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.