our commitments around those experiences, given the uncertainty that those will stage. Hopefully they do, but they may not, and so we're going to manage that as appropriate. Ultimately, four shows that have not yet staged but are still in the calendar to be staged have tens of millions of dollars of direct costs that we're looking to avoid in order to minimize the cash burn versus what it otherwise might have been. in a normal year. And at the same time, our SG&A is down meaningfully. During some of the moves in the short term, you know, we've been able to reduce Q2 SG&A by, you know, 25, 30 percent type levels. And depending on how the rest of the year plays out, you know, we'd be willing to make moves to similarly reduce the rest of the year.

Okay, thanks.

The next question is from Jeff Mueller of Baird. Please go ahead.

Yeah, thank you. This might be already covered by saying that your insurance covers communicable disease, but is there any pandemic exclusion in your policy?

No, I want to be very clear. we paid extra for a rider that specifically covers pandemic. Got it. That's helpful. And then you were kind of breaking up, at least for me, can you just run through the expense base again? There was something about over, I think, 50% of SG&A is fixed or variable, and you gave us something on direct expenses. Could you just David, just break that down again for us, please. It wasn't coming through clearly to me. For sure. Sorry about that. We're all remote, so I'm doing this on the cell phone. So basically, you generally look at our direct cost to put on an event as about 30% fixed and 70% variable. But that's as you get closer and closer to an event. Ultimately, if there are If you have visibility well ahead of time around an event not happening or being snored, even that 30%, what I'm calling six, can be variable, right? That's kind of initial marketing spend, the rent on the facility, things like that, where there's a certain amount you're just going to spend if you're putting on the event. And in my mind, that's six. But if you know you're not going to have the event, also that can become variable if you're ahead of it far enough. and can become more variable if you're ahead of it on a show that would be smaller. You can commit to a smaller amount of space. You can have a smaller marketing plan from day one where you're never getting ahead of yourself on that. And so that's what I was talking about in terms of direct costs. On SG&A, the way we look at it, a bit more than half is fixed at the cost of the senior team, IT, rent, company costs. or generally the things that fall within that. And the rest, we look at it more variable. And, again, scaling around the number of shows we produce, the amount of marketing that we spend, the effort we put behind sales, et cetera, are all things that are a bit more variable in nature and with proper planning can be improved. reduced if you foresee revenue is going to be lower than you plan or if you foresee producing less events over time. Okay. And then on the insurance policy, you gave us the amount and you put it in the context of revenue, but I'm not interpreting it that revenue or shows that account for half of your revenue is are covered it sounds like correct me if i'm wrong like all of your revenue is covered but then there's a maximum depending upon um i guess stripping out the direct or avoidable costs and that's structured that way to incent you to get rid of those costs can you just let me know if i'm interpreting that correctly or if not uh where's my error sure so um Let me try to simplify it. We have $191 million of coverage in 2020 for events canceled, for events damaged, or for enforced reduced attendance due to 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 so, ultimately, what is covered then with that $191 million limit is the lost profits to Emerald from those circumstances, right? So perhaps we think about that as the profit contribution or gross profit of that show to Emerald is what's covered. Heading into a year, we supply budgets for our events to the insurance carriers that is what is how the premium is determined that we pay for the coverage. So that's how we come up with the amount of the $191 million. That's how we come up with the premium that we pay for that insurance is based on $191 million. And now we have $191 million of coverage over the course of the year across any and all events that are potentially impacted and fall under the circumstances that were triggered with policies. Okay. And then a different variation of an earlier question, but if the show attendance remains depressed intermediate term, so like, I don't know if this is an attendees per show or a revenue per show kind of in 2022 is, pick your number, 25 or 40 or whatever percent below the the 2019 revenue level for that same show, whatever kind of numbers you've run through in some of your sensitivity analysis, what would that imply for gross profit or EBITDA kind of at a show level? Like if revenue is down 25, is EBITDA down 50 or just any sort of sensitivity around what the financial implications would be if you wouldn't have show revenue return to 100% of prior baseline anytime soon? Thanks. You know, I don't think I'm going to start playing the scenario game about what percent of what for 2022, which is a long time from now, and hopefully there's a popular pharmaceutical to this problem at that time. But ultimately, we just talked about a fixed first variable component of our events. And I think if you use that as a starting point, you can run some scenarios of what things could look like if revenues are hit looking out a couple of years when showrooms are staging again and might not be back to full force. But one thing I do want to reinforce, right, is with enough lead time, that 30% that I'm saying is fixed on a show can be more variable. And so if it becomes clear that events are coming back at levels lower than we anticipate, we can book smaller venues. We can adjust our costs around putting on the event in order to protect the margin a bit more than a surprise shortfall of revenue at the last minute would otherwise allow us to plan. Okay. Thank you for taking the questions. Sure.

The next question is from Robert Weaver of International FC Stone. Please go ahead.

Hi, guys. Thank you for taking my question. I know there has been a lot of questions asked on the insurance, but just I'll take one more stab at it. Basically, you're covered at $191 million of lost revenue. The purpose of the insurance is to cover the gross profit effectively associated with that lost revenue. Like you're saying, you have to pay back the deferred revenue, the prepayments. After all that is done, the gross profit from that $191 million in revenue should be protected. Is that the correct way to look at that?

That is essentially how the policy is constructed.

Okay. And then on your revolver utilization, I don't know if it's too much of a projection to ask, but given these – the expected proceeds that you can get from the insurance coverage, do you think you would have availability, you know, beyond the current draw, which I understand this is $50 million, beyond the current $50 million draw, you know, going forward, like, let's say past 2Q?

I'm sorry, I'm not too aware of that. I'm not quite sure what you're asking.

You notice that you have the springing financial covenant on your revolver, but 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 events. Given all those expectations, do you think you would have availability on that revolver greater than the current amount that you've drawn down? Like you noted that you're below the amount of the springing financial covenant right now. Do you think you could take it up beyond that at any point in this year, even if it's for one quarter or so?

Sure. It's surely 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 covenant to kick in.

Okay. Thank you very much. Appreciate it.

Sure.

This concludes the question and answer session. I would like to turn the floor back over to Mr. Brian Fields for closing comments.

Yes, I'd just like to thank everyone for joining us today and reaffirming our confidence in Emerald over the long term and the kind of attention that we're delivering to our customers and through all of our staff activity and support of that attention to our customers is something I'm deeply grateful for and that I'm confident will 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.