Emerald Holding, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Emerald Holdings Third 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 open for questions with instructions to follow at that time. As a reminder, this conference is being recorded. I would now like to turn this call 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 third quarter 2020 earnings call. I'm very pleased to have Brian Field, Emerald Interim President and Chief Executive Officer with me here today. As a reminder, a replay of this call will be available on the investor section of the company's website through 1159 p.m. Eastern Time on November 9, 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 Private Securities Litigation Reform Act of 1995. These include remarks about future expectations, beliefs, estimates, plans and prospects. Such statements are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from those indicated or implied by such statements. Such risks and other factors are set forth 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. This afternoon, I will provide an update on the exhibition industry. and then discuss progress transforming our operations to position Emerald for a return to organic growth. David will review our third quarter results, and we will then open the call to your questions. On today's call, there are five main points that I hope you take away. First, our survey work continues to affirm our customers' desire to return to live, face-to-face events, given the value and importance of our marketplaces to their businesses. Second, third-party studies and recently staged shows across the world both demonstrate the clear desire for a return to live in-person events. Third, we are also seeing this desire in our own portfolio as our IGES show, which is set to stage this week, has experienced 36% registered attendance growth as compared to last year's show. Fourth, we continue to implement our strategic initiatives designed to improve our execution and accountability across the company. Our goal is to deliver improved organic growth and profitability once the environment normalizes, and we are aggressively implementing our initiatives during this current time period. And lastly, we are well capitalized, given our insurance coverage and the completion of our preferred stock offerings. This places Emerald in an enviable position. We now have the flexibility to invest in our business for the future and also take advantage of dislocations in the market as a result of the pandemic. Of note, we are seeing opportunities today and believe there will be many attractive assets coming for sale at compelling values. Turning to our trade shows, we have canceled all of our large events through year-end, with the exception of the International Gift Exposition in the Smokies, or IGES, which is scheduled to take place this week. Additionally, this past August, we began to host several small showroom events in New York City, which, while small in scale, were down an average of only 9% from 2019 revenue levels. Looking forward, Our first quarter 2021 events are certainly at risk given continued restrictions at the state level, combined with the potential for several venue facility closures due to COVID-related government restrictions and venue takeovers. We have already canceled some of our first quarter events and postponed others. Despite the uncertainty that remains, our teams continue to actively plan for next year, and are evaluating various scenarios for each event based upon varying levels of attendance, combined with the necessary protocols to ensure we provide a safe environment for our customers. We are often asked what levels of profitability we can achieve at varying show sizes, as well as how we think about the path of the recovery. From a business perspective, we can achieve the same level of margin at varying levels of attendance, as long as we properly plan the event for that size and manage expenses accordingly. Additionally, as we've said before, our live event cost structure is typically approximately 70% variable and 30% fixed, but we can manage down the fixed portion of the event's expense structure to maintain margin if we have adequate lead time. As we look forward, our focus is on delivering successful events for both our exhibitors and attendees, as our customer satisfaction remains our number one priority. As the environment begins to normalize, we will then determine on an event-by-event basis what level of attendance is necessary to stage a successful event. What I can say with confidence is that many of our customers are eager to return to face-to-face events given the ROI that they achieve and the importance of our live in-person events to their businesses. We see this through the survey work that we have ourselves completed, as well as in industry reports, like UFI's Global Recovery Insights 2020 report, which was published on October 20th in partnership with Exploree. By way of background, UFI is the leading global association of the world's trade show organizers, and Exploree is a leading research and analysis platform focused on the events industry. This survey was designed to measure both exhibitor and attendee preference towards participating in live events. The study received more than 9,000 responses from 30 countries and clearly shows that both exhibitors and attendees overwhelmingly prefer live meetings taking place in a face-to-face format. The survey noted that the social aspect of face-to-face events and the ability to make connections across their community is critical. and cannot be achieved or duplicated in a purely digital medium. We are also seeing tangible proof of these findings as events slowly start to stage again across the world. Caravan Salon is one such show that we found very encouraging. This event is the largest RV trade show in the world and staged from August 29th to September 6th in Dusseldorf, Germany. The show covered approximately 762,000 square feet and drew 107,000 attendees, comparing to 2019's show, which covered 2.3 million square feet and drew 268,000 attendees. This was clearly a smaller show, given the necessary safety requirements, but it was the first show to stage in Dusseldorf post-lockdown, and local media noted that it was a major test for the trade show industry. In reports that we've seen, the show's organizers noted their exhibitors being pleased with both the quality of attendees and levels of sales achieved. Another example is the Shenzhen International Furniture Exhibition, which staged from August 23rd to the 25th in Shenzhen, China. Trade Press reports, indicate that exhibitors increased by 75% compared to previous edition of the show, while visitor numbers increased by nearly 40% at 216,000. We've also seen this enthusiasm in our IGES show, which is set to stage this week in the Smoky Mountains of Tennessee. For those who are not familiar, IGES is the largest dedicated gathering of wholesale souvenir resort and gift buyers in the U.S., What is interesting is the surge in attendee registrations that we experienced when the show dates were finally confirmed. Even though exhibitors are down by about half, there appears to be significant pent-up demand. As I mentioned earlier, registered attendees are tracking up 36% versus last year's levels, which provides further confidence that our market participants are very eager to get back to in-person events. While we're encouraged with the direction of these shows and remain optimistic that live face-to-face events will begin to reemerge next year, we are in parallel continuing to implement our growth strategies designed to improve the efficiency of our operations, accelerate organic sales growth, and improve our profitability. Exploring new digital product offerings and revenue models designed to complement our live events and improve our customer engagement is one such initiative. During the third quarter, we hosted over 90 digitally delivered events across a variety of formats and form factors and are exploring various subscription-based revenue streams as well for more recurring predictable revenue. Over time, we expect these digital initiatives will become important new revenue streams, adding to Emerald's growth profile as face-to-face events return. As I noted earlier, the consistent feedback that we receive from our customers is that digital events are additive to, but not a replacement for, our in-person events. This feedback is encouraging and leads us to believe that there is an emerging hybrid model for these digitally delivered solutions that complement face-to-face events over the year. While we project a modest annualized revenue opportunity in the $5 to $10 million range at a strong contribution margin in the nearer term, The more important value of these events is our ability to engage with our exhibitors year-round and to provide them with opportunities to engage their target buying audiences in today's environment. This, in turn, should allow our digital content and event platforms to serve as meaningful new customer acquisition vehicles, which, by example, together generated 62,000 new customer prospects for Emerald over this past quarter. Another area of focus in the quarter was the continued progress on our unified data initiative that we call Smart Tech, which remains on track for delivery in the first quarter of 2021. This project will enable us to house and quickly access our customer information in one centralized customer data hub and allow us to develop a deeper understanding of our customers' interests and behaviors, what events they attend and what they do at those events. We believe this will provide us with greater insight to what our customers care about, which will allow us to be more targeted in how we market and sell solutions to them. We see a significant opportunity to provide incremental value and cross-sell to our vast customer base. Our ability to strategically invest in our business and thoughtfully prepare for a return to live face-to-face events is possible because of our insurance coverage and recent capital raise. As David will touch on in more detail, we have submitted $146.2 million in claims for canceled events thus far and have received $64.3 million in interim prepayments through October. An additional $15.7 million in insurance claim payments were recently approved, and we expect receipts in the coming days. We also expect to submit incremental event cancellation insurance claims for events that were scheduled to occur in the second half of the year. In regards to capital, we completed the sale of our convertible preferred stock offering in the third quarter, which generated $130 million in incremental proceeds on top of those raised in Q2. At the end of the third quarter, we had approximately $327 million of cash, which, importantly, will allow us to take advantage of dislocations in the market that are likely to result from the pandemic, as we believe many high-quality shows will come for sale at attractive valuations, representing opportunities for Emerald. Now, let me turn the call over to David.