Emerald Holding, Inc.

Good morning and welcome to the Emerald Olding Inc. second quarter 2024 earnings conference call. At this time, all lines in a listen-only mode. Following the presentation, we'll 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 forelooking statements. within the meeting 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 maturely from those indicated are 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. The company does not undertake any duty to update such provoking statements. Additionally, during today's call, management will discuss non-GAAP measures which it believes can be useful in evaluating the company's performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. The reconciliation of these 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 to 11.59 p.m. Eastern Time on August 14th. I would now like to turn the call over to Mr. Irvi Sedky, President and Chief Executive Officer. Sir, please go ahead.

Thank you, Julie, and good morning, everyone. It's great to be with all of you today to discuss our second quarter results. I'll start with a brief overview or review of our performance and then give an overview of our strategy. David Doft, our CFO, will then provide more detail on our financials. We had a positive performance in what is a seasonally smaller quarter due to the relatively less significant show schedule, which combined with our Q1 performance and expectations for the second half, set us up for another full year of strong revenue and EBITDA growth. These trends reflect the exceptional value and ROI we provide our customers for their marketing budgets. For many businesses, Trade shows are their number one selling or marketing event of the year. Our goal has been to underscore 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. We plan to continue to maximize value for our customers and shareholders, fostering an intense sense of loyalty. Our customers' commitment to us is reflected in their continued and consistent desire to return to our shows each year, as well as their increasing engagement in between event conditions throughout the year. The evidence is clear. Our trade shows have a profound impact. At all of our trade shows, we've implemented on-site pre-booking, which means we have been selling exhibitor space into the first half of 2025 for some time and just begun selling into H2 2025. Our sales pacing data offers us a highly granular view into exhibitor trends up to a year out, which gives us confidence in our forecasts for 2024 and for continued growth into 2025. Looking ahead, we project continued increases in revenue above our industry's historical run rate. Overall, as a reaffirmation of our original guidance indicates, we expect another meaningful 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 to drive double digit annual revenue growth overall. Our strategy continues to be informed and inspired by the three pillars of our value creation, customer centricity, 365 day 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 Emeralds, and ultimately should help drive higher revenue per customer. In the end, we provide a unique experience that is both financially and personally rewarding. Our customers walk away from our trade shows feeling re-energized by their future prospects and inspired by the innovations they discovered. In 365-day engagements, we are providing multiple entry points to the customer engagement cycle through trade shows, conferences, webinars, media content, and commerce. This reinforces our brands in their respective markets, increasing their reach and driving down the acquisition cost of attendees to our events. This is where we're seeing the most opportunities to scale by leveraging artificial intelligence, where we have numerous tests across our content and marketing teams. We're excited about some of the early results and expect to fully implement it in certain areas of the business in 2025. For example, by leveraging our proprietary first party data assets, we can better personalize messages to our readers and prospective attendees. AI can help scale these personalization efforts quickly and efficiently which we expect will improve conversion rates in the future. And in portfolio optimization, through our acquisitions and new event launches, we have targeted industries with strong, stable growth rates in order to continue to improve Emerald's growth profile overall. We're always evaluating potential attractive acquisition opportunities, and this is an important part of our growth strategy. we expect new event launches to contribute one to two percentage points of annual organic revenue growth. 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. Our modest level of financial leverage combined with the visibility and expected stability of free cash generation allows us to have a capital allocation strategy focused on driving per share value to our shareholders and includes stepped up return of capital by reinitiating Emerald's common stock dividend that was suspended during the pandemic, as David will elaborate. Also central to our strategy is the belief that the personal experience of our customers is paramount. By always putting people first, we ensure our initiatives resonate deeply and create lasting value. We are confident that we can sustain this trajectory and deliver growth in excess of our industry while enhancing our profitability year after year. And with that, let me turn the call over to David.

Thank you, Hervé, and good morning. I'll continue with a financial overview of the most recent quarter and then discuss our dividend initiation and guidance. For the second quarter, total revenue was $86 million compared to $86.5 million in the prior year quarter. The very slight decrease was primarily driven by scheduling adjustments where events staged in different quarters this year versus last year on our show calendar. and several small, unprofitable discontinued events as we look to optimize resource allocation and profitability of the Emerald portfolio. Organic revenue, which takes into account the impact of acquisitions, scheduling adjustments, and discontinued events with $82.1 million for the second quarter 2024, an increase of $2.6 million or 3.3% versus the prior year period. As we've discussed, we have a broad portfolio of shows, some of which are experiencing faster growth rates than others as a function of where their industries are in the business cycle, as well as other factors. Therefore, any one quarter's organic growth rate is not necessarily indicative of the growth in the overall portfolio, and we would encourage you to look at our business on a full year basis. Second quarter adjusted EBITDA excluding insurance proceeds grew approximately 4.8%, to $15.3 million compared to $14.6 million for the same quarter last year. This equates to an adjusted EBITDA margin of approximately 17.8% for the quarter, given our seasonally lower revenue against the fixed component of our cost base. Second quarter free cash flow was $7.1 million compared to $4.6 million in the prior year quarter. Turning to expenses, in the second quarter SG&A was $39.5 million versus $41.8 million in the prior year quarter. The year-over-year decrease in SG&A is largely due to ongoing efficiency initiatives, as well as the benefit of a $1.7 million increase in remeasurement of estimated contingent consideration for past acquisitions, offset by incremental SG&A from the hotel interactive acquisition that closed in January of this year. Given the number of industries Emerald serves, Our guidance has always assumed some variability in quarter-to-quarter organic growth rates. As we discussed in our last earnings call, while Q1 contributed strong double-digit organic revenue growth, other quarters, including Q2 and Q3, were not expected to reach that level based on the mix of business in each specific period, with Q4 growth expected to reaccelerate, all consistent with the assumptions that underpin our annual guidance. Turning to the balance sheet. We had $193.2 million in cash as of June 30th, 2024, versus $186.8 million as of March 31. As a reminder, in early May, we completed the conversion of our convertible preferred stock, eliminating the preferred dividend and resulting in a simpler, all common equity structure. Our total liquidity is $303.2 million, including full availability on our $110 million credit facility. As of June 30th, we had net debt of $218 million, leading to a net leverage ratio as defined in our credit agreement of 2.10 times our trailing 12-month consolidated EBITDA, based on the definition in our credit agreement of $104.0 million. 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. On that note, we are pleased to announce that our board of directors has authorized the reinitiation of a regular quarterly dividend at an initial rate of one and a half cents per share, which would imply an annualized cash dividend amount of $12 million reflecting a dividend yield of 1.3% based on yesterday's closing price. Prior to COVID, Emerald was historically a dividend payer, and given our strong cash generation coupled with our organic and inorganic growth, it is our intention to grow the quarterly dividend over time with a target payout ratio of up to 25% of free cash flow. As Hervé said, We believe the visibility and expected stability of the company's free cash generation position positions us to return capital to shareholders on an ongoing basis. This quarter, we added a slide to our earnings presentation deck outlining our capital allocation and financial policy that we've discussed over the past several quarters. We expect to continue to balance capital allocation between acquisitions, investments in our own business, managing debt leverage below 3.0 times net debt to EBITDA and returns on capital, which includes dividends and opportunistic share buybacks. At quarter end, we had $23 million remaining on our existing buyback authorization after not buying back any shares in the second quarter. Turning to guidance, we continue to expect that our 2024 performance will be within our full-year guidance 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%. 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.