Emerald Holding, Inc.

Before we begin, let me remind everyone that this call will include certain statements that can 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 indicated or implied by such statements. For discussion of these uncertainties and other factors, please refer to the company's SEC filings, including its most recently filed periodic reports on Form 10-K and Form 10-Q, as well as the company's earnings release. all of which can be found on the company's investor relations website. The company does not undertake any duty to update such forward-looking 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 US GAAP. The reconciliation of these non-GAAP measures to the most comparable GAAP measures can be found in the company's earnings release, which is available on the company's investor relations website. As a reminder, this conference is being recorded and the replay of this call will be available on the investor's section of the company's website.

Thank you, Eric, and good morning, everyone. This is Hervé Setki. It's good to be with you and to discuss our third quarter results. I'll start with a brief 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've spoken often about the concept of portfolio optimization here at Emerald. And today I want to fill you in on some of the more aggressive steps that we're taking to position the company for better growth and profitability in the future, which had near-term implications on our expected 2024 results. In addition, although we're seeing strong and broad-based year-over-year pacing growth into the first half of 2025, we do not expect our performance in the second half of 2024 to meet expectations. As a result, we're reducing our previously communicated expectations for full year 2024. This update is primarily driven by two factors. First, a proactive decisions to optimize our portfolio mix. And second, certain macroeconomic and operational impacts on our content business. Let me address each of these in more detail now. First, to optimize the long-term organic growth and margin trajectory of our portfolio, earlier this year we conducted a thorough review of our entire catalog, event catalog. An outcome of this review was the decision to accelerate certain portfolio optimization activities by pruning several smaller and unprofitable events. Over the past several months, we have permanently discontinued 20 events totaling $20 million in historic run rate revenue. $17 million of this total is for events that will not stage in 2024, but did stage in 2023. And $3 million is for events that did stage in 2024, but we have decided not to stage in 2025. In aggregate, these events were not growing and had negative margin at the EBITDA level. As a result, we expect these actions to positively impact growth and margin in 2025. Additionally, we had to cancel one of our hosted buyer events in early October, which was set to stage in Florida during Hurricane Milton. The impact was just under a million in revenue with high contribution margins. We are now in the process of submitting a corresponding insurance claim given that a state of emergency and evacuation orders were issued. Our view is that this cancellation will fall under our event cancellation insurance policy and we expect to be reimbursed as we have been several times in the past following similar weather-related disruptions. Moving forward, our priority remains growing the business. Our actions are consistent with our stated objective of portfolio optimization, which we believe puts us at an even stronger foundation for expansion next year and beyond. We expect solid growth and a return to margin enhancement in 2025, aided by the removal of these unprofitable assets. David will touch on the near-term impact to the business in a moment. Despite these challenges, our existing show portfolio continues to thrive. Just a few weeks ago, we completed the New York edition of Advertising Week. We had a great turnout with several new tracks added, including an investor summit and leading voices from some of the most prominent industry players, including Meta, Google, Amazon, TikTok, and Netflix, among many others. We're now excited for the upcoming slate of fourth quarter events, including BDNY, Healthcare Design Expo, and MJBizCon, and feel confident about the strength of our portfolio as we move into the first half of 2025. In fact, our pacing into 2025 is stronger and more broad-based than at this point last year and reinforces our view that growth should improve in the new year. Currently, we expect solid revenue growth in 2025 with a return to margin expansion aided by an improved mix of business from our portfolio optimization efforts. Second, beyond our event business, we're seeing continued softness in our small content business. This segment currently accounts for approximately 5% of our total revenue, but has continued to perform below expectations. We made significant organizational changes over the last 18 months that were expected to drive a recovery in the second half of the year. However, the advertising environment in several end markets has remained challenging and our expectations for near-term growth are modest. Even with such small exposure, we're experiencing a low to mid single digit million dollar shortfall versus expectations for the full year 2024, which had called for growth this year. As a result, we now anticipate that 2024 content revenue will decline on a year-over-year basis. Our content portfolio remains an important component of our operations due to the leverage it gives us in event marketing and the proprietary data assets it generates. This business is additive to our strategy around personalization and enhances lead generation for our event customers throughout the year. As growth in other much larger parts of Emerald continues, content is naturally becoming an increasingly smaller component of our overall revenue, which means that variances here should have a limited impact on our overall performance in the future. As a result of these factors, we're adjusting our full-year revenue and adjusted EBITDA guidance to at least $400 million and $100 million, respectively. Our updated guidance still implies year-over-year growth in both revenue and adjusted EBITDA, albeit at a lower level than previously anticipated. We expect the changes to the makeup of our portfolio and more aggressive efforts within our content division will leave us well-positioned for strength in 2025 and beyond. We believe that the value proposition for Emerald's large and diverse collection of events is strong, and our customers understand and appreciate the strong ROI that in-person events offer, as is evidenced by the solid growth we're experiencing in 2025 bookings. As I've said before, trade shows are often the number one selling and marketing events of the year for our customers. According to a recent survey by the Boston Consulting Group, 87% of CMOs are reporting that traditional channels like email campaigns and display ads offer diminishing returns due to the rise of ad blockers and algorithmic changes. As a result, CMOs are reallocating spend toward more effective channels like in-person events and experiential marketing. Nearly 65% of CMOs, according to Deloitte, are reported increasing their investment in in-person events to improve brand loyalty and customer engagement. In-person events are also no longer seen as large cost centers, but rather as a necessary and incredibly valuable part of a company's marketing strategy. To underinvest in them is viewed by many C-suites as a competitive disadvantage. In short, in-person events provide a real opportunity for long-term value creation through knowledge sharing, innovation, and relationship building, the key building blocks for any growing business. As we look forward, we continue to believe in the strength and value of our portfolio. We are confident in the positive mid- to long-term trends for in-person events as we get further removed from the volatile comps created during and immediately following the pandemic, and we believe in the deep value Emerald brings to the market. Ultimately, we're not afraid to make difficult decisions based on data that strengthen our prospects for growth. This quarter was no exception. We are a profitable portfolio on the EBITDA level of some of the industry's most well-known and respected events in the markets they serve and we are committed to building this portfolio through accretive acquisitions alongside new event launches. More importantly, recent transactions in the industry serve to further validate the value of the live event space. I'm excited for the path forward and continue harnessing the power and impact of in-person events. With that, let me turn things over to David Dobbs. David?

Thank you, Hervé, and good morning. I will start with a financial overview of the most recent quarter and then discuss capital allocation as well as our guidance. For the third quarter, total revenue was $72.6 million compared to $72.5 million in the prior year quarter. This was primarily driven by $4.2 million in revenue from acquisitions as well as scheduling adjustments of $4.2 million. These gains were offset by $5 million in discontinued event revenue that was not contributing to profitability as part of our portfolio optimization strategy, and organic decline of $3.3 million. Organic revenue, which takes into account the impact of acquisitions, scheduling adjustments, and discontinued events, declined 5.3% in the third quarter to $58.7 million as compared to $62 million in the prior year quarter. Besides the items Hervé reviewed, growth in the quarter was also impacted by construction at one of the venues where we hold large events. which has temporarily caused disruption for a small number of events in the short term. Year-to-date organic revenue is up 4.8% as compared to the same period last year. Third quarter adjusted EBITDA, excluding insurance proceeds, grew 56.3%, or $4.5 million, to $12.5 million versus the prior quarter. This equates to an adjusted EBITDA margin of approximately 17.2%. As Hervé discussed, we conducted a thorough review of our entire event catalog as part of a proactive review of our nearly 150 show portfolio. As a result, we removed 20 unprofitable events this year. For the events that were discontinued, there was some positive contribution at the event level, which means we're in the process of reducing overhead related to those changes, and we expect the full benefits should be seen in 2025. Turning to expenses, third quarter SG&A was $40.8 million versus $41.6 million in the prior year period, driven by continued management of overhead costs and lower stock-based compensation expense. This was partially offset by lower gains from the remeasurement of contingent consideration for prior acquisitions. In the third quarter, we generated $6.7 million of free cash flow, excluding event cancellation insurance proceeds as compared to $2.7 million in the prior year period. As many of you know, the Federal Reserve recently reduced their interest rate by 50 basis points, which delivers an immediate boost to our free cash flow as we have a floating interest rate on our debt. Specifically, we have $410 million of term loans, so every point reduction from the Federal Reserve leads to approximately $4 million of incremental cash flow for Emerald. This is good for our equity holders and provides added fuel for investing in value-added initiatives. Turning to the balance sheet, we had a healthy cash balance of $188.9 million as of September 30th versus $193.2 million as of June 30th. 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. I should also highlight that in the third quarter, S&P upgraded Emerald's debt from a B rating to B+, reinforcing the strength of our model and liquidity position. Our total liquidity is $298.9 million, including full availability on our $110 million credit facility. As of September 30th, we had net debt of $221.2 million, leading to a net leverage ratio as defined in our credit agreement of 2.11 times our trailing 12-month consolidated EBITDA based on the definition in our credit agreement of $105.0 million. Our balance sheet strength and cash flow generation support our ability to opportunistically invest in and grow our business. Going forward, we expect to continue to balance our capital allocation priorities between acquisitions to bolster our portfolio of events, investments in our own business, managing debt leverage to 3.0 times net debt to EBITDA or below, and returns of capital to shareholders, which includes dividends and opportunistic share buybacks. During the third quarter, we bought back 743,000 shares for $3.6 million, or an average price of $4.85 per share, under our existing buyback authorization, which had $19.6 million of capacity remaining. Our Board of Directors authorized an extension and expansion of that existing share repurchase program through December 31, 2025, for the repurchase of $25 million of Emeralds common stock, representing approximately 3% of the current equity market capitalization. Additionally, on October 29th, Emeralds Board of Directors declared a regular quarterly dividend of 1.5 cents per share for the quarter ending December 31, 2024, which would imply an annualized cash dividend amount of $12 million and reflecting a dividend yield of 1.3% based on yesterday's closing price. Turning to guidance, as Hervé noted, we now expect that our 2024 performance will be at least $400 million of revenue and at least $100 million of adjusted EBITDA. Our revised guidance reflects the impact of the discontinued events, the aforementioned content softness and the cancellation of one hosted by our event in October due to Hurricane Milton. As survey also noted, we believe this cancellation should fall under our event cancellation insurance policy, and we expect to file an insurance claim for this event shortly. Our guidance implies an adjusted EBITDA margin of approximately 25%. Note that we continue to believe that we can achieve an adjusted EBITDA margin in the range of 35% in the coming years as we continue to leverage our existing cost base, realize the benefits of our investments, and reap the benefits from the pruning of our portfolio. Thank you very much for your time. And with that, we'll now open the line for questions.