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spk00: Good morning and welcome to the Emerald Holding Incorporated first quarter 2024 earnings conference call. At this time, all lines are in the listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Before we begin, let me remind everyone that this call will include certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This includes remarks about future expectations, beliefs, estimates, plans, and prospects. In particular, the company's statements about projected results for 2024 are forward-looking statements. 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 forth in the company's most recent filed periodic reports on Form 10-K and Form 10-Q and subsequent filings. The company does not undertake any duty to update such forward-looking statements. Additionally, during this 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 prepared in accordance with US GAAP. The reconciliation of this non-GAAP measures to the most comparable GAAP measure 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 investor section of the company's website through 1159 p.m. Eastern Time on May 14th. I'd now like to turn the call over to Mr. Hervé Sedky, President and Chief Executive Officer. Sir, please go ahead.
spk01: Well, thank you, Ivo, and good morning, everyone. It's great to be with all of you today to discuss our first quarter. I'll start, as usual, with a review of our performance and then give an overview of our strategy, and then David Doft, our CFO, will then provide more detail on our financials. 2024 is off to a strong start, driven by our unwavering commitment to customer centricity and year-round engagement. This focus has not only fueled early rebookings into 2025, but has also provided us with excellent forward visibility into our revenue trajectory. In the first quarter alone, we hosted successful shows with record attendance in some of our strongest categories, including KBiz, our kitchen and bath show, Prosper, the largest gathering of Amazon and other marketplace sellers, and the International Pizza Expo, serving thousands of of American pizzerias and their wholesale ingredients and equipment suppliers. Our positive trends in attendee and exhibitor counts, square footage, and pricing are all products of the exceptional value and ROI we provide to our customers for their marketing budgets. For many businesses, trade shows are their number one selling or marketing event of the year, and a big part of our ongoing efforts has been to highlight this value proposition and make the ROI more transparent by developing value-added tools and metrics that we believe will deliver an even better trade show experience. The result is that our customers view our shows as an investment rather than a cost. Our goal is to continue to maximize value for our customers and shareholders, driving loyalty and not only a desire to return, but also a growing engagement in between event editions over the course of the year. At all of our trade shows, we've implemented on-site pre-bookings, which means we are already selling exhibitor space into 2025. Our sales-facing data offers us a highly granular view into exhibitor trends up to a year out, which gives us confidence in our forecasts for 2024. Looking ahead, we project continued increases in exhibitor counts and revenue above our industry's historical run rate. In our content business, where we saw advertising budgets under pressure last year in certain end markets experiencing economy-related softness, we're beginning to see signs of stabilization. Importantly, we're seeing evidence in our forward bookings that our investments and the reorganization efforts are paying off. As an example, we recently launched the small business exchange, our first content product spanning all of Emerald's industry portfolio and reaching a scaled audience of small businesses across all of our events. Since launching Small Business Exchange only a few months ago, it now has over 400,000 subscribers. In our commerce business, we continue to be delighted with the performance of Elastic Suites, our software as a service offering for wholesale e-commerce transactions. From its origins in the outdoor and action sports apparel and equipment, we've expanded Elastic into the kitchen and bath and indoor design categories. more than doubling its total addressable market. We have also signed some large names as new customers that were announced at our KBiz show in February and led to a burgeoning pipeline for Elastic in the category. Meanwhile, our bulletin platform is gaining traction powering New York Now Online with hundreds of trade show exhibitors leveraging the platform to engage with buyers both around the time of and after our trade show. Over time, we plan to leverage Bulletin to supplement the on-site experiences for many of our events to drive commerce throughout the year. Overall, as our guidance indicates, we expect another significant step forward in both revenue and profitability this year. Our longer term plan is to deliver run rate organic growth in the mid to high single digits combined with growth from acquisitions in the mid to high single digits to contribute to double digit annual revenue growth overall. May 2 marked a significant milestone as we completed the conversion of all outstanding convertible preferred shares into common stock. This conversion eliminates a $34 million per year dividend that was only accruing to the benefit of the preferred holders and greatly simplifies our capital structure such that all equity holders can benefit from future value creation and cash flow generation. As we move forward, our steadfast focus remains on delivering consistent, profitable growth and building on the value of our irreplaceable portfolio of in-person events. The way we'll achieve these goals is by executing on the three pillars that underpin our value creation goals, customer centricity, 365 engagement, and portfolio optimization. In customer centricity, we are focused on improving the customer experience and delivering greater value in the form of add-on services, actionable data and insights, and a clearer picture of the return on investment customers receive from the marketing dollars they put to work across Emerald's platform. This improves our stickiness with customers, incentivizes them to deploy more marketing dollars with Emerald, and ultimately should help drive higher revenue per customer. In 365-day engagement, we're providing multiple entry points to the customer engagement cycle through trade shows, conferences, webinars, media content, and our e-commerce platforms. And in portfolio optimization, through our acquisitions and new event launches, we have targeted industries with strong, stable growth rates. and product categories with recurring sales cycles. Over time, we expect new event launches to contribute one to two percentage points of annual revenue growth. Lastly, on the personnel side, we're pleased to welcome our new general counsel, Sarah Altschul, who's joining Emerald next week following an impressive career as a general counsel in the advertising and travel sectors. Sarah is an outstanding addition to the executive team, and we look forward to working closely with her when she settles in. To conclude, we're pleased with our strong start in 2024 with the overall business tracking in line with our expectations. Through our value-added efforts and investments across our connections, content, and commerce businesses, we're positioning Emerald to be a reliable, free cash flow generator and earnings compounder with attractive growth characteristics built in. We are very confident that we can sustain this trajectory and deliver meaningful growth in excess of our industry while enhancing our profitability year after year. And with that, let me turn the call over to David.
spk02: Thank you, Hervé, and good morning. Turning to our results for the first quarter, which is our seasonally largest quarter of the year, Total revenue was $133.4 million compared to $122.3 million in the prior year quarter. The increase was driven primarily by organic revenue growth with a small contribution from acquisitions. Organic revenue for the connection segment, which takes into account the impact of acquisitions, scheduling adjustments, and discontinued events, was $118.6 million for the first quarter of 2024, an increase of $13.6 million, or 13% versus the prior year period. In the first quarter of 2024, we recognized $1 million of other income, reflecting an insurance claim recovery tied to a virtual event during 2021 where our technology service provider had a disruption, leading to a loss for Emerald. There are no other material insurance claims outstanding. First quarter adjusted EBITDA excluding insurance proceeds grew 9% of $39.8 million compared to $36.5 million for the same quarter last year. This equated to an adjusted EBITDA margin of approximately 30% for the quarter. First quarter free cash flow excluding event cancellation insurance proceeds was $3.8 million compared to $5.2 million in the prior year quarter. First quarter free cash flow is impacted by non-recurring costs related to acquisition integration and some restructuring charges. Turning to expenses. On a reported basis, first quarter SG&A was $55.5 million versus $48.8 million in the prior year quarter. The year-over-year increase is largely due to the impact of the acquisition of Hotel Interactive, which closed in January, severance expense related to recent changes to de-layer some of our senior leadership teams, acquisition integration costs, and a $1.5 million increase in estimated contingent consideration payments for past acquisitions, which flows through the PML at an expense, even though it will be purchase price when ultimately paid. We thought it would be helpful to briefly review our show calendar and seasonality, given some shifts in the timing of certain large shows in recent years, as well as our acquisition activity. This past year, we moved the winter edition of Outdoor Retailer to November, instead of January, and consolidated a number of smaller shows in Q1. Note that our other outdoor retailer event held in June remains unchanged on the calendar. We believe these changes better align the winter outdoor retailer show with the industry buying cycle. Taken together, these changes impacted the top line in Q1 2024 by $2 million and Q1 2023 by $7.2 million and can be seen in Schedule 1 in our earnings release. Our full show calendar for 2024 can be found on our website. Along these lines, given the number of industries Emerald serves, our guidance always assumes some variability in quarter-to-quarter organic growth rates. While Q1 contributed strong double-digit organic revenue growth, other quarters are not expected to reach that level based on the mix of business in each specific period, all consistent with the assumption that underpins our annual guidance, which we reaffirm today. Turning to the balance sheet, we had $186.8 million in cash as of March 31, 2024, versus $204.2 million as of December 31, 2023, after funding the $8.6 million dividend on our convertible preferred stock and the hotel interactive acquisition. Our total liquidity is $296.8 million, including full availability on our $110 million credit facility. We believe our balance sheet strength and cash flow generation support our ability to opportunistically invest in and grow our business, as well as optimize the per share value of our stock. We expect to continue to balance capital allocation between acquisitions, investments in our own business, managing debt leverage, and returns of capital. At quarter end, we had $23 million remaining on our existing buyback authorization, after buying back approximately 295,000 shares in the first quarter. As Herve mentioned, we completed the conversion of all of our outstanding preferred shares subsequent to quarter end. Following the conversion, our total outstanding share count is approximately $203.8 million, equating to a market cap of $1.2 billion as of yesterday's close. We paid the final first quarter preferred dividend in cash, thereby avoiding the issuing of an additional 2.4 million common share. We expect our shareholders will benefit from our newly simplified capital structure and improved free cash flow. As of March 31st, we had net debt of $225.4 million, leading to a net leverage ratio as defined in our credit agreement of 2.17 times our trailing 12-month consolidated EBITDA, based on the definition in our credit agreement of $103.9 million. Turning to guidance, we are reaffirming our full-year guidance for 2024 in the range of $415 million to $425 million of revenue and $110 million to $115 million of adjusted EBITDA. This guidance implies an adjusted EBITDA margin of approximately 27% and includes a 300 basis point drag from continued investment in the growth initiatives I noted on our last call. We believe as our business continues to scale and we leverage the investments we have made, that we have runway to improve this number as we work our way back over time to the margins we saw prior to COVID. Thank you very much for your time. And with that, we'll now open the line for questions.
spk00: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by number one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by number two. If you are using a speakerphone, please leave the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Barton Crockett of Gross and Black. Your line is now open.
spk05: Okay. Thanks for taking the questions. I was curious if you guys could elaborate a little bit more on some of the variability you flagged in the organic growth rate expectations for this year. You know, if there's any quarter that looks, you know, particularly stronger, particularly weaker, and a little bit of color underneath that. And then, you know, on top of that, I do note that you've got this acquisition of a hotel interactive here in January. And so I was wondering if you, you know, could maybe give us a little bit more color around the materiality of that and the importance of that, and also around the acquisition contributions that you expect for this year and how those kind of compare to your long-term kind of aspirations.
spk04: Sure. Thank you, Barton.
spk02: You know, one of the things we've talked about, I think, a bit over the last several quarters is the volatility quarter-to-quarter of organic growth relates entirely to the sectors in which we have events in a particular quarter. So if you recall, in the fourth quarter, our organic growth was lower than it was in the first quarter, but we gave visibility of an acceleration ahead, and it's purely based on the business mix. One thing about our business is that while what we execute are events, they're all different businesses with different dynamics based on the industry they serve, and they happen once or twice a year typically, and so once a quarter that a particular event stages in, would greatly impact the results of that quarter, but have nothing to do with the quarter before and the quarter after. And so with that, the way we see the year playing out is the first and fourth quarter, we're expecting the strongest growth rates. And then the middle two quarters of the year have a bit more muted organic growth, but still expect organic growth in those quarters based on the mix of the business and what staging at the different times in the year. From an acquisition standpoint, Hotel Interactive is a series of about 15 smaller hosted buyer events. For those not aware, the hosted buyer model is a really attractive high ROI model for our sponsors and attendees, but by their nature, they're smaller. where we bring together a couple of hundred executives with buying budgets in a particular niche industry for a couple of days at a venue with education and networking, as well as one-on-one meetings with sponsors who are selling the products that the buyers are in market looking for. So very direct, tangible ROI for sponsors and a really effective and high NPS score model for attendees and sponsors alike. And so they're spread out pretty much evenly over the course of the year for Hotel Interactive, and you can assume that the run rate that you see here in Q1 is pretty similar spread out over the course of the rest of the year. There's no other acquisitions at this point that we've closed on this year, and so Time will tell what other impacts there would be from acquisition revenue in future quarters. We are ambitious on the M&A front. There are a number of opportunities that we're pursuing, and our hope is that we can close on two, three, four more smaller opportunities like this over the course of the year.
spk05: Okay. And just to follow up on the acquisition commentary relative to your guidance, Do you have acquisition revenues in your guidance?
spk02: We don't have acquisitions of future, sorry, we don't have future acquisitions in the guidance. The guidance has always had Hotel Interactive because the deal closed in January and we gave the guidance in early March and had already announced the deal and it was implied in our numbers.
spk05: Okay. And then if I could ask another question, you know, you were referring, Herbie, I think you were referring to growth in some of the key metrics, square footage and others. And I was just wondering if you could give us a little bit of detail around what you're seeing in those metrics, if there's any numbers you can give us to kind of underlie what you were talking about on that point.
spk02: So this is David. I'll take this. So we continue to see a strong opportunity on the pricing front. We're seeing pricing up better than mid-single digit so far year to date and would expect at least a mid-single digit pricing improvement over the course of the year. And that's on top of the more meaningful price improvements we were able to get over the last couple of years as we rolled out what we think is a more sophisticated pricing algorithm than we operated under prior to the pandemic. NSF's up a few percent. There is variability there, event to event, and that's kind of the part of what drives the organic growth commentary based on industry exposures. But we're continuing to see better than historical growth rates in NSF. for the year and implying there's still a little bit of tailwind from a pandemic recovery in certain sectors, as well as we hope and expect benefit from some of the initiatives that we've begun to put in place over the last couple of years to drive incremental growth for Emerald longer term. I'll give a shout out in particular to our international sales team, which has particular momentum on driving improvements to our mix of business from international exhibitors coming to our events here in the U.S.
spk05: Okay. And then if I could just ask one final question. In this one, I'll also offer to Herve if it makes sense for you. But I know that the visa situation has been problematic. It's something that you've had some interest in. And I was just wondering if you could update us on what's happening in terms of the visa timing backlog and the impact that has on you guys in the industry at this point and what the prospects are going forward there.
spk01: Sure. The visa processing is still an issue for us as an industry, not just for Emerald. And it's something that we participate in as part of an industry effort. The association, ECA, the Exhibitions and Conference Alliance, which I happen to chair, is very focused on lobbying, really, governments to modernize visa processing and restore visa operations to pre-pandemic levels. And there are a number of bills that are sitting in Congress that are getting some support from both Democrats and Republicans. There's some that have already secured some really good funding, which we're excited about, and others that we continue to push for. And so I think we're making some very good progress, but more is needed. And I spent a little bit of time on Capitol Hill actually last week, I think it was, And there is Exhibitions Day coming up end of the month where a lot of industry colleagues will be lobbying Congress to continue to push. But I think it's moving in the right direction. It's something, to David's point, we all as an industry can benefit from the tailwind of increasing international participation in all of our events. And it's top of mind for our industry and certainly can benefit Emeralds.
spk05: Okay. All right. Thank you, David and Herve. I appreciate it.
spk04: Thank you, Martin.
spk00: Your next question comes from the line of Alan Clee of Maxim Group LLC. Your line is now open.
spk03: Yes. Good morning. Can you talk a little about the new launches you did last year from Accelerator, kind of what you're looking to to improve upon them and how you're thinking about potential performance from them in 24?
spk04: Sure.
spk01: So we have a number of launches that we highlighted. And so let me highlight a couple. Casino Sabrosa, which was an event that's dedicated to the Latin food market, Latin food and beverage market, was a successful launch in September of 2023. It was a very, very successful launch and we expect that that will continue to grow in 2024. Commercial Integrator is another one that was successful that was adjacent to our Cedia events another successful launch leveraging the Cedia infrastructure another way to launch successfully leveraging an existing infrastructure existing customer base existing cost base and but still attracting a different customer in this case it was a professional customer versus a residential customer in the integration channel space that we're excited about and we'll see some good growth and expecting some good growth in 2024. And the same with one that we call D2. It's in the decentralization. Deciphered is the name of the event. And it's really all about educating businesses around Web3 innovation. And that one is a little different as well in terms of its platform, one that we're scaling across multiple events, so it has its own unique conference, but we're also able to launch it alongside other events where it makes sense, where we have audiences like RSE and others that are interested in that content. And so in those particular instances, the launches that we're highlighting, we're seeing some really good growth opportunities. And that's what I mentioned in my opening remarks. Launches like this are exciting for us because they really provide us with growth opportunities, which we believe over time will give us one to two points of organic growth benefit to Emerald overall.
spk03: Thank you. For the content business, that struggled last year, but it sounded like you sounded a little more positive on that. Could you just go into that a little bit more detail of why you think that's kind of maybe bottomed out?
spk01: Yeah, I'll start and I'll turn it over to David. We are more positive about our content business for really two primary reasons. The first and foremost reason is that we have made some investments in that business. Basically, content for Emerald was a business that was attached to the trade show business. So the content business was inside of the trade show business. What we did over the course of the last year plus is we separated it. We completely separated it into a separate business, hired leadership that have expertise in that business and made some investments in that business from a leadership and an infrastructure perspective so that we can shift that business and be less over time reliant on pure advertising and really create more of a lead generating type capability, which is where we intend to go with that business. So we feel, and the example that I gave in terms of creating this one brand, leveraging all of the databases that we have across Emeralds, to create this one brand and one product has been really successful. So the focus that we've put on it, the leadership that we've put on it, the product that we launched that has had some good successes out of the gate gives us some early signs of success that give us confidence. The second part is that we do have some forward visibility and we feel and we are starting to see some of the sectors that were harder hit, particularly tech last year, start to open up. And so we feel more confident in that business with some forward visibility in the content business. But I'll turn it over to David as well.
spk02: Yeah, I think just to build on the reorg of the business, and the separation out from the events, essentially went from 20 different businesses being run on their own to one business being run on shared technology platform, best practices, et cetera, where each industry vertical can leverage the whole. And it's a massive change in approach that has allowed us to meaningfully improve the operations, but also modernize it to be a modern platform media business, not a media business of 10 years ago, 15 years ago, et cetera. And that's a really large opportunity that we're excited about. And with that comes more and better editorial, more leverageable editorial, understanding the analytics of readership and how that should drive an editorial calendar and strategy, as well as a consolidated sales effort that can sell across the platform, not just sell their own individual vertical, which we expect will drive meaningful incremental opportunity. And so with that, we've seen the forward bookings turn. And so while Q1 still had a decline year over year, our bookings for the year are up. And so we're confident that this will be a contributor to growth this year based on the efforts of the team that always takes a little time to get its footing up. But once it does, and then once it has, we start to see some real momentum on the sales front that should lead to meaningfully bettering performance over the course of the rest of the year.
spk03: That's great. Thank you very much. And then also under commerce, I heard you say that you've expanded some of your verticals, which could double the audience you're going after. Two things. Could you talk a little about when the new verticals were added and sort of think about when they can start contributing? And then second, for Bulletin, you talked about how that was gaining traction and powering New York Now and some other users and trade shows. Could you just go into a little more detail explaining what that all means? Thank you.
spk01: Sure. Happy to. So on the last call, we spent a little bit of time on Elastic and how we're expanding the addressable market. We were very focused, Elastic has traditionally been very focused on the outside space and its roots have been in outdoor apparel and so forth. And so we've moved inside. We've moved to the kitchen and bath and really focusing on this very large asset that we have with that particular industry and signed some very large brands in that space that we announced on the last earnings call and at the last KBiz events. So that industry in of itself allows us, just the kitchen and bath industry in of itself allows us to double the addressable market or actually more than double the addressable market for that particular product. And that has always been our strategy. Our strategy has been to leverage this excellent product, which is a highly integrated product for very large customers and go from industry to industry that we serve. And so we're on track there. In terms of Bulletin, Bulletin is a different type product. Bulletin is not an integrated product. Bulletin is really a product for much, much smaller businesses, much easier to scale, scale across a much wider range of products as customers. As you know, 85% plus of our customers are small businesses. And so we needed something that can scale faster and easier to our smaller customers. And so we started with New York Now, given that Bulletin's entry point was in the home space. And so that has, as I mentioned in my opening remarks, has been quite successful. And so what we are looking to do now, as I mentioned, is to then do exactly as we've done with Elastic is then to scale that across other categories over time.
spk04: That's great.
spk03: And then just one of your pillars is to try to get 24-hour, I'm sorry, full-year engagement from customers. How would you feel about where you are in that process and where you're getting the benefits from that?
spk01: Yeah, I think the 365-day engagement are basically the two parts that we just talked about. So customers attend our events. Those are episodic. The ability for us to stay in touch with them and offer them value through our contents business, those happen to be through the editorial, through leads, and also through the commerce business. And those two working in tandem with our connections business or with the events business allows us then to offer this 365 platform. So I think we're tracking very well to that. Obviously, it's a journey. We continue to do more, but we are very well on track to deliver on our plan, and we feel good about As I mentioned, we track the value that we create to our customers. David mentioned pricing. That's a big part of our pricing strategy. And the reason why we're able to command increasing in pricing is that we are very focused on pricing for value creation. we price based on the value that we create to customers. What we want to do is be maniacally focused on delivering value to our customers and getting compensated for the value that we create. And so that is our strategy. And so we constantly look for how do we constantly create value 365 days a year. And therefore, the content business, the commerce business allows us to do that for our entire customer pool of, you know, of connections to customers.
spk03: That's great. My last question is you use a matching technology for those who are at trade shows. Can you talk about where you are in terms of, like, the feedback you've gotten of how this adds value to those at the trade shows and what you're doing going forward with that? Thank you.
spk01: Yes, we do. We now are using matchmaking tools and solutions as well as lead sharing tools at all of our trade shows. All trade shows now have implemented these types of solutions. Again, that's linked to the value creation. And they're doing really well. And the reason we know it's going well is because we measure net promoter scores and we measure loyalty and we can see that customers that utilize such solutions rate us stronger. They have a higher net promoter score, higher loyalty score than those that don't. And so our efforts are not Our efforts to date have been to make sure that we have it across all of our events. And now we're very focused on adoption and usage and making sure that as many customers as possible across both the exhibitors and the visitors are using these tools. And we're making really good progress on making sure that we've got this adoption across all of our events.
spk03: That's great. Thank you. Congrats on the strong quarter.
spk04: Thank you very much. Thanks, Alan.
spk00: We don't have any further questions at this time. Presenters, please continue.
spk01: Great. Well, I just wanted to thank you all for your questions. Thank you all for your interest in Emerald. I'm very pleased with what our teams have accomplished this quarter, and I'm glad that we've been able to deliver on the expectations and the commitments that we've made. And I look forward to speaking with you all next quarter. Have a great day.
spk00: This concludes today's conference call. Thank you for your participation. You may now disconnect.
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